Appendix — Pacific Far East Line, Inc. v. Pacific Seafarers, Inc.

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APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 21,173

Pactric SEAFARERS, INC., ET AL.,

Appellants

v.

PaciFic Far Kast Linz, INc., BT AL.,

f Appellees

Appeal from Order and Judgment of the United States

District Court for the District of Columbia

Decided September 30, 1968

Mr. Robert E. Sher, with whom Messrs. Abraham J

Harris, Marvin J. Coles and Neal M. Mayer were on the

brief, for appellants. Mr. Donald D. Webster also entered

an appearance for appellants.

Mr. Frederick M. Rowe, with whom Messrs. James M.

Johnstone, Bertram Walter Rein, Edward D. Ransom,

Gordon L. Poole and R. Frederic Fisher were on the brief,

for appellees, Pacific Far East Line, Inc., et al.

Mr. Verne W. Vance, Jr., with whom Mr. Henry E. Folzy

was on the brief, for appellee Farrell Lines, Inc.

Messrs. James N. Jacobi and Richard W. Kurrus entered

appearances for appellee American Export Isbrandtsen

Lines, Ine.

Mrs. Amy Scupi entered an appearance for appellee

American Union Transport, Inc.

Mr. Robert Burk entered an appearance for appellee

Matson Navigation Company.

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Mr. J. Franklin Fort entered an appearance for appellee

Moore and McCormack Co., Inc.

Mr. Donald J. Mulvihill entered an appearance for

appellee Gace Line, Inc.

Mr. John K. Mallory, Jr., entered an appearance for

appellee Waterman Steamship Corporation.

Mr. Elmer C. Maddy entered an appearance for appellee

Lykes Bros. Steamship Co., Inc., et al.

Before McGowan, Tamm and Leventuat, Circuit Judges.

LeventHaL, Circuit Judge: This case concerns the

applicability of sections 1 and 2 of the Sherman Act to an

alleged conspiracy among defendant-appellees, 21 American

shipping lines and two conferences to which they belong,’

to destroy plaintiff-appellants’ business of carrying AID?-

financed cement and fertilizer cargoes between Taiwan and

South Vietnam. The charges were first aired before the

Federal Maritime Commission, which dismissed plaintiffs’

complaint alleging violations of sections 15, 16 First, and

18 of the Shipping Act* on the ground that this trade

between foreign ports, of goods owned and shipped by

foreigners to foreigners,‘ was net within the Commission’s

1 Liability is alleged as to most of the defendants by virtue of

their participation in either the Atlantic and Gulf American-flag

Berth Operators (AGAFBO) or the West Coast American-flag

Berth Operators (WCAFBO) conferences, rather than from active

participation in the Far East interport trade.

2 Agency for International Development.

$46 U.S.C. §§ 814, 815 First, 817, respectively.

*The Federal Maritime Commission found that ‘‘The cargoes

carried by PSI are entirely commercial in nature originating in

one foreign port. and destined to another foveign port. The ship-

ping arrangements as well as the sales of the commodities are

made between foreign principals. Although the U.S. Government

through the Agency for International Development (AID) ulti-

mately finances the sales—including the cost of water transporta-

tion—our Government in no way participates in the transactions.’’

(JA 114)

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jurisdiction under the Shipping Act. That ruling was not

appealed. Plaintiffs’ subsequently-filed complaint for

damages under the antitrust laws’ was dismissed, at the

close of oral argument, when the District Court granted

defendant’s motion for dismissal of the complaint. This

order was presumably based on the jurisdictional ground

that the Sherman Act was inapplicable to the complaint

because of the absence of a claim of restraint of foreign

commerce.’ We reverse that determination.

These are the pertinent facts as set forth in the complaint,

which must be accepted as true for purposes of a motion to

dismiss. Plaintiffs Pacific Seafarers, Inc. (PSI) and

Seafarers, Inc. (Sesfarers)’ are American corporations,

formerly engaged in the ocean shipping business. They

operated United States flag vessels, manned by American

crews. Plaintiffs’ business operations were centered in

New York, and their ships intermittently returned to the

United States for personnel and maintenance requirements.

Plaintiffs’ business was selling their American-flag shipping

services to cement and fertilizer exporters in Taiwan, and,

to a lesser extent, Thailand, who needed American-flag

shipping for AID-financed sales to importers in South

Vietnam. AID does not own the goods, nor does it arrange

for their transportation. It does, however, provide, either

on loan or grant basis, dollars to the South Vietnamese

Government, which in turn sells these dollars to South

Vietnam merchants desiring to finance their purchases

abroad. AID implements the Cargo Preference Law® by

515 U.S.C. § 15.

6 The District Judge rendered his decision from the bench at the

close of oral argument. He stated: ‘‘I am of the opinion that

the complaint does not state facts constituting a cause of action

under the Sherman Antitrust Act and, therefore, this Court is

without jurisdiction and the motions to dismiss will be granted.”’

(JA 167)

7 The other plaintiffs’ claims are derivative.

846 U.S.C. § 1241(b). See AID Regulation 1, § 201.6(N).

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regulations requiring that at least 50% of ATD-financed

cargoes be transported to the recipient country in privately

owned United States-flag commercial vessels. Further-

more, as a matter of policy, AID finances the costs of

transportation, in addition to cargo, where the shipping is

done in American-flag vessels. These regulations effec-

tively reserve the trade in carriage of AID-financed cargo

for American shipping.

At the time plaintiffs entered the business it was handled

primarily by American-flag competition engaged in round-

trip voyages from the United States to the Far East. In the

course of their journeys, these vessels would stop to take on

cargoes of foreign origin destined for ports farther along.

The rate for this service was set by AFBO,” an association

of American-flag carriers which are members of either or

both AGAFBO" or WCAFBO,” both conferences of

American-flag shippers organized to carry military cargoes

for the Government (which must likewise use American-

flag shipping where available). Neither the AFBO agree-

ment, nor the rates set thereunder for cargoes originating

in foreign ports and destined to foreign ports, were filed

with the Federal Maritiras Commission.

Plaintiffs thought that by using older, less-expensive

vessels they could institute and profitably operate a sub-

stantial service in AID-financed cargoes. As stated by

plaintiffs, defendant American-flag shipping lines acted to

preserve this profitable trade to themselves, at rates set

pursuant to concerted action and not subject to regulatory

scrutiny. They first sought to erect legal barriers to

plaintiffs’ getting the buisness, and when they failed in

-—-—-_-

* Affidavit of David E. Bell, former Administrator of AID.

(JA 147)

© American-flag Berth Operators.

1 Atlantic-Gulf American-flag Berth Operators.

12 West Coast Americen-fiag Berth Operators.

PN AS RNR GFE MMI

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that endeavor they dropped their prices and drove plaintiffs

out of business.

(a) Their first effort was to seck issuance of a directive

from AID limiting AID-financed shipping in the area to

**eonference liners.’? That would have excluded plaintiffs’

vessels, but it was not obtained.

(b) Defendants then successfully urged the Director

General of Commerce of South Vietnam to issue a ruling

to South Vietnamese importers requiring that all future

AID-financed shipments of cement be shipped on liners

operated by AFBO members. Plaintiffs were not then

members of AFBO, but AID countermanded that directive.

(co) Next, plaintiff PSI was told by the Director General

that it would have to join WCAFBO if it wished to con-

tinue in the South Vietnamese cement business. When

PSI tried to comply, its application for membership was

blocked: because it had no Military Sea Transportation

Service Contract (MSTS) with the Defense Department, as

did all other WCAFBO members. Plaintiff sought such

a general clegibility contract, and seven of the appellees

tried io block it by protesting te the Defense Department.

That too, was unsuccessful.

(d) Finally, at an AFBO meeting held in the United

States, the rates on cement and fertilizer from Taiwan to

South Vietnam, and on cement from Thailand to South

Vietnam were thrown open, and they dropped from $8.95

per long ton to $4.96 per long ton. All other rates were

maintained,

Plaintiffs were shortly driven out of business. Thereafter

defendants raised the rates, and indeed raised them to

substantially higher levels than ‘those prevailing before

plaintiffs sought to enter the trade.

1, We first consider defendants’ arguments that prin-

ciples of collateral estoppel and ‘practical primary juris-

diction considerations’ preclude relitigation by plaintiffs

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of the Federal Maritime Commission’s determination that

this trade, carried on “totally within the confines of Far

Eastern ports,’’ was not part of ‘our foreign commerce.’’

Principles of collateral estoppel may properly be applied

in administrative cases."* In general these principles apply

to jurisdictional issues'* and we may assume that they

require giving effect in subsequent litigation to an agency’s

determination of facts underlying its conclusion that juris-

diction was lacking. In this case, however, there is no real

dispute concerning those facts which the Commission held

to be jurisdictional. Thus, plaintiffs do not seriously allege

that they were plying a trade other than selling shipping

services to foreigners, for transportation of foreign-owned

goods to foreign consignees. They do not allege that the

goods thus transported between foreign ports originated

in the United States. On the other hand, defendants cannot

seriously contest that the key to this whole trade was that

plaintiffs and defendants were not just selling shipping

services: They were selling United States-flag shipping

services, Which fact was of crucial importance to importers

requiring ATD-dollar financing for their transactions. Thus

the sole question is whether, under those facts, a conspiracy

to drive plaintiffs out of the business of selling United

States-flag shipping services is a restraint on United States

foreign commerce subject to the Sherman Act,

Although the Commission was of the view that defend-

ant’s activities had no cffect on United States ‘foreign

commeree,’’ that determination rested solely on the

standards of the Shipping Act of 1916. Thus the Commis-

% United States v. Utah Constr. & Min. Co., 384 1.8, 394, 422

(1966); Sunshine Anthracite Coal Co, v. Adkins, 310 U.S. 381,

402-08 (1940); Fairmont Aluminum Co. v. Commissioner, 222 FP.

2d G22, 627 (4th Cir.), cert. denied, 350 U.S. 838 (1955) ; 2 Davis,

Administrative Law §§ 18.01-18.10 (1958).

“Sunshine Anthracite Coal Co. v. Adkins, supra, 310 U.S. at

408 ; Esteves v. Nabers, 219 F. 2d 321, 323-24 (5th Cir. 1955).

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sion held that its entire jurisdiction was limited to activities

affecting ‘‘foreign commerce’’ within the intendment of

section 1 of the Shipping Act," which defines a ‘‘common

carrier by water in foreign commerce’’ as a ‘common

carrier engaged in transportation by water of passengers

or property between the United States or any of its Dis-

tricts, Territories, or possessions and a foreign country.”

As plaintiffs carried no property or passengers to or from

the United States they were not engaged in foreign com-

meree under the Shipping Act."*

8 46 U.S.C, § 801.

® Section 15 of the Shipping Act provides that, ‘Every common

carrier by water, or other person subject to this chapter, shall file

immediately with the Commission a true copy, or, if oral, a true

and complete memorandum of every agreement with another such

carrier or other person subject to this chapter, or modification or

cancellation thereof, to which it may be a party or conform in

whole or in part, fixing or regulating transportation rates or fares;

giving or receiving special rates, accommodations, or other special

privileges or advantages; controlling, regulating, preventing, or

destroying competition; pooling or apportioning earnings, losses,

or traffic; allotting ports or restricting or otherwise regulating the

number and character of sailings between ports; limiting or reg-

ulating in any way the volume or character of freight or passenger

traffic to be carried; or in any manner providing for an exclusive,

preferential, or cooperative working arrangement. The term

“agreement”? in this section includes understandings, conferences,

and other arrangements.’’ 46 U.S.C. § 814,

The Commission thus substantially limited the broad term ‘every

agreement,’ presumably on the grounds that the sole concern of

the Shipping Act was with that trade which by virtue of § 1 made

anyone carrying it subject to the Act. A similar approach, albeit

in a different context, was rejected by the Supreme Court in

Tolkswagenwerk Aktiengesellschaft v. FMC, 390 U.S. 261 (1968),

Moreover, the Commission held that, in the AFBO context, the

defendants ‘‘cannot be deemed to be engaged in the foreign com-

meree of the United States, .. . for the simple reason that the

trade does not involve as one terminus any port in a State, District,

Territory or possession of the United States.”

6 RE Le

The Commission did not rule that there was no ‘foreign

commerce’’ as that term is used in the Sherman Act, nor

did it rule that the standards under the two acts were the

same. It is commonplace in the law to encounter instances

of the same words being given different scope in different

contexts." Indeed counsel for the defendants effectively

put it to the Commission that jurisdiction under the Ship-

ping Act is narrower than under the Sherman Act, and

counsel objected to antitrust principles being ‘dragged in

by the heels.”?"* Accordingly defendants cannot bootstrap

Smiley v. Holm, 285 U.S. 355 (1932); Atlantic Cleaners &

Dyers, Ine, v. United States, 286 U.S, 427, 484 (1932) ; Sampson

v. Channell, 110 F. 2d 754 (1st Cir.), cert. denied, 310 U.S. 650

(1940); Cf. Towne v. Kisner, 245 U.S. 418 (1918); Cook, ‘*Sub-

stance’? and “Procedure”? in the Conflict of Laws, 42 Yale Lo,

$33, 337 (1983).

18 The following colloquy took place at oral argument before the

Commission :

Commissioner Hearn: Now, do you contend that, furthering

Mr. Patterson's question, do carrier members of AFRO, purely

by reason of the foreign inter-port carriage, can act with impunity

so far as this Commission is concerned, dealing with MSTS and

AID cargo, even to the detriment of the United States-flag carrier t

Mr. Poole: So far as the Shipping Act is concerned, yes. T think

they take their chances under the antitrust laws.

Commissioner Hearn: Well, in that case, you draw the distine-

tion between foreign commerce of the United States and section

15 here?

Mr. Poole: Yes.

Well, section 15 I think can only be read in reference to sec.

tion 1 of the Act where it defines those carriers which are subject

to the regulation of the Shipping Act. There section 1 makes it

pretty clear that it is only those carriers which are in the foreign

trade from or to ports in the United States or districts, territories,

and possessions of the United States are those carriers in the foreign

commerce which are regulated by the Shipping Act.

What T am saying is it has been held, and T think it is true, that

the jurisdiction under the Shipping Act is more restrictive than

the jurisdiction under the antitrust laws. That is why T objected

to antitrust principles being dragged in by the heels, so to speak,

to define the jurisdiction of the Commission under the Shipping

Act. (JA 148)

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the Commission's determination into a preclusive ruling on

whether foreign commerce was restrained under Sherman

Act standards,””

29, We turn therefore to the principal issue in the case:

Whether the District Court was correct in its jurisdictional

determination that the complaint made no allegation of

restraint on United States foreign commerce, Secking

affirmance of that ruling, defendants urge that there can

be no restraint of United States foreign commerce, and

henee no Sherman Act violation, no matter how egregious

the conduct under Sherman Act standards, unless there

is restraint of, or substantial effect on, United States com-

modity imports or exports or transportation to or from

the United States.

In our view plaintiffs, in participating in the market of

supplying the service of transportation in United States-

flag vessels, were engaged in foreign commerce of the

United States. We have no doubt that the Sherman Act

applies toe the restraint alleged here, an attempt by

American firms to deny another American firm access to a

line of international shipping trade created by Congress

for the general benefit of American shipping, We hereafter

elaborate our reasons for these views.

Tn our view the judgment cannot be affirmed because of the

doctrine of primary jurisdiction invoked by appellees, The Tear.

ing Examiners’ findings insofar as they are purely factual are not

really contested, Tnsofar as they make judgment on matters like

logal causality under antitrust standards, their significance is

limited both because the Commission made no ruling on them, and

in any event, they do not lie within the area of expertise which

justifies deference to the ageney’s findings.

Furthermore, the purpose of the primary jurisdiction doctrine

is to harmonize the application of antitrust and regulatory policies,

The Commission held merely that it had no regulatory power with

respect to this conspiracy, not that this was lawful behavior under

the Act and consistent with public interest. Compare S.W.W,, Tne,

v. Air Transport Ass'n of America, 89 TLS. App. D.C. 2738, 280,

191 F. 2d 658, 664 (1951), cert. dented, 348 U.S, 955 (1982),

Se AR EONS Oe : RNR

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3. We may usefully begin our analysis by considering

defendants’ rather guarded assertions that the carriage of

foreign-owned goods between foreign ports in American

Vessels may not be “commerce with foreign nations’

subject to constitutional regulation by Congress, Con-

cededly defendants themselves are engaged in United States

foreign commerce, because they carry United States

exports and imports, Their actions clearly ean be regulated

by Congress. Their contention, however, is that the

Sherman Act cannot be applicable unless United States

foreign commerce itself is restrained.” Obviously if plain-

™ Defendants’ point rests on analogy from cases involving re-

straints in interstate commerce, holding the Sherman Act is appli-

able only where the target of the restraint is interstate commerce,

eg. Lieberthal v. North Countey Lanes, 882 F.2d 269, 279 (Qa

Cir, 1964); Page vo Work, 290 FP. 2d 893, 880 (Oth Cin), cert.

dented, 368 US, 875 (1961); David Cabrera, Ine. vo Union de

Choferes y Duenos, 256 F. Supp. 889, 843-44 (D. PLR, 1966),

Similarly the defendants urge that United States v. Yellow Cab

Oo, 88 US, 2TS, 2IO-82, VWI} (1947) holds that the “eommeree’’

affected by a restraint on transportation is determined by terminal

points of the journey, Tn that ease, the Supreme Court: dismissed,

for want of a restraint of interstate commerce, that portion of the

Government's antitrust complaint that related to a monopoly of

local taxicab service, However, the problem there is primarily

whether the federal government, acting within the framework of a

federal system, has power to deal with sueh local restraint. The

issue turns, as it must under the Constitution, on whether the facts

show an effect on interstate commerce. The disclaimer of inter

state commerce does not constitute a withdrawal of American hoy,

but an assessment that what is involved is a matter of local law

rather than national law,

Where foreign commerce is involved, however, the issues are

different. Tn a sense the question of interpretation may still be

similar: Whether United States rewulation is reasonable in light

of the international, rather than intrastate, chacacter of the trade.

However, the problem is different for the courts because the ques.

tion may properly be answered by reference to frotors such as

vitizenship that are meaningful in an international setting yet not

involved where the issue is whether local commerce or national

interstate commerve is restrained. Furthermore, the courts have

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tiffs were not engaged in United States foreign commerce

in the constitutional sense, there could be no such restraint.

We therefore consider whether plaintifls engaged in United

States foreign commeree,

Gibbous vy. Oaden ™ makes clear that, as used in the Con-

stitution, “ecommerce”? is a very broad ecacept whieh in-

chides navigation-not merely because of the relationship

between shipping and the movement of goods,” most cer-

tainly commeres, but also because shipping itself is a form

of gnintal ecanantie activity Were it not 80, Chief J usti ico

mene

an obligation tw follow Congreasiowal will that tn greater wie

the only rewson for failure to do so is lack of harmony with prin-

ciples of international law, than it is when the Congressional in-

tention is counter to the Constitutional mandates reserving the

verulation of loowl affairs to the states rather than to Congress,

Compare Atlantic Cleaners & Dyers, Tne. v. United States, 286

US. 427, 484 (198),

BQ US, (CY Wheat.) 1 C1824),

® Compare United States v. South Bastern Underwriters Ass'n,

82 US, HWW, ANS 7 C144) where the Government, appealing a

dismissal of an indictment, argued that even if insurance was not

‘Seommerve a restraint fi the fisurance industry was a restraint

on those industrios whieh must buy fire insurance, Beeause of its

broad reading: of ‘Seommerve’? the Court found it unnecessary to

PARe ON atrel questions,

® Soe aleo Justion Story's construction of the word ‘trade’? in

the Coasting and Bishery Act of 1798, 1 Stat, 305, in Tae Nymph,

18 Bod, S06 C1884), quoted by the Supreme Court in United States

v. National Ass'y of Real Bstate Boards, 889 US. 485, 490-91

(UMNO): -

“The anrument for the claimant tisists, that ‘trade’ is here

weed in ite mort restrictive sense, and ag equivalent to traffle

in goods, ov buy tage and sollinge iy commerce or exchange But

Tam clearly of the opinion that such is not the true sense of

the word, ax weed fi the Qa section, Tn the first place, the

word “trade? is often, and indeed wenerally, used ina broader

were, vs equivalent to oeeupation, employment, or business,

whether manual or mereantile. Wherever any occupation,

omplayment ov business ts cartiod on for the purpose of profit,

or pain, or a livelihood, not tn the liberal arts or the learned

professions, it ts constantly called a trade,”

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Marshall wrote, ‘‘the government of the Union has no direct

power over the subject, and can make no law prescribing

what shall constitute American vessels, or requiring that

they shall be navigated by American seamen.’’ ™

Gibbons v. Ogden unequivocally states that the constitu-

tional language granting Congress power to regulate

‘commerce with foreign nations’ authorizes Congressional

enactment of laws regulating ‘‘every species of commercial

intercourse between the United States and foreign

nations.”?>** That much was ‘universally admitted”? in

1824, Plainly, United States vessels engage in a “species

of commervial intercourse’? between the United States and

foreign nations regardless of the ownership or national

origin of the goods they carry.

One of the significant accounts in foreign commercial

intercourse is the fact that certain maritime nations earn

income for their balance of international payments by pro-

viding transportation services involving neither their ports

nor their products. Examples readily suggest themselves :

eg, Norway, Greece, Great Britain. They are engaged, in

terms that are readily and fully understood by practical

businessmen as well as theoretical economists, in the

‘“‘export’’ of shipping services. So too, when American

Vessels carn transportation income, whether by payments

from foreigners or Americans, there is direct benefit to the

economy of the United States. More American seamen are

employed and there is more business for American-based

service industries dependent on shipping—e.g,, repair and

insurance. The fact that American-flag vessels must carry

American crews,™ and are liable to penalty tax if they

are repaired abroad,” and are available to the Government

22 U.S. (9 Wheat.) at 190.

Ma 22 U.S. (9 Wheat.) at 193,

46 U.S.C. § 672a(b) requires generally that 75% of the crew

shall be United States citizens.

619 U.S.C. § 257,

Ped ie # ee ee eres geen CLL eee tere

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in time of national emergency * provides a substantial and

on-going nexus to the United States.

These are the kinds of beneficial consequences, apart from

any interest of the vessel owner himself, that nations

further in their public interest by protecting the trade

aspirations of their citizens. That policy is particularly

compelling where ships are concerned because of the need

to maintain a strong merchant marine available in wartime

regardless of its peacetime routes.

Substantiating our view that the sale of American flag

shipping services to foreigners is itself a form of United

States foreign trade, is the protection Congress accorded

to that trade in section 14 of the Shipping Act of 1916.

That section authorizes the Federal Martime Commission

to bar foreign carriers from United States ports if they

are parties to an agreement respecting transportation

between foreign ports that excludes American-flag carriers

from admission on equal terms. And defendants appar-

2746 U.S.C. § 1242(a). The statute applies to all vessels owned

by citizens of the United States.

28 46 U.S.C. § 813, providing in pertinent part:

‘*The Federal Maritime Board upon its own initiative may,

or upon complaint shall, after due notice to all parties in

interest and hearing, determine whether any person, not a

citizen of the United States and engaged in transportation by

water of passengers or property—

**(2) Is a party to any combination, agreement, or under-

standing, express or implied, that involves in respect to trans-

portation of passengers or property between foreign ports,

deferred rebates or any other unfair practice designated in

section 812 of this title, and that excludes from admission

upon equal terms with all other parties thereto, a common car-

rier by water which is a citizen of the United States and which

has applied for such admission.”’

Any person who is a party to such an agreement is denied the

right of entry to United States ports.

tale) radinist anti, th deel 20 woke wre wut twad

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ently concede that the National Labor Relations Act, 29

U.S.C. §§ 151 et seq., passed by Congress under its com-

merce power, is applicable to all American-flag vessels.”

4. We hold that plaintiffs were engaged in the foreign

commerce of the United States for purposes not only of

determining constitutional power, but also of determining

the applicability of the Sherman Act, which prohibits con-

spiracies ‘‘in restraint of trade or commerce among the

several States or with foreign nations.”’

The basic approach to Sherman Act construction is the

broad premise that Congress exercised therein the full scope

of its powers under the Commerce clause of the Constitu-

tion®® That premise has been stated in cases involving

interstate commerce, and may well be subject to limitations

_for cause shown, so to speak—in regard to foreign com-

29 Defendants note that the Jones Act, 46 U.S.C. § 688, accord-

ing a remedy to seamen injured in the course of their employment,

is rocted in Congress’s Article III admiralty power. As to the

National Labor Relations Act, 29 U.S.C. §§ 151 et seq., defendants

contend that this is mere application of the internationally recog-

nized principle that for purposes of on-board conduct and regula-

tion of the crew, ships are part of the territory of the flag nation.

United States v. Flores, 289 U.S. 137 (1933). While it may be

that the fiction justifies application of United States law to Amer-

ican vessels as a matter of international law, it by no means follows

that this serves as the source of Congressional power under our

constitutional law. The constitutional basis of the National Labor

Relations Act is, pure and simple, the commerce power.

8 See, United States v. Frankfort Distilleries, 324 U.S. 293, 298

(1945) ; United States v. South-Eastern Underwriters Ass’n, 322

U.S. 533, 558 (1944) ; Atlantic Cleaners & Dyers v. United States,

286 U.S. 427, 435 (1932).

sidan tee

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merce." For example, it may fairly be inferred, in the

absence of clear showing to the contrary, that Congress did

31Jn United States v. Aluminum Co. of America, 148 F. 2d 416,

443 (2d Cir. 1945), Judge Learned Hand wrote: ‘‘Nevertheless,

it is quite true that we are not to read general words, such as those

in this Act, without regard to the limitations customarily observed

by nations upon the exercise of their powers; limitations which

generally correspund to those fixed by the ‘Conflict of Laws.’ We

should not impute to Congress an intent to punish all whom its

courts can catch, for conduct which has no consequences within

the United States.’’

The International complications that have arisen concerning the

application of United States antitrust laws to foreign commerce

relate primarily to subjection of foreigners to United States laws

for acts not done in the United States. See, e.g., British Nylon

Spinners, Ltd. v. Imperial Chemical Industries, Ltd., 2 All E.R.

780 (Ct. App. 1952). The theory on which this liability has pro-

ceeded is that ‘‘any state may impose liabilities, even upon persons

not within its allegiance, for conduct outside its borders that has

consequences within its borders which the state reprehends; and

these liabilities other states will ordinarily recognize.’’ United

States v. Aluminum Co. of America, supra, 148 F. 2d at 443. Con-

formance to international law is argued by analogy to the decision

in The Case of the S.S. ‘‘Lotus’’ P.C.I.J. Ser. A. No. 10 (1927).

In the case at bar, however, no such international complications

are present insofar as nationality is a recognized international basis

for prescribing conduct, cf. Blackmer v. United States, 284 U.S.

421 (1932), and in any event the interests of foreign parties are

insubstantial. Thus while we agree with defendants’ arguments

that considerations of comity are appropriate in construction of

the antitrust laws, we think that here it is tae Sherman Act’s ap-

plicability, rather than inapplicability, that is supported by con-

sideration of the ‘‘comity’’ factors—considerations similar to the

factors appropriate in choice-of-law cases, see generally Cheatnam

& Reese, Choice of the Applicable Law, 52 Colum. L. Rev. 959

(1952).

16a

not intend an application that would violate principles of

international law.™

However, the broad statement that Congress has exer-

cised the full sweep of its commerce powers is not withovt

significance in determining whether the Sherman Act ap-

plies as to restraints that operate, in the constitutional

sense, against the ‘‘fereign commerce”’ of the United States.

The Sherman Act has aptiy been characterized as a ‘‘char-

ter of freedem.’’™ Its principle of limiting the aceumula-

tion and exercise of deminant economic power ™ is rooted

in histerie notions of the invalidity of unreasonable trade

restraints,” and that policy has been increasingly accepted

as a fundamenta! principle of our system.” If, as defend-

82 Compare McCulloch v. Sociedad Nacional de Marineros de

Honduras, 372 U.S. 16, 21 (1963) with The Charming Betsy, 6 U.S.

(2 Creavh) 64, 228 (3804) (Marshall, C.J.).

For a sampling of the dialogue concerning the legality under

international standards of applications o£ the anti-trust laws of

the United States to foreiga nativnais see, e.g., Carlston, Antitrust

Policy Abroad, 49 Nw. U.L. Rev, 718 (1955); Fugate, Antitrust

Jurisdiction and Foreign Sovereignty, 49 U. Va. L. Rev. 925

(1963): Whitney, Sources of Conflict Between International Law

and the Apvtitrust Laws, 68 Yale LJ. 655 (1954); Symposium,

Extraterritovial Effect of the U.S. Antitrust Laws, A.B.A, Antitrust

Law Section, Proceedings at the Annual Meeting 65 (1957); Hear-

ings before the Subcommittee on Antitrust and Monopoly of the

Senate Committee on the Judiciary, 89th Cong., 2d Sess. (1966).

88 Anpalachian Coals, Inc. v. United States, 286 U.S. 344, 359

(1933).

%4 See generally Bork, Bowman, Blake & Jones, The Goals of

Antitrust: A Dialogue on Policy, 65 C ‘um. L. Rev. 422 (1965).

“3 Standard Oil Co, v. United States, 221 U.S. 1 (1911); United

States v. Addyston Pipe & Steel Co., 85 Fed. 271 (6th Cir. 1898),

aff'd 175 U.S. 211 (1899); Dewey, Common-Law Background of

Antitrust Policy, 41 U. Va. L. Rev. 759 (1955).

% Antitrust principles are relevant even in those economic sectors

subject to day-to-day supervision by federal regulatory agencies.

FMC v. Aktiebologat Sverska Amerika Linien, 390 U.S. 238

—. e Aa ie Rinne se tae alt St 8 AD YL owe mms RT!

eee aie -

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l7a

unts contend, that policy cannot extend to the full sweep

of American foreign commerce because of the international

complications involved, then surely the test which deter-

mines whether United States law is applicable must foeus

on the nexus between the parties and their practices and

the United States, not on the mechanical cireumstances of

effect on commodity exports or imports.

The Sherman Act is not limited, in effect, to restraints

on sales of goods. That is the thrust of defendants’ distine-

tion. In the domestic setting, however, it is settled that the

Sherman Act’s bar on unreasonable restraints on trade or

commerce extends to service industries—and transportation

is clearly a service industry "—as part of commerce,”

There is no basis in the statute or in reason to argue that

conspiracies in service industries are proscribed only if

the services are in interstate commerce, and not if they are

ir. foreign commerce.”

Defendants correctly point out that the cases hitherto

applying the Sherman Act to foreign commerce have in fact

(1948) ; United States v. El Paso Natural Gas Co., 876 U.S. 651

(1964) ; United States v. Radio Corp. of America, 358 U.S. $34,

351 (1959) ; Georgia v. Pennsylvania R. Co., 324 U.S, 489 (1945) ;

City of Pittsburgh v. FPC, 99 U.S. App. D.C. 118, 287 F. od

741 (1956),

3' United States v. Joint Traffic Ass’n, 171 U.S. 505 (1898) ;

United States v. Traus-Missouri Freight Ass’n, 166 U.S, 290 (1897).

United States v. National Ass’n of Real Estate Boards, 339

U.S. 485 (1950); Atlantic Cleaners & Dyers v. United States,

supra note 17; United States v, American Medical Ass’n, 72 U.S.

App. D.C, 12, 110 F, 2d 708, cert. denied, 310 U.S. 644 (1940),

* With this case in a purely jurisdictional posture we need not

consider the question, in many ways more diffieult, whether in

terms of raling on the merits of the validity of actions taken, the

Sherman Act standards of reasonableness developed for interstate

commerce should be applicable with full force to foreign trans

actions, and whetier that issue is still open in light of Timken

Roller Bearing Co. v. United States, 341 U.S. 523 (1951).

18a

involved either exports or imports of goods, or transporta-

tion to or from United States ports,” and conclude that it

is inapplicable unless one or the other is present." We ree-

ognize that ours is the first ruling on the issue before vs—

but if there has never before been a ruling affirming appli-

cation of the Act to this kind of trade, neither has there

been a ruling rejecting that application. The matter is res

nova, and we must decide it in the light of the reasoning

and analysis that appears to us to be sound.

Tt may be noted that in related contexts contentions close

to those urged by defendants have not been accepted. A

mechanical commodity export-import limitation was re-

jected by the District Court in In re Grand Jury Investiqa-

tion of the Shipping Industry, 186 F.Supp. 298, 313 (D.D.C.

1960). Prior to that it had been rejected as unsound by

the 1955 Report of the Attorney General’s National Com-

mittee to Study the Antitrust Laws (p. 77-80). We reject

it also,

Tt may be a sumed that, as a matter of construing Con-

gressional intent, the Sherman Act has no application where

* See, ¢.g., Continental Ore Co, v. Union Carbide & Carbon Corp.,

$70 U.S. 690, 704 (1962) (United States vanadium exports) ;

Timken Roller Bearing Co. v. United States, supra note 39 (im-

ports and exports of industrial bearings); United States v. Sisal

Sales Corp,, 274 U\S, 268 (1927) (United States sisal imports) ;

United States v. Aluminum Company of America (ALCOA), 148

RP, 2d 416 (2d Cir, 1945) exports and imports of aluminum ingot) ;

United States vy. Imperial Chemical Industries, 100 F. Supp. 504,

591-592 (S.D.N.Y. 1951) (exports and imports of explosive

powder) ; United States v. General Electric Co., 82 F. Supp. 753,

891 (D.NoJ. 1949) (exports and imports of incandescent lamps).

“Where the allegedly illegal restraint concerns commodities

then, of course, the absence of an effect on United States exports

or imports renders the Sherman Act inapplicable. See, e.g., Alfred

Bell & Co. v. Catalda Fine Arts, Inc, 191 F. 2d 99, 105 (2d Cir.

1951) (price-fixing agreement ‘explicitly confined to Great Britain

and Treland’’ not violative of United States Antitrust laws).

19a

the market involved consists of shipping services between

two foreign ports, without any American characteristic, and

the only American aspect is that one or some of the persons

competing in the transportation market is offering Ameri-

can flag ships. In the case before us, however, we hold that,

since there is an identifiable, distinctive market for Ameri-

ean-flag shipping service where the American characteristic

is dominant—a market defined as involving the transporta-

tion of ATD-financed cargoes, which has a definite nexus

with significant interests of the United States—the Sherman

Act is applicable te a conspiracy to exclude newcomers from

the trade.”

Our conclusion as to the existence of the requisite nexus

is influenced by three salient considerations. First, the

trade is entirely a product of the United States policy of

subsidizing its merchant marine. It is the United States

that has the greatest interest in this trade, and its conduct

on a strong and efficient basis. Defendants claim that ATD

is merely a financier, yet the fact that the foreign importers

were willing to accept the burden of higher-cost United

States-flag shipping in order to get ATD financing tends to

show that ATD was providing a stimulus to trade far be-

yond the realm of the conventional private financier, We

may take note of what Judge Ryan found, on a more com-

plete record, concerning the significance of AID and its

programs. In United States v. Concentrated Phosphate

Export Ass’n he wrote:

We also do not accept or agree with defendant’s argu-

ment that ATD was but an incidental party to the trans-

*2 Compare Continental Ore Co. vy. Union Carbide & Carbon

Corp., 370 U.S. 690 (1962); Branch vy. FTC, 141 F. 2d 31 (7th

Cir, 1944), both of which condemned, as illegal, conduct by Amer.

ican firms having an adverse effect on the international business

opportunities of other American firms. See also the Webb-

Pomerene Act, 15 U.S.C. §§ 61-65, conditioning antitrust immunity

for export associations, in part, on the absence of restraint on the

export trade of any domestic corporation.

action—no more than the usual financing institution

found in international transactions where there are

problems of currency exchange. ATD was at the center

of the transactions, it was the foree which initiated,

directed, controlled and financed them. Without ATD,

there would have been no sale or purchase and the ex-

tent of the role it played was known in every detail to

and relied on by both parties to the transactions, par-

ticularly by the supplier who looked to it for pay-

ment and obligated itself to conform to its requirements

and conditions if he was to receive payment.®

Since the United States has established and promoted, in

carriage of ATD-financed movements, this trade of provid-

ing American-flag shipping service, it is only reasonable to

expect the ‘‘fundamental national economic policy’’ of the

antitrust laws to be applicable.“ Clearly, the right of all

American-flag ships to participate is basic. Had there heen

a conspiracy of foreign carriers to exclude American-flag

ships from access to trade, the Federal Maritime Commis-

sion would have been directed to exclude them from United

States ports.“ Can it be supposed that Congress intended

American competitors to be able to organize a similar con-

spiracy with total immunity for their conduct?

Secondly, all parties must be Americans to participate in

serving this market for American-flag shipping. Conse-

quently there are few possible international complications

to justify an interpretation that deliberately cuts back on

the scope of the antitrust laws as applied to commerce

which greatly concerns the United States. It is plain that

#273 F. Supp. 268, 270-71 (S.D.N.Y. 1967) prob. juris noted,

$90 U.S. 1001 (1968).

*€ Carnation Co. v. Pacific Westbound Conf, 883 U.S. 218, 218

(1966).

% See 46 U.S.C, § 818, quoted note 28, supra.

Qla

where American foreign commerce is affected foreigners

may be held under our antitrust laws for restraints there-

on. It is also significant, for the purpose of determining

whether what is involved constitutes activities affecting

American foreign commerce within the scope of the anti-

trust laws that the trade not only has significant contacts

and nexus with the United States but also is the province

of American concerns,“

5. We now consider whether the foregoing analysis is to

any extent aborted or negatived by defendants’ contention

that, whatever the case as to the application of the antitrust

laws generally to foreign commerce not involving com-

modity exports, the Sherman Act must be read in conjune-

tion with, and be limited by, the Shipping Act of 1916.

Defendants thus switch from their prior position before

4¢ It is settled that the antitrust laws may apply to foreigners.

See, eg., United States v. The Watchmakers of Switaerland In-

formation Center, Inc, 183 F. Supp. 40, 184 F. Supp. 710

(S.D.N.Y, 1955), 168 F. Supp. 904 (S.D.NVY. 1958).

Where restraints of commodity exports or imports are concerned,

the test most used to determine whether the Sherman Act is ap-

plicable to acts done outside the United States is that formulated

by Judge Learned Hand in United States v. Aluminum Co, of

America, supra note $1, whether the agreement was intended to,

and did, affect United States imports or exports. See, e.g., United

States v. Minnesota Mining & Mfg. Co., 92 F. Supp. 947 (D. Mass.

1950). The principal question is what is meant, in this context,

by the word “‘intent’’ in light of the presumption that persons

are presumed to intend the natural consequences of their actions.

The considerations outlined in this opinion of American contacts

and nexus (see supra, p. 18) provide objective criteria that may

usefully supplement such an ‘intent’? test,

"Tn our case it is effectively the province of American operators,

by law. It is significant that in the overwhelming bulk of the

decided cases involving application of the antitrust laws to Amer-

ican commerce, the prohibited conspiracy was one in which

American concerns played a significant role, See, ¢.9., cases cited

note 40, supra

OEP OPERA ER TY 6A TRIN DI I LEE DE PIES AIR RIK BELEN OR IER AS MENG AMES INE 0

22a

the Commission,” and now urge that the Commission's

jurisdiction and the Sherman Act are coterminous. If the

two acts are to be held to have similar coverage, it may well

be because insofar as agreements of common carriers affect-

ing foreign commerce are concerned, the Commission was

in error in its narrow view of Shipping Act jurisdiction,”

not because the Sherman Act is to be narrowed.

The Supreme Court has specifically held that the anti-

trust laws, which ‘represent a fundamental national eco-

nomic policy,’ continue in effect as to the shipping indus-

try, and their rate-making activities in foreign commeree.

Carnation Co. v. Pacific Westbound Conference, 883 U.S,

213 (1966), The Court recognized that the Shipping Act

limits the scove of the antitrust laws, but this curtailment

was confined to the “explicit provision exempting activities

which are lawful under $15 of the [Shipping] Act,’? and

the Court declined to countenance any “wastated legislative

purpose to free the shipping industry from the antitrust

laws.’ See 883 U.S, at 216, 217. (Emphasis added) There-

fore the antitrust laws continue in effect, without modiflen-

tion based merely on implication, as to common carriers,

subject to the Act, which do not obtain the Commission

approval under $15 which Congress required as a condi-

tion of exemption. The antitrust laws also continue in

effect as to areas not subject & the Shipping Act—eg, a

restraint engineered by one or more ocean tramps affecting

American foreign commerce. The fact that the Shipping

Act is limited by virtue of $1, to those vessel operators

who are ‘tcommon carriers’’ certainly cannot be supposed

to make an exemption available, say, to operators not com-

mon carriers, offering service of transporting commoditics

from the United States. That instance is not our case, of

*® See note 18, supra.

4 See note 16, supra,

” a | yeaa ers.

PER OTE A LOOSE PERN NECA IW VES OPE i ef

Wa

course, but it exemplifies that the two acts do not preeisely

mesh,”

In & more sophiationted contention, defendants say that

the fact that the provision in 815 providing an exomptio

from the antitrust lawa was not made applicable to ship.

ping between foreign ports is an indication of Congressional

understanding that such shipping was not subject (> the

Amerioan antitrust laws, Indeed Congress contemplated

in § 14 of the Act that American carriers would participate

in foreign nate conferences governing shipping between

foreign porta, and could hardly have supposed that they

would be subject to the antitrust laws, or to more competi-

tion than governed shipping to and from the United States,

The dispositive analysis seems to us to run as follows:

We are not to turn to the acts of subsequent Congresses for

unstated exemptions, or implicd repeals, of the antitrust

laws, That is clear from Cartation.”’ Moreover, “how

mombors of a later Congress may have interpreted the 1890

Act is not of weight for the purpose of construing the

Sherman Act,’*™

The immunity granted by Congress in the Shipping Act

Was limited to those tiatances where there was some agsur-

anee, provided by Commission approval, that acts im-

munized from the antitrust laws were not contrary to the

overall public interest. We have already expressed our

—e ee

The Shipping Act does not eliminate all possibility of risks

under the antitrust laws, Compare Ryan, J, in Sabre Shipping

Corp. v. American Presidential Lines, — F. Supp. — — (S.D.NLY,

66 Civ, 8617) (1968),

See also, United States vy. Philadelphia Nat'l Bank, 974 0.8,

$21, 850 (1968); Pan American World Atpways v. United States,

S71 US, 206 (1968); California vo PPC, 869 U.8. 482 (1962);

United States v, Borden Co, 808 UL8, 188, 201 (1989),

United States ¥. Wire, 870 U8, 405, 414 (1962),

th ve sas!

Ec NE Re Real eo at BE OG I en NM DS »

24a

doubt whether the Commission correctly disclaimed juris-

diction over the commerce before us. But assuming, for

discussion, that the Commission was right, this is at most

a casus omissts, and the antitrust exemption or limitation

is not to be implied, but is to be furnished only when and

as directed by the legislature, which has hitherto accom-

panied such directions with substitute provisions to safe-

guard the public interest.

Finally, we turn to defendants’ argument that American

participation in unapproved forcign conferences is contem-

plated by § 14 of the Shipping Act, and hence cannot rea-

sonably be deemed governed by the antitrust laws. Such

foreign conferences do not have the primary nexus of

American contacts (supra point 5), which underlies our

ruling that the activities before us constitute foreign com-

merce within the meaning of the Sherman Act.

Reversed and remanded.

SPD Apa INS mel eae Ab Da ll Ra A AE in baa TE il I AP hy

1b

APPENDIX B

Opinion and Order of the District Ccurt for the

District of Columbia

STATEMENT OF THE CouRT AT THE CONCLUSION OF ORAL

ARGUMENT ON JUNE 2, 1967

The Court: Gentlemen, I thank you very much for your

very learned arguments.

I must say to you that prior to coming on the bench

today I have had an opportunity over the past several

days to review the pleadings very carefully and to review

the briefs which have been filed.

I don’t sce any benefit that will arise from me taking

the matter under advisement. I am prepared to rule at

this time.

I am of the opinion that the complaint does not state

facts constituting a cause of action under the Sherman

Antitrust Act and, therefore, the Court is without juris-

diction and the motions to dismiss will be granted.

Does that dispose of the other motions as well?

Mr. Mallory: It does dispose of the other motions as

well.

Mr. Sher: Yes.

The Court: Very well, thank you, gentlemen.

(Whereupon the hearing on the motions was concluded.)

omens

2b

(Filed June 9, 1967)

ORDER

Plaintiffs filed their complaint on November 18, 1966

alleging violations of Sections 1-3 of the Sherman Act, 15

U.S.C. §$ 1-3, by the named defendants.

As listed in paragraph 1 of the stipulation filed with

the Court on May 10, 1967, defendants have filed motions

contesting this Court’s jurisdiction over the subject matter

of the complaint.

Upon consideration of the legal memoranda of the par-

ties, and of the oral arguments by counsel presented

thereon on June 2, 1967, in accordance with paragraphs

1 and 2 of the aforesaid supulation, it appears that this

Court is without jurisdiction over the subject matter of this

cause.

Accordingly, it is this 9tn day of June, 1967 :

ORDERED that the complaint be, and it hereby is, dis-

missed in its entirety.

It further appears that this Court’s determination that

it is without jurisdiction over the subject matter makes it

unnecessary to consider any other motions pending in

this cause as listed in paragraphs 3 and 6 of the aforesaid

stipulation. .

JosepH C. McGarracHy

Joseph C. McGarraghy

United States District Judge

Attorney for Plaintiffs

BGT EV ro eh ene Ee ed ae oC

le

APPENDIX C

Decision of the Federal Maritime Commission

REPORT

By THe Commission: (John Harllee, Chairman; James V.

Day, Vice Chairman: George H.

Hearn and John S. Patterson, Com-

missioners)

This is a complaint case before us on exceptions to the

Initial Decision of the Examiner.

Complainant Pacif : Seafarers, Inc. (PSI), alleges that

respondents AGAFBO,' WCAFBO,? and AFBO,’ together

with their member lines, have unlawfully attempted to

drive PSI out of the Taiwan-Thailand/South Vietnam

trade. Complainant asserts that respondents (1) have

violated section 15 of the Shipping Act (the Act) by op-

erating pursuant to an agreement not filed with or ap-

proved by the Commission, (2) have violated section 18

of the Act (a) by not filing ‘their concertedly estabiished

rates with the Commission, and (b) by maintaining rates

that are so unreasonably low as to be detrimental to our

commerce, and (3) have violated section 16 First of the

Act by acting in a manner which is unduly prejudicial to

complainant.

. PSI operates a common carrier service with American

flag vessels in the Taiwan-Thailand/South Vietnam trade.

It does not offer a service between the United States or

any of its Districts or Territories or possessions on the

one hand and a foreign country on the other hand. The

principal commodity that it carries is cement and it was

these cement offerings which prompted the institution of

1 Atlantic and Gulf Coast American Flag Berth Operators.

2 West Coast American Flag Berth Operators.

3 American Flag Berth Operators.

Ye

complainant’s service. In addition to its common carrier

service, a VSI affiliate operates a charter or tramp service

in the same trade, again catering to cement principally.

The cargoes carried by PSI are entirely commercial in

nature originating in one foreign port and destined to

another foreign port. The shipping arrangements as well

as the sales of the commodities are made between foreign

principals. Aithough the U.S. Government through the

Agency for International Development (AID) ultimately

finances the sales—including the cost of water transpor-

tation—our Government in no way participates in the

transactions. Indeed, but for the cargo preference laws

which require, generally, that fifty percent of AID-financed

cargoes move in American flag bottoms, American flag

vessel participation in the movement might never have

occurred. Further, the record is bereft of any evidence

that the cement involved was cement transshipped from

the United States.

AGAFBO is a conference of American Flag carriers

which operates under approved Agreement No. 8086,

WCAFBO operates under Agreement No. 8186. Parties

to each of these agreements are permitted to act col-

lectively in the negotiation of transportation rates and

conditions of carriage respecting MSTS* cargoes (includ-

ing related shipments) to and from U.S. ports and _ be-

tween foreign ports. Agreement No. 8750, an approved

inter-conference agreement, permits meetings and discus-

sions between AGAFBO and WCAFBO. None of these

_agreements permits the signatories to agree upon rates

for either commercial or other government-sponsored car-

goes in our foreign commerce or in the foreign com-

‘merce of other nations. ABO, an association of American

flag carriers organized in the early 195v’s, is composed of

carriers who are members of either AGAFBO, WCAFBO,

or both, although membership in neither AGAFBO, nor

* Military Sea Transportation Service.

Xe

WCAFBO, is a prerequisite to AFBO membership. AirBO

purports to establish rates and conditions of carriage by

its signatories between Taiwan/Japan and Thailand, Korea,

Victnam, the Phillippines, Okinawa and Cambodia. Its

memoranda of agreed rates relate solely to commercial

cargoes in these foreign interport trades. AFBO does not

enjoy Commission approval under section 15 of the Act,

nor are its tariffs filed with the Commission.®

Apart from the asserted violations of the Act, we are

first confronted with the issue of jurisdiction. It is our

judgment that the reach of the Act and, consequently our

jurisdiction, does not extend to the matters complained of.

Admittedly, respondents entered into an agreement in

the Taiwan-Thailand/South Vietnam trade and that agree-

ment—AFBO—is the type which falls squarely within

the purview of section 15. Parties to the AFBO agree-

ment have not filed their agreement with the Commission

and have effectuated it without the Commission’s prior

approval. If our jurisdiction encompassed this trade, a

classic violation of section 15 would be established, harm

vel non to complainant notwithstanding.

While it is true that section 15 requires that:

‘‘every common carrier by water ... shall file...

a copy ... of every agreement with another such

carrier. ’’

the ‘‘common carrier by water’’ of section 15 is the en-

tity defined in section 1:

‘*The term ‘common carrier by water’ means a com-

mon carrier by water in foreign commerce or a com-

mon carrier by water in interstate commerce on the

5 PSI, likewise, has not filed with the Commission any schedule

of rates in the Taiwan-Thailand/South Vietnam trade.

OMT IS AAMC! PI IN ea TOG BE ; .

4c

high seas or the Great Lakes on regular routes from

port to port.’’

And a common carrier in foreign commerce is defined as:

‘*. .. a common carrier ... engaged in the trans-

portation by water of passengers or property between

the United States or any of its Districts, Territories,

- or possessions and a foreign country, whether in the

import or export trade....’’

Hence, the reading of section 15 which Congress obviously

intended requires that every common carrier by water in

interstate commerce and every common earrier engaged in

the transportation by water of passengers or property

between the United States or any of its Districts, Ter-

ritories, or possessions and a foreign country file with

the Commission for prior approval certain species of agree-

ments with other such carriers.

The record in this case makes perfectly clear that the

conduct complained of is and has been exercised by car-

riers in a trade or trades other than between ‘‘the United

States or any of its Districts, Territories or possessions

and a foreign country,’’ and no matter how offensive or

horrendous that conduct, it does not fall within the anthor-

ity of this Commission. There is not a modicum of evi-

dence that brings the gravamen of the complaint within

the purview of the Act. Complainants have attempted to

cross the jurisdiction barrier on two grounds.

First, we shall deal with the claim that since the car-

goes, including the cost of transportation, were financed by

AID what otherwise might have been commerce between

two (or more) foreign nations was converted to the com-

merce of the United States. We have noted, in this re-

gard, that the ocean transportation and the sales were

arranged between foreign principals and that neither AID

nor any other agency of our Government participated in

any of the commercial or shipping transactions. AID’s

5e

concern began and ended with its role as financier.® The

lending of funds by a government agency to finance wholly

foreign transactions, including occan freight, does not

convert foreign-to-foreign commerce into the foreign com-

merce of the United States, any more than would the

lending of such money by an American private financial

institution.

Our view in this regard is not unlike that generally held

with respect to our antitrust laws:

‘*. .. (I)t is clear that the mere financing by Ameri-

cans of manufacturing, mining, or other local activ-

ities abroad does not come within the Sherman Act.”?

Report of the Attorney General’s National Committee

to Study the Antitrust Laws (1955).

In short, our jurisdiction cannot be expanded or con-

tracted merely by the underlying financial arrangements

of ocean shipping.’

Finally, PSI argues alternatively that (a) AFBO itself,

is an agreement within the purview of section 15 and

should have been filed and approved before its effectua-

tion, or (b) it is part and parcel of AGAFBO and/or

WCAFBO which, as a modification thereof, should have

been filed aiid approved prior to implementation.

$“*A.LD., itself, does not procure any commodities or make

shipping arrangements. As a general rule, A.I.D. acts only in

the capacity of a financing institution.”’ Deposition of David E.

Bell, AID Administrator, Exhibit 106.

7A second argument advanced by PSI is not dissimilar from

its AID claim. Briefly, its thrust is that the mere operation of

U.S. flag vessels constitutes a “part of the commerce of the United

States.”’ No authority is found to support this assertion. We

have noted that PSI’s operation has been wholly foreign. We

believe such operation constitutes ‘‘other local activities abroad,’

Attorney General’s National Committee, supra.

oer ern On

6c

As the record establishes, AF'BO is an organization of

American flag vessels plying a trade totally within the

confines of foreign Far Eastern ports. For the simple

reason that the trade does not involve as one terminus

any port in a State, District, Territory or possessiou of

the United States, the carriers, within the AFBO con-

text cannot be deemed to be engaged in the foreign com-

merce of the United States.

Complainant’s alternative argument, although equally

defective, is more engaging. In support of its proposition

it points to the use of AGAFBO and WCAFBO offices

(and officers) for the transaction of some of AFBO’s busi-

ness and cites predecents which indicate that our juris-

diction often involves foreign-to-foreign commerce.

As the Examiner noted, the use of the ‘‘ physical organi-

zation or ‘machinery’ ’’ of the two approved agreements

by the AF'BO group is immaterial to whether or not AFBO

constitutes an agreement within the purview of section 15.

There is no relationship between AFBO on the one

hand and AGAFBO and WCAFBO on the other hand,

save an overlapping of memberships and some confusing

of the organizations administering the agreements. But

it is erystal clear that AGAFBO and WCAFBO do not

encompass the foreign-to-foreign movement of commercial

cargoes, whether or not financed or owned by our Govern-

ment. Were AGAFBO and WCAFBO to agree on rates

and conditions of cargo moving on our foreign commerce

not specifically authorized by the approved agreements,

a different result might have been reached.

The cases cited by complainant fall far short of aiding

its theories. In States Marine Lanes, Inc. v. Trans-Pacific

Freight Conf., 7 FMC 204 (1962), the Commission con-

sidered the legality of an approved neutral body provision

ic

in the context of the filed and approved agreements. The

particular tra: saction which triggered the proceeding, the

movement of oranges from Japan to Canada, was entirely

irrelevant. The real question in issue was whether con-

ference was effectuating a neutral body provision compati-

ble with the one which had been approved as a modification

to its basic or organic agreement. Upon review, the

court, in Trans-Pacific Freight Conference of Japan v.

FMC, 314 F. 2d 277 (1963), addressed itself to the ju-

risdictional issue in foreign-to-foreign commerce and con-

cluded that the neutral body’s fines were assessed not

‘‘for any act or thing done in connection with the ship-

ments from Japan to Canada.’? he court significantly

brushed aside the Conference’s contention of no jurisdic-

tion with the statement:

‘*... (W)e think that petitioners’ assertion of lack of

jurisdiction is without validity for a more fundamental

reason. When the members of the conference chose to

adopt their conference agreement and its various

amendments, they deliberately elected to enter into a

single unitary agreement ‘to promote commerce from

Japan, Korea and Okinawa to Hawaii and Pacific

coast ports of the United States and Canada.’”’ (Em-

phasis ours.)

Further, Oranje Line, et al. vy. Anchor Line Limited. 5

FMB 714 (1959), the Board noted that the trade between

Canada and the United Kingdom was encompassed ex-

plicitly by the very terms of the agreement:

“Tt is clear that in this case, where the agreements

cover both the foreign commerce of the United States

and also the intimately related foreign commerce of

Canada our jurisdiction exists.’’

In the case before us, the subject matter of the AFBO

agreement is not set forth in the AGAFBO and WCAFBO

a noe

ay | eae

Fee

8c

agreements, nor is the subject matter ‘‘intimately related’?

to our foreign commerce.®

Since we have no jurisdiction in the premises, we shall

not address ourselves to the other contentions raised by

complainants. Accordingly,

Ir Is OrvErED, That the complaint is hereby dismissed.

By the Commission.

THomas Lis!

Thomas Lisi

Secretary

8 Complainant has placed some reliance on United States v.

Anchor Line, Ltd., 232 F. Supp. 379 (1964). Involved in that

case were agreements made abroad which directly related to the

foreign commerce of the United States:

‘‘The vital principle to be applied in determining whether the

United States courts have jurisdiction over foreign-flag car-

riers who fail to file contracts entered into abroad is whether

the performance of those contracts or effectuation of those

arrangements operated in this country so as to affect our for-

eign commerce directly and materially.’? (Emphasis added.)

In the case at hand the AFBO agreement neither directly nor

materially affected our foreign commerce.

Se

1d

APPENDIX D

Statutes Involved

Sherman Antitrust Act

Act of July 2, 1890, c. 647, $1, 26 Stat. 209, 15 USC §1:

Every contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or com-

merce among the several States, or with foreign na-

tions, is declared to be illegal . .. Every person who

shall make any contract or engage in any combination

or conspiracy declared by sections 1-7 of this title to

be illegal shall be deemed guilty of a misdemeanor, and,

on conviction thereof, shall be punished by fine not

exceeding fifty thousand dollars, or by imprisonment

not exceeding one year, or by both said punishments,

in the discretion of the court.

Act of July 2, 1890, c. 647, § 2, 26 Stat. 209, 15 USC § 2:

Every person who shall monopolize, or attempt to

monopolize, or combine or conspire with any other

person or persons, to monopolize any part of the trade

or commerce among the several States, or with fereign

nations, shall be deemed guilty of a misdemeanor, and,

on conviction thereof, shali be punished by fine not ex-

ceeding fifty thousand dollars, or by imprisonment not

exceeding one year, or by both said punishwents, in the

discretion of the court.

FD ER. LE PL Oe OS \Pee

i as Ae Ste

Shipping Act of 1916

Act of September 7, 1916, c. 451, § 1, 39 Stat. 728, 46 USC

§ 801:

When used in this chapter:

The term ‘‘common carrier by water in foreign com-

merce’’ means a common cxrrier, except ferryboats running

on regular routes, engaged in the transportation by water

of passengers or property between the United States or

any of its Districts, Territories, or possessions end a for-

{

i

t

®

t

t

f

att |

eign country, whether in the import or export trade: Pro-

vided, That a cargo boat commonly called an ocean tramp

shall not be deemed such ‘common carrier by water in

foreign commerce,”?

The term ‘‘common earricr by water in interstate com.

merece’? means a common carrier engaged in the transporta-

tion by water of passengers or property on the high seas

or the Great Lakes on regular routes from port to port

between one State, Territory, District, or possession of the

United States and any other State, Territory, District, or

possession of the United States, or between places in the

same Territory, District, or possession.

The term ‘‘common carrier by water’? means a common

carrier by water in foreign commerce or a common carrier

by water in interstate commerce on the high seas or the

(reat Lakes on regular routes from port to port.

The term ‘other person subject to this chapter’? means

any person not included in the term ‘common carrier by

water,’’ carrying on the business of forwarding or furnish-

ing wharfage, dock, warchouse, or other terminal facilities

in connection with a common carrier by water.

The term ‘person’? includes corporations, partnerships,

and associations, existing under or authorized by the laws

of the United States, or any State, Territory, District, or

possession thereof, or of any foreign country.

The term ‘Vessel’? includes all water craft and ether

artificial contrivances of whatever description and at what-

ever stage of construction, whether on the stocks or

launched, which are used or are capable of being or are

intended to be used as a means of transportation on water,

The term ‘documented under the laws of the United

States’’, means ‘registered, enrolled, or licensed under the

laws of the United States.’’

fd

Act of September 7, 1916, « 451, § 14a, as added June h,

1920, ©, 250, § 20, 41 Stat. 996, and amended, 46 USC

$818;

The Federal Maritime Board upon its own initiative may,

or upon complaint shall, after due notice to all parties in

interest and hearing, determine whether any person, not

a citizen of the United States and engaged transporta-

tion by water of passengers or property—

(1) Has violated any provision of section £12 of this

title, or

(2) Is a party to any combination, agreement, or under-

standing, express or implied, that involves in respect to

transportation of passengers or property between foreign

ports, deferred rebates or any other unfair practice desig.

nated in section 812 of this title, and that exeludes from

admission upon equal terms with ell other parties thereto,

a common carrier by water which ‘s a citizen of the United

States and which has applied for such admiasion,

Tf the Board determines that any such person has

violated any such provision or is a party to any such

combination, agreement, or understanding, the Board shal!

thereupon certify such fact to the Commissioner of Cus-

toms, The Commissioner of Customs shall thereafter re-

fuse such person the right of entry for any ship owned or

operated by him or by any carrier directly or indirectly

controlled by him, into any port of the United States, or

any Territory, District, or possession thereof, until the

Board certifies that the violation has ceased or such com-

bination, agreement, or understanding has been terminated.

Act of September 7, 1916, « 451, § 15, 39 Stat. 738, 46 USC

§ 814;

* * * * . * ” * . .

Every common carrier by water, or other person subject

to this chapter, shall Mle immediately with the Commission

OO RR RE OTe Gene Ore OR ne ae gr

4d

a true copy, or, if oral, a true and complete memorandum,

of every agreement with another such carrier or other per-

son subject to this chapter, or modification or cancellation

thereof, to which it may be a party or conform in whole or

in part, fixing or regulating transportation rates or fares;

giving or receiving special rates, accommodations, or other

special privileges or advantages; controlling, regulating,

preventing, or destroying competition; pooling or appor-

tioning earnings, losses, or traffic; allotting ports or re-

stricting or otherwise regulating the number and charscter

of sailings between ports; limiting or regulating in any

way the volume or character of freight er passenger traffic

to be carried; or in any manner providing for an exclusive,

preferential, or cooperative working arrangement. The

term ‘‘agreement”’ in this section includes understandings,

conferences, and other arrangements.

The Commission shall by order, after notice and hearing,

disapprove, cancel or modify any agreement, or any modi-

fication or cancellation thereof, whether or not previously

approved by it, that it finds to be unjustly discriminatory

or unfair as between carriers, shippers, exporters, import-

ers, or ports, or between exporters from the United States

and their foreign competitors, or to operate to the detri-

ment of the commerce of the United States, or to be con-

trary to the public interest, or to be in violation of this

chapter, and shall approve all other agreements, modifica-

tions, or cancellations. No such agreement shall be ap-

proved, nor shall continued approval be permitted for any

agreement (1) between carriers not members of the same

conference or conferences of carriers serving different

trades that would otherwise be naturally competitive, un-

less in the case of agreements between carriers, each car-

rier, or in the case of agreement between conferences, each

conference, retains the right of independent action, or (2)

in respect to any conference agreement, which fails to pro-

vide reasonable and equal terms and conditions for admis-

sion and readmission to conference membership of other

od

qualified carriers in the trade, or fails to provide that any

member may withdraw from membership upon reasonable

notice without penalty for such withdrawal.

The Commission shall disapprove any such agreement,

after notice and hearing, on a finding of inadequate polie-

ing of the obligations under it, or of failure or refusal to

adopt and maintain reasonable procedures for promptly

and fairly hearing and considering shippers’ requests and

complaints.

Any agreement and any modification or cancellation of

any agreement not approved, or disapproved, by the Com-

mission shall be unlawful, and agreements, modifications,

and cancellations snall be lawful only when and as long as

approved by the Commission; before approval or after dis-

approval it shal! be unlawtul to carry out in whole or in

part, directly or indirectly, any such agreement, modifica-

tion, or cancellation; except that tariff rates fares, and

charges, and classifications, rules, and regulations explana-

tory thereof (including changes in special rates and charges

covered by section 813a of this title which do not involve a

change in the spread between such rates and charges and

the rates and charges applicable to noncontract shippers)

agreed upon by approved conferences, and changes and

amendments thereto, if otherwise in accordance with law,

shall be permitted to take effect without prior approval

upon compliance with the publication and filing require-

ments of section 817(b) of this title and with the provisions

of any regulations the Commission may adopt.

Every agreement, modification, or cancellation lawful

under this section, or permitted under section 813a of this

title, shall be excepted from the provisions of sections 1-11

and 15 of Title 15, and amendments and Acts supplement-

ary thereto.

Whoever violates any provision of this section or of sec-

tion 813a of this title shall be liable to a penalty of not

more than $1,000 for each day such violation continues, to

ThE

6d

be recovered by the United States in a civil action. Pro-

vided, however, That the penalty provisions of this section

shall not apply to leases, licenses, assignments, or other

agreements of similar character for the use of terminal

property or facilities which were entered into before the

date of enactment of this Act, and, if continued in effect

beyond said date, submitted to the Federal Maritime Com-

mi:sion for approval prior to or within ninety days after

the enactment of this Act, unless such leases, licenses, as-

signments, or other agreements for the use of terminal

facilities are disapproved, modified, or canceled by the

Commission and are continued in operation without regard

to the Commission’s action thereon. The Commission shall

promptly approve, disapprove, cancel, or modify each such

agreement in accordance with the provisions of this section.