Practices of the Trans-Atlantic Agreement and its Members With Respect to Independent Action; Order of Investigation and Hearing

FEDERAL MARITIME COMMISSION

[Docket No. 94-29]

Practices of the Trans-Atlantic Agreement and its Members With

Respect to Independent Action; Order of Investigation and Hearing

The Trans-Atlantic Agreement (``TAA'' or ``Agreement''), FMC

Agreement No. 202-011375, first became effective August 31, 1992,

pursuant to the Shipping Act of 1984 (``1984 Act''), 46 U.S.C. app.

1701 et seq. Sixteen ocean common carriers, identified in Appendix A

hereto, currently are members of the Agreement.\1\

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\1\On October 24, 1994, additional modifications of the basic

agreement were permitted by the Federal Maritime Commission

(``Commission'') to take effect under the 1984 Act, among which

amendments was a change of the agreement's name to the Trans-

Atlantic Conference Agreement. While officially renamed to clarify

its designation as a conference, the carrier members continue to

refer to the Agreement as TAA.

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By Order issued July 27, 1994, the Commission instituted Fact

Finding Investigation No. 21, entitled Activities of the Trans-Atlantic

Agreement and Its Members. In the Fact Finding Order, the Commission

directed the designated Investigative Officers to investigate, inter

alia, allegations that TAA or its members may have reached agreements

or taken other actions which discourage or suppress the right of

members to take independent action (``IA'') on rate or service items.

The Fact Finding Order also provides that the Investigative Officers

are not precluded from developing facts related to any possible

violations of the 1984 Act that may be uncovered in the course of the

proceeding. In commencing the above nonadjudicatory investigation, the

Commission's objective was to determine whether sufficient evidence

exists to warrant formal adjudicatory, assessment or injunctive

proceedings for alleged violations of the 1984 Act by the TAA or its

carrier members.

Through responses to subpenas issued by the Investigative Officers

and to an order issued by the Commission pursuant to section 15 of the

1984 Act, 46 U.S.C. app. 1714, through testimony in hearings held in

connection with the Fact Finding Investigation, and through other

means, it now appears to the Commission that carrier members of the TAA

engaged in practices which may have artificially constricted the

members' right of independent action. Testimony from numerous shipper

witnesses appearing in the hearing failed to identify any meaningful IA

rate activities taken by a TAA member, despite shipper requests. To the

contrary, shippers have testified that they had been informed by TAA

carrier representatives that independent action would not, or could not

be taken under TAA.

In addition to shipper testimony concerning the absence of IA,

documents have been obtained which indicate that TAA members may have

agreed to a procedure requiring that rate matters be tabled for

discussion at a conference meeting before filing an IA rate, and that

TAA members expected and demanded that other members adhere to this IA

procedure. Also, it appears that TAA members may have agreed to limit

their authority to take IAs to one or two designated high level

executives, and that TAA's Executive Director may have been authorized

by the members to cancel any tariff filing that he deemed not to be in

the best interests of TAA. Such strategies appear designed to inhibit

and curtail IA rather than facilitate its exercise.

It appears that these alleged agreements or other similar practices

designed to constrict IA may violate section 5(b)(8), 46 U.S.C. app.

1704(b)(8), which requires that every conference agreement must provide

that any conference member may take IA on any rate or service item

required to be filed in a tariff. Such agreements or practices also may

violate section 10(a) (2) or (3) of the 1984 Act,\2\ 46 U.S.C. app.

1709(a) (2) or (3). In addition, such practices may violate provisions

of the Commission's regulations designed to protect the integrity of

the right of independent action within conferences. In particular, 46

CFR 572.801 prohibits a conference from prescribing notice periods for

adopting, withdrawing, postponing, canceling or taking similar actions

on independent action matters; from requiring that notice of

independent action be given by the proposing member to the other

parties to the agreement; from requiring the proposing member to attend

a conference meeting, to submit any further information other than that

necessary to accomplish the filing of the independent tariff item, or

to comply with any other procedure for the purpose of explaining,

justifying, or compromising the proposed independent action; and from

failing to include an IA rate or service item in the conference tariff

effective no later than 10 days after receipt of an IA notice, 46 CFR

572.801(b)(2), (c), and (d).

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\2\Section 10(a) (2) and (3) provide that a carrier or

conference may not:

(2) operate under an agreement required to be filed under

section 5 of this Act that has not become effective under section 6,

or that has been rejected, disapproved or canceled; or

(3) operate under an agreement required to be filed under

section 5 of this Act except in accordance with the terms of the

agreement or any modifications made by the Commission to the

agreement.

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In commencing the Fact Finding Investigation, the Commission noted

that the right of independent action is a critical ingredient of the

compromise reflected in the 1984 Act between carrier and shipper

interests and has been guarded carefully by the Commission. In the

Conference Report accompanying the 1984 Act, H.R. Rep. No. 98-600, 98th

Cong., 2d Sess., 34 (1984), the conferees state their belief ``that

potential reductions in competition will be at least partially offset

by a member carrier's right of independent action and ability to enter

and leave the conference freely.'' It appears that TAA may have

suppressed that right and, thus, removed a competitive counterbalance

to the conference's ability and desire to increase rates.

The Commission recognizes that its action instituting this formal

adjudication necessarily precludes that opportunity to obtain

additional testimony on this subject from conference and carrier

witnesses in the context of the ongoing Fact Finding Investigation. The

Commission is taking action at this time because it believes that there

is sufficient evidence to warrant such action, and because of the

importance of this issue to effective Commission regulation of

conferences. The initiation of a formal adjudicatory proceeding will

provide the full measure of procedural due process accorded respondents

in adjudicatory matters generally.

Now therefore, it is ordered, That pursuant to sections 5, 10, 11,

and 13 of the 1984 Act, 46 U.S.C. app. 1704, 1709, 1710, and 1712, an

investigation is instituted to determine:

(1) Whether the TAA and its carrier members, jointly or severally,

violated section 5(b)(8) of the 1984 Act by not complying with the

mandatory independent action provision of that section of the 1984 Act

and, if found to be operating in violation of section 5(b)(8) of the

1984 Act, why the Agreement should not be disapproved, canceled or

modified by the Commission;

(2) Whether the TAA and its carrier members, joint or severally,

violated section 10(a)(2) of the 1984 Act by operating under an

agreement violative of the mandatory independent action provisions of

section 5(b)(8) of the Shipping Act of 1984, which agreement was never

filed with the Commission under section 5 and made effective under

section 6 of the 1984 Act and, if found to be operating in violation of

section 10(a)(2) of the 1984 Act, why the Agreement should not be

disapproved, canceled or modified by the Commission;

(3) Whether the TAA and its carrier members, jointly or severally,

violated section 10(a)(3) of the 1984 Act by operating under an

agreement required to be filed under section 5 in a manner which was

not in accordance with the terms of the agreement, by failing to comply

with the mandatory independent action provisions of section 5(b)(8) of

the Shipping Act of 1984 and, if found to be operating in violation of

section 10(a)(3) of the 1984 Act, why the Agreement should not be

disapproved, canceled or modified by the Commission;

(4) Whether the TAA and its carrier members, jointly or severally,

violated the provisions of 46 CFR 572.801 by operating under an

agreement violative of the mandatory independent action provisions

thereof and, if found to be operating in violation of said regulations

of the Commission, why the Agreement should not be disapproved,

canceled or modified by the Commission;

(5) Whether, in the event violations of sections 5(b)(8), 10(a)(2),

or 10(a)(3) of the 1984 Act are found, civil penalties should be

assessed and, if so, the amount of such penalties; and

(6) Whether, in the event violations are found, an appropriate

cease and desist order should be issued.

It is further ordered, That a public hearing be held in this

proceeding and that this matter be assigned for hearing before an

Administrative Law Judge of the Commission's Office of Administrative

Law Judges at a date and place to be hereafter determined by the

Administrative Law Judge in compliance with Rule 61 of the Commission's

Rules of Practice and Procedure, 46 CFR 502.61. The hearing shall

include oral testimony and cross-examination in the discretion of the

Presiding Administrative Law Judge only after consideration has been

given by the parties and the Presiding Administrative Law Judge to the

use of alternative forms of dispute resolution, and upon a proper

showing that there are genuine issues of material fact that cannot be

resolved on the basis of sworn statements, affidavits, depositions, or

other documents or that the nature of the matters in issue is such that

an oral hearing and cross-examination are necessary for the development

of an adequate record;

It is further ordered, That TAA (Agreement No. 202-011375) and its

carrier members specified in Appendix A are designated respondents in

this proceeding;

It is further ordered, That the Commission's Bureau of Hearing

Counsel is designated a party to this proceeding;

It is further ordered, That notice of this Order be published in

the Federal Register, and a copy be served on parties of record;

It is further ordered, That other persons having an interest in

participating in this proceeding may file petitions for leave to

intervene in accordance with Rule 72 of the Commission's Rules of

Practice and Procedure, 46 CFR 502.72;

It is further ordered, That all further notices, orders, and/or

decisions issued by or on behalf of the Commission in this proceeding,

including notice of the time and place of hearing or prehearing

conference, shall be served on parties of record;

It is further ordered, That all documents submitted by any party of

record in this proceeding shall be directed to the Secretary, Federal

Maritime Commission, Washington, DC 20573, in accordance with Rule 118

of the Commission's Rules of Practice and Procedure, 46 CFR 502.118,

and shall be served on parties of record;

It is further ordered, That in accordance with Rule 61 of the

Commission's Rules of Practice and Procedure, the initial decision of

the Administrative Law Judge shall be issued by August 23, 1995 and the

final decision of the Commission shall be issued by November 23, 1995.

Joseph C. Polking,

Secretary.

Appendix A

Trans-Atlantic Agreement, Meadows Office Complex, 201 Route 17

North, Rutherford, NJ 07070

Polish Ocean Lines, 1001 Durham Ave., South Plainfield, NJ 07080

Neptune Orient Lines Ltd., c/o Tricom Shipping Agency, 15 Exchange

Place, 7th Floor, Jersey City, NJ 07302

Mediterranean Shipping, Company S.A., 420 5th Avenue, 8th Floor, New

York, NY 10008-2702

DSR/Senator Joint Service, 50 Cragwood Rd., South Plainfield, NJ

07080

Sea-Land Service, Inc., 150 Allen Road, Liberty Corner, NJ 07938

P&O Containers Limited, One Meadowlands Plaza-12th Fl., E.

Rutherford, NJ 07073

Hapag-Lloyd AG, 399 Hoes Lane, Piscataway, NJ 08854

Orient Overseas Container Line, 4141 Hacienda Drive, Pleasanton, CA

90731

Atlantic Container Line AB, 50 Cragwood Road, South Plainfield, NJ

07080

A.P. Moller-Maersk Line, Giralda Farms, P.O. Box 880, Madison, NJ

07940-0880

Nedlloyd Lijnen BV, c/o Nedlloyd Lines (USA) Corp., 2100 RiverEdge

Pkwy, Ste. 300, Atlanta, GA 30328-4656

Nippon Yusen Kaisha, NYK Line, 300 Lighting Way, 5th Floor,

Secaucus, NJ 07094

Transportacion Maritima, Mexicana, S.A. de C.V., c/o Trans-America

S.S. Agency, 140 W. 6th Street, San Pedro, CA 90731

Tecomar S.A. de C.V., c/o Phoenician Int'l Shipping, 2350 N. Belt

East, Suite 720, Houston, TX 77032

Cho Yang Shipping Co. Ltd., 301 Route 17 North, 6th Floor,

Rutherford, NJ 07070

Hanjin Shipping Co., Ltd., 1521 Pier C Street, Long Beach, CA 90813

[FR Doc. 94-29407 Filed 11-29-94; 8:45 am]

BILLING CODE 6730-01-M