WASHINGTON — A House lawmaker wants to give federal maritime regulators more power to crack down on collusive shipping agreements among foreign ocean carriers.

The Ocean Shipping Competition Enforcement Act, introduced on Monday by Rep. John Garamendi, D-Calif., would allow the Federal Maritime Commission to block any agreements among carriers and marine terminal operators found to be unduly anticompetitive without having to first obtain a federal court order.

The FMC currently cannot on its own block an agreement that it determines to be unreasonably anticompetitive. Instead, it must petition the U.S. District Court for the District of Columbia and persuade the court to do so. If the court disagrees with the FMC’s assessment, the agreement automatically becomes effective.

“The ocean shipping industry was the last transportation sector deregulated by Congress in 1984,” Garamendi said in introducing his bill. “Because of that, today the industry is now dominated by nine foreign-flagged ocean liners that openly collude under three carrier alliances handling some 80% of cargo. After reforming our nation’s ocean shipping laws for the first time in nearly a quarter century, Congress must ensure that the Federal Maritime Commission can do its job and fully enforce the law.

“Americans expect fair, competitive markets with good government, and that is exactly what our bipartisan bill would ensure,” he added.

Garamendi’s legislation follows a request by FMC Commissioners Max Vekich and Carl Bentzel asking Congress to change the ocean shipping laws that currently force the FMC to seek remedies in federal court.

“Experience has shown that this process is cumbersome and time-consuming; and some would even argue designed to impede the Commission’s oversight of agreements,” Vekich and Bentzel wrote in December in a letter to congressional leaders.

“Specifically, we urge legislation to amend the existing statutory review process to allow the Commission to determine that an agreement violates [shipping regulations] and to prohibit the parties from operating pursuant to the agreement,” they stated.

“The FMC’s determination could then be subject to appeal to the United States Court of Appeals for the District of Columbia Circuit. The parties who are seeking to operate pursuant to the agreement would have the opportunity of demonstrating that the agreement is not unreasonably anti-competitive.”

Garamendi and Rep. Dusty Johnson, R-S.D., have been leading a bipartisan effort in the House to fine-tune and build upon last year’s Ocean Shipping Reform Act “to fix the global supply chain crunch by reforming the ocean shipping industry to better protect American businesses and consumers from price gouging by foreign-flagged ocean liners,” according to Garamendi.

Those efforts include the reintroduction in March of the Ocean Shipping Antitrust Enforcement Act, which would repeal foreign ocean carriers’ exemption from all federal antitrust laws and address unfair practices.

But the World Shipping Council, which represents foreign-flagged container liners, takes issue with the proposed changes.

Bud Darr, executive vice president of MSC, the world’s largest container line company, spoke on behalf of WSC at a hearing in Washington last month and said the proposal to end carrier antitrust exemptions was “fraught with quite a bit of peril and unintended consequences.”

As for the Ocean Shipping Competition Enforcement Act, WSC President and CEO John Butler asserted that it is “built on the false premise that ocean carriers jointly set rates. They do not,” Butler told FreightWaves when asked to comment.

“The carrier agreements under the Shipping Act are used to share space on ships, which provides more services to more ports (including small and medium size ports) in the most efficient way possible. This benefits U.S. importers, exporters, and consumers. The Federal Maritime Commission has a full suite of oversight tools to make sure that there are no negative effects on competition, and the FMC itself has found that the industry is fiercely competitive. This bill is a solution in search of a problem.”

Related articles:

China in crosshairs of new ocean shipping reforms

Exporters raise concerns about ocean carrier market power

How will Maersk-MSC split redraw container shipping landscape? 

Click for more FreightWaves articles by John Gallagher.

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