On Feb. 28, Rep. Jim Costa (D-Calif.) introduced proposed legislation[1] titled the Ocean Shipping Antitrust Enforcement Act (the Act), which would repeal 46 U.S.C. § 40307,[2] a statute conferring certain antitrust exemptions to ocean common carriers. The proposed legislation has six Democratic and two Republican co-sponsors as of March 8.[1]

Antitrust Exemptions for Shipping Carriers

Ocean shipping carriers have enjoyed exceptions to federal antitrust law since the Shipping Act of 1916. The Shipping Act was amended in 1961, and further amended by the Shipping Act of 1984 and the Ocean Shipping Reform Act of 1998.[3] The Biden administration has characterized these amendments as “expanding the antitrust immunity while weakening ocean carriers’ obligation to publicly disclose prices and fees and treat business and their customers fairly.”[4]

Currently, there are exemptions from antitrust law for agreements on shipping rates, pooling arrangements and shipping route allocations if those agreements are first submitted to the Federal Maritime Commission (FMC).[5] The FMC exercises oversight of industry conduct and establishes rules and regulations. Furthermore, under 46 U.S.C. § 40307(d), private parties may not recover damages under Section 4 of the Clayton Act for violations of the Shipping Act. Costa’s proposed legislation would eliminate these exemptions.

Increased Antitrust Scrutiny

The Act comes amid a broader push by the Biden administration. In 2021, the FMC and Department of Justice entered into a Memorandum of Understanding that established a framework to enhance cooperation in antitrust enforcement.[6] On Feb. 28, 2022, the same day that the Ocean Shipping Antitrust Enforcement Act was introduced, the FMC and Department of Justice reaffirmed this commitment to cooperate, which includes facilitating information exchange between attorneys, economists and technical experts for enforcement of purported violations of the Shipping Act and the Sherman and Clayton Acts.[7]

In President Biden’s State of the Union, he announced a “crackdown” on ocean carriers, highlighted a lack of competition and targeted “foreign-owned companies” that “raised prices by as much as 1,000% and made record profits.”[8] The White House released a corresponding statement arguing that global alliances of ocean carriers control 80% of global container ship capacity and 95% of East-West trade lines, and that these ocean carriers have significantly increased rates and fees since the start of the COVID-19 pandemic.[9] The White House trumpeted an audit program established by the FMC to address complaints about carriers charging unfair fees and stated that the FMC had launched 42 cases investigating port congestion charges.[10] The president also asked Congress to pass “reforms that address the current antitrust immunity for ocean shipping alliances.”[11]

The Biden administration and Democrats in Congress have pushed for antitrust law reform and greater antitrust enforcement more broadly. For example, as covered in a prior client alert, last year Sen. Amy Klobuchar (D-Minn.) introduced the Competition and Antitrust Law Enforcement Reform Act of 2021, which would overhaul U.S. antitrust law.[12] Last July, Biden issued an executive order articulating an aggressive antitrust policy that instructed agencies to increase enforcement and promote competition.[13] The Biden administration has sought to address inflation with antitrust enforcement, including by instructing the FMC to investigate price gouging.[14] In December, the chair of the FMC, Daniel B. Maffei, said that market forces were driving price increases but that the focus on antitrust had “upped [the FMC’s] credibility” and discouraged anticompetitive behavior.[15]   

Conclusion

If enacted, the Ocean Shipping Antitrust Enforcement Act would remove existing antitrust exemptions for ocean shipping carriers. Regardless of whether the legislation passes, however, it is clear that the Biden administration is prioritizing antitrust enforcement and that both the White House and Congress are focused on shipping carriers amid rising inflation and supply chain problems. Shipping carriers should be alert to the increased likelihood of enforcement actions and investigations. 


[1] Ocean Shipping Antitrust Enforcement Act, H.R. 6864, 117th Cong. § 2(a) (2022), https://www.congress.gov/bill/117th-congress/house-bill/6864/text?r=1&s=1

[2] 46 U.S.C. § 40307, https://www.govinfo.gov/app/details/USCODE-2020-title46/USCODE-2020-title46-subtitleIV-partA-chap403-sec40307&collectionCode=USCODE

[3] Organisation for Economic Co-operation and Development, Directorate for Financial and Enterprise Affairs Competition Committee, Working Party No. 2 on Competition and Regulation – Competition Issues in Liner Shipping, June 19, 2015, ¶¶ 3-10, https://www.justice.gov/atr/file/823411/download

[4] The White House Briefing Room, Fact Sheet: Lowering Prices and Leveling the Playing Field in Ocean Shipping, Press Release, Feb. 28, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-lowering-prices-and-leveling-the-playing-field-in-ocean-shipping/

[5] Organisation for Economic Co-operation and Development, Directorate for Financial and Enterprise Affairs Competition Committee, Competition Enforcement and Regulatory Alternatives – Note by the United States, June 7, 2021, ¶ 12, https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-international-competition-fora/competition_enforcement_and_regulatory_alternatives_us_submission.pdf; see 46 U.S.C. § 40301.

[6] The United States Department of Justice, Office of Public Affairs, Justice Department and Federal Maritime Commission Sign Memorandum of Understanding to Support Interagency Collaboration, Press Release, July 12, 2021, https://www.justice.gov/opa/pr/justice-department-and-federal-maritime-commission-sign-memorandum-understanding-support

[7] The United States Department of Justice, Office of Public Affairs, Justice Department and Federal Maritime Commission Reaffirm and Strengthen Partnership to Promote Fair Competition in the Shipping Industry, Press Release, Feb. 28, 2022, https://www.justice.gov/opa/pr/justice-department-and-federal-maritime-commission-reaffirm-and-strengthen-partnership

[8] The White House Briefing Room, Remarks of President Joe Biden – State of the Union Address As Prepared for Delivery, Speeches and Remarks, March 1, 2022, https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/03/01/remarks-of-president-joe-biden-state-of-the-union-address-as-delivered/

[9] The White House Briefing Room, Fact Sheet: Lowering Prices and Leveling the Playing Field in Ocean Shipping, Press Release, Feb. 28, 2022, https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/fact-sheet-lowering-prices-and-leveling-the-playing-field-in-ocean-shipping/

[10] Id.

[11] Id.

[12] Daniel B. Goldman and Steven S. Sparling, The Potential Impact of the Competition and Antitrust Law Enforcement Reform Act of 2021 on Antitrust Enforcement and Private Antitrust Litigation, Kramer Levin Client Alerts, March 18, 2021, https://www.kramerlevin.com/en/perspectives-search/the-potential-impact-of-the-competition-and-antitrust-law-enforcement-reform-act-of-2021-on-antitrust-enforcement-and-private-antitrust-litigation.html

[13] The White House Briefing Room, Executive Order on Promoting Competition in the American Economy, Presidential Actions, July 9, 2021, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/

[14] Jim Tankersley and Alan Rappeport, As Prices Rise, Biden Turns to Antitrust Enforcers, The New York Times, Dec. 25, 2021, https://www.nytimes.com/2021/12/25/business/biden-inflation.html

[15] Id.