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            june 20, 2019

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US revises Shipping Act to prevent alliances becoming all powerful


US President Donald Trump has signed into law a revised version of the Shipping Act that shields US terminal operators, harbour pilots, tug boat operators, bunkering and equipment suppliers against potential anti-competitive practices by the three carrier alliances.
According to law firm Holland & Knight, the new legislation protects such suppliers "from being forced to accept pricing from the ocean carriers in concerted action that will threaten their long-term sustainability and impede future investment in infrastructure and technology," reported American Shipper.
The legislation was drafted in response to consolidation in the global container shipping industry and is contained in the US Federal Maritime Commission Authorisation Act of 2017, which was incorporated into the Frank LoBiondo Coast Guard Authorisation Act of 2018 that the US president signed last week.
In a commentary, Holland & Knight says the law contains "the first substantive revision" to the Shipping Act of 1984 since the Ocean Shipping Reform Act was enacted in 1998.
A string of mergers and acquisitions has swept through the ocean liner industry over the past two decades and the major east-west trade lanes are now dominated by the three major carrier alliances: 2M, Ocean Alliance and THE Alliance.
Speaking in May 2017 during a mark-up of the bill, the then-chairman of the House Coast Guard and Maritime Transportation Committee, Duncan Hunter said the bill would "eliminate any opportunities for port service providers to be disadvantaged in any negotiations with ocean carriers."
Oregon Democratic Congressman Peter DeFazio said revisions to the law were needed because the Shipping Act is "not keeping up with the massive changes in the shipping industry, the so-called alliances, these new giant conglomerates have the potential for inordinate bargaining power which could diminish our domestic industry even further".
The law grants the Federal Maritime Commission authority to investigate any ocean carrier alliances that engage in anti-competitive action during negotiations with other maritime industry players such as stevedores and marine terminal operators, tug boat companies that berth ships and bunkering companies.
Holland & Knight highlighted these provisions: The FMC must review the effects of alliances on an annual basis and include this information in its report to Congress; and carrier alliances are prohibited from engaging in collective negotiation that would result in excessive anti-competitive impacts (ie. unsustainable rates, reductions in capacity).
In addition, the FMC will consider the aggregate effect of carrier alliance agreements on competition when determining whether to seek injunctive relief against certain activities; and carriers cannot participate in both a rate discussion and vessel sharing agreement operating in the same trade if such participation results in a reduction in service or increase in transportation cost.
Holland & Knight said the law "grants the FMC authority to seek injunctive relief against actions of regulated entities that 'substantially lessen competition in the purchasing of certain covered services.'" It also expands the scope of factors the FMC must consider when seeking injunctive relief to include the aggregate effect of agreements on competition, rather than reviewing the agreements' isolated impacts.

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