Justice Department Urged FMC to Block OCEAN Alliance Over Antitrust Concerns

The Justice Department's Antitrust Division pushed the Federal Maritime Commission to block the recently approved OCEAN Alliance (see 1610240016) in comments submitted to the agency on the proposed agreement prior to approval (here). "Applying well-accepted antitrust principles, the proposed alliance consolidation raises serious competitive concerns," the DOJ said. "The collaboration proposed here contemplates such close cooperation among its members that competition among them will be largely eliminated." The alliance includes COSCO Shipping, CMA CGM, Evergreen Marine, and Orient Overseas Container Line Limited.

The FMC "should seek to enjoin the proposed OCEAN Alliance Agreement outright," said the comments, which are dated Sept. 19 but were released by the DOJ on Nov. 7. Outside an FMC block of the deal, it's "critical that the Commission ensure that certain provisions that raise particular competitive concerns are modified or eliminated," the DOJ said. The Antitrust Division submission includes a number of suggested changes to help allay antitrust concerns. Among specific concerns mentioned were information-sharing abilities and "coordinated negotiation of supply agreements." The FMC did make a number of changes over anticompetitive worries, as outlined on Nov. 8 by FMC Commissioner William Doyle in a news release (here), though it's unclear whether the changes address the DOJ's objections. The DOJ and FMC didn't immediately comment.

The comments also note that the DOJ "has long taken the position that the general antitrust exemption for international ocean shipping carrier agreements is no longer justified" and "to the extent that ocean carrier agreements continue to be immunized under the 1984 Shipping Act, it is important for the agreements to be limited and precise, as it is well-settled that antitrust immunities should be construed as narrowly as possible." Despite the immunity provisions, "Congress expressly gave the Commission authority to protect the public from agreements that will result in an unreasonable increase in price or reduction in service," the DOJ said.

Future market concentration is also of concern, the DOJ said. "Increases in concentration are of particular concern where, as in the shipping context, there is evidence of past collusion or anticompetitive behavior," it said. Notably, the FMC received a filing from Asian and European operators for another agreement, known as THE Alliance, on Nov. 7, The Wall Street Journal reported (here). "Four companies (three of which are ocean carriers slated to join THE Alliance) have pled guilty, and eight corporate executives have been indicted or pled guilty in connection with a worldwide conspiracy involving price fixing, bid rigging and market allocation among providers of roll-on, roll-off cargo shipping," the DOJ said in its comments as evidence of potentially anticompetitive behaviors. FMC Chairman Mario Cordero recently discussed industry consolidation and pointed to the OCEAN Alliance as approved as a successful balance of "the concerns of the shipping public" and the efficiencies created by such an alliance, during a speech about the significant challenges facing the shipping industry (see 1611040029).