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  May 9th, 2017 | Written by

Clarifying FMC Action on Ocean Carrier Agreement

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  • FMC rejected a Tripartite Agreement among Japanese carriers.
  • FMC made it very clear that it was rejecting an arrangement among Japanese carriers on jurisdictional grounds.
  • The FMC does have a role in enforcing US competition policy

On May 2, the Federal Maritime Commission refused to approve a Tripartite Agreement filed by the Japanese carriers Kawasaki Kisen Kaisha, Ltd (K Line), Mitsui O.S.K. Lines (MOL), and Nippon Yusen Kaisha (NYK).

The FMC made it very clear from the beginning that it was rejecting the arrangement on jurisdictional grounds. Because the commission saw the agreement as the first step towards a merger, and since the FMC lacks the authority to pass on the lawfulness of company mergers, it saw the Tripartite Agreement as outside of its area of regulation.

Nonetheless, some media reports since then have characterized the action as a rejection of the merger while others reported that the FMC’s rejection suggested that the carriers were involved in activities that violated antitrust laws. Global Trade Daily, frankly, regarded this as a non-story, because of the FMC’s clarity on the matter, until other outlets muddied the waters.

The FMC’s authority is derived from the Shipping Act, and, in that context, does have a role in enforcing United States competition policy by reviewing alliance and other agreements filed with the commission by carriers, ports, ,and others to make sure they do not inhibit competition. But it is the Department of Justice, and not the FMC, that passes on the legality of proposed mergers.

Since the FMC saw this agreement as a first step towards a merger, which is outside its jurisdiction, it refused to approve it. Here’s what the FMC said on May 2:

“The Shipping Act does not provide the Federal Maritime Commission with authority to review and approve mergers. After careful consideration, the Commission determined that parties to the Tripartite Agreement were ultimately establishing a merged, new business entity and that action is among the type of agreements excluded from FMC review….These parties were seeking authority to share information with each other in advance of a new business entity being formed under the agreement next year.”

Acting Chairman Michael Khouri, commenting on the media reports said: “It is unfortunate that such misinformation is circulating in the trade press about the commission’s deliberations in this matter suggesting that the FMC considered whether the authority sought by parties would violate antitrust laws administered by other competition agencies. To our knowledge, these corporations came to the commission in good faith with the single purpose of trying to comply with all US laws. The commission made only one finding—that the Tripartite Agreement falls outside the jurisdiction of the Shipping Act of 1984….The Shipping Act expressly excludes acquisition agreements from the act’s coverage.”