UPDATE: The End of the Ocean Carriers’ Antitrust Exemption?
President Joe Biden’s call for shipping reform during his State of Union address is the latest indicator that the longstanding antitrust exemption for ocean carriers may be running aground.
On January 7, 2022, this blog asked whether supply chain delays and skyrocketing container shipping prices could lead to the end of ocean carriers’ historical immunity from the antitrust laws under the Shipping Act of 1916. Given events in the ensuing weeks, the answer may well be “yes.”
The White House released a Fact Sheet on February 28, entitled “Lowering Prices and Leveling the Playing Field in Ocean Shipping.” After citing estimates that in 2021 the pandemic enabled the container shipping industry to reap profits seven times higher than its 2020 profits, and five times its profit over the entire prior decade, the Biden administration announced several steps designed to “lower consumer prices and level the playing field in ocean shipping.” Id. Among those initiatives, the President called on Congress to pass “reforms that address the current antitrust immunity for ocean shipping alliances.” Id.
President Biden echoed this message in his State of the Union address. After commenting that “capitalism without competition isn’t capitalism,” it is “exploitation,” President Biden observed: “During the pandemic, these foreign-owned companies raised prices by as much as 1,000% and made record profits.” Id. He then announced a “crackdown” on ocean carriers “overcharging American businesses and consumers.” Id.
In fact, Congress did not wait for the State of the Union to put the shipping antitrust exemption on the chopping block. Representative Jim Costa issued a press release following the State of the Union address describing his bipartisan Ocean Shipping Antitrust Enforcement Act as the answer to President Biden’s call for shipping reform. The bill, which would eliminate the shipping antitrust exemption in its entirety, was introduced in the House on February 28 by Rep. Costa and co-sponsors- Rep. Dusty Johnson and Rep. John Garimendi (whose Ocean Shipping Reform Act passed the House in December 2021 by a 364-60 bipartisan vote). This legislation would thus go even further than the Free Market Antitrust Immunity Reform (“FAIR”) Act bill proposed in 1999-2001, which would have eliminated the exemption for ocean carriers while preserving the exemption for marine terminal operators.
We can expect this drive to revive competition in the shipping industry to continue. Reps. Costa and Johnson are the Chair and Ranking Member, respectively, of the House Agriculture Subcommittee on Livestock and Foreign Agriculture. Agricultural export interests have been severely affected by ocean carrier practices during the pandemic, including the shipping of empty containers back to foreign ports.)
Our January 7 post observed that Congress could consider more granular approaches. In addition to the FAIR Act approach, we noted that a pro-competitive bill could eliminate the exemptions that enable fuel profiteering while “permitting ocean carriers to continue entering into vessel-sharing agreements that at least in theory promote efficiency by combining containers from multiple carriers onto a single ship—similar to airline codesharing arrangements.”
The adverse market effects of the Shipping Act antitrust exemptions continue to command the attention of the White House and Congress. The days of ocean carriers’ antitrust immunity, though more than a century old, may now indeed be numbered.
Written by Seth D. Greenstein
Edited by Gary J. Malone
Tagged in: Antitrust Enforcement,