FMC Potpourri: Notable Rulings, Filed Agreements, New Commission Policy Guidance

Notable Federal Maritime Commission (FMC) Rulings

OJ Commerce, LLC v. Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft A/S & Co KG and Hamburg Sud North America, Inc. (Docket No. 21-11)

The Commission published an Order Affirming Initial Decision for the above-captioned case on Aug. 27, 2024. The Initial Decision, issued by the Administrative Law Judge (ALJ) on June 7, 2023, found that Hamburg Südamerikanische Dampfschifffahrts-Gesellschaft A/S (HSDG) had engaged in knowing and willful violations of the Shipping Act of 1984 by refusing to deal with OJ Commerce in violation of 46 U.S.C. §41104(a)(10) and retaliating against OJ Commerce in violation of 46 U.S.C. § 41104(a)(3). The Commission upheld the ALJ's finding of liability but modified the damages calculation, ultimately awarding OJ Commerce nearly double the reparations awarded by the ALJ.

In affirming the ALJ's Initial Decision, the Commission found that there was evidence to support the claim that HSDG unreasonably refused to deal with OJ Commerce. After OJ Commerce notified  HSDG that it intended to file a complaint with the Commission, HSDG failed to provide contractually required space under its existing service contract and refused to negotiate a renewal of the service contract for the following year. The Commission denied HSDG's exceptions to the Initial Decision, rejecting its arguments that HSDG did not refuse to deal since it continued to carry spot market shipments and that any refusal was reasonable due to legitimate transportation factors and business discretion.

Similarly, the Commission found that HSDG's response to the notice that OJ Commerce intended to file a claim with the Commission established HSDG had retaliated against OJ Commerce in violation of the Shipping Act. Significantly, while confirming the ALJ had correctly interpreted the Commission's Guidance on Retaliation, the Commission stated a "notice of intention to file a case with the Commission" is protected by the Commission's prohibition on retaliation "for any other reason."

In the Initial Decision, the ALJ had ordered HSDG to pay OJ Commerce more than $9.8 million in reparations. The Commission affirmed the ALJ's finding that double reparations were appropriate due to the "knowing and willful" nature of HSDG's violations. However, after determining the ALJ miscalculated the actual harm suffered, the Commission opted to adjust the calculation of damages itself rather than remanding to the ALJ. Ultimately, the Commission ordered HSDG pay more than $17.5 million  in reparations.

Notably, this is the first Commission decision to address retaliation and refusal to deal in the wake of the Ocean Shipping Reform Act of 2022. It will serve as a road map for cases to come, specifically with regard to how the Commission will view these types of claims going forward.

Recent Notable Filed Agreements

The Gemini Cooperation Agreement

The FMC recently announced that the Gemini Cooperation Agreement took effect on Sept. 9, 2024. Originally filed with the FMC in May 2024, the agreement allows Maersk A/S and Hapag-Lloyd AG and Hapag-Lloyd USA LLC to share vessels in the trades between the U.S. and Asia, the Middle East and Europe. Specifically, this collaboration, depending on route, will consist of between 27 and 29 services, supported by 30 intraregional services and more than 300 ships. While the agreement was pending, the Commission assessed "its likely competitive impacts and its compliance with other statutory requirements and prohibitions."

Under Title 46 U.S.C. § 41307, the FMC has the authority to "assess the competitive effects of a filed agreement to determine if it is likely, by a reduction in competition, to cause an unreasonable increase in transportation costs or a decrease in transportation service. If the Commission makes such a finding, on either a newly filed agreement or an already-operative agreement, its exclusive remedy is to seek an injunction in federal district court."¹ The Commission announced that it has not decided to seek an injunction against the Gemini Cooperation Agreement but will monitor it for an anticompetitive consequences. The Gemini Cooperation Agreement will officially launch in February 2025.

New Commission Policy Guidance on Use of Investigative Authority

Statement of the Commission On the Potential Use of an Investigatory Process to Support Determinations Under 46 U.S.C. § 41307(b) (Dkt. No. 24-25) (July 30, 2024)

The Commission issued a policy statement on July 30, 2024, "On the Potential Use of an Investigatory Process to Support Determinations Under 46 U.S.C. § 41307(b)" (Policy Statement). The statement outlined the Commission's intent to potentially use its "administrative investigation process, under 46 U.S.C. §§ 41302-04 and applicable regulations, to enhance its determinations regarding filed agreements that may present the anti-competitive features described in 46 U.S.C. § 41307(b)." Under § 41307(b), the Commission can seek injunctive relief from a federal court where an agreement among ocean common carriers, marine terminal operators or marine terminal operators and ocean carriers has been filed if the Commission determines that the agreement will result in 1) an unreasonable reduction in transportation service, 2) an unreasonable increase in transportation cost or 3) to substantially lessen competition in the purchasing of certain covered services. The Commission can seek injunctive relief any time after the filing or effective date of an agreement; however, injunctive relief is the sole remedy available to the Commission in such cases.

The Policy Statement explains that the Commission's potential use of its investigative authority under §§ 41302-04 would be distinct from the agreement review and judicial-review processes described in § 40304(d) and § 41307(c). Nonetheless, the Policy Statement states that the Commission may simultaneously open an administrative investigation when the Commission reviews a cooperative agreement for its potential effect on competition,. According to the Policy Statement, the potential use of public or nonpublic investigative authorities would allow the Commission "to more rigorously review filed agreements by gathering evidence via subpoenaing witnesses and documents, and by holding hearings...[i]n addition to investigative reviews yielding more comprehensive examinations of filed agreements." If an agreement is determined to have a potentially anticompetitive effect, the Policy Statement posits that the resulting report would be considered an agency determination with evidence to back the FMC's reasoning. The use of investigative authorities in connection with review of filed agreements appears intended to enhance the Commission's ability to review filed agreements and support potential bases for seeking and obtaining injunctive relief before a court.

Notes

¹ Id.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.