Biden Takes on Container Shipping Despite No Evidence of Wrongdoing
Bloomberg March 1, 2022
By Laura Curtis (Bloomberg) —
President Joe Biden is taking on the concentrated market power of ocean shipping companies, although officials at the agency overseeing the industry indicated they lack both the jurisdiction and, for now, any evidence of wrongdoing.
The White House said Biden will call on Congress at his State of the Union to address the immunity that shipping alliances have from antitrust scrutiny under current law. The Federal Maritime Commission will join with the Department of Justice in a new initiative announced Monday, to push for competition in ocean freight transportation.
“Many shippers really want us to do something about the rapid inflation of rates and decline in reliability in the ocean freight system,” FMC Chairman Daniel Maffei said Monday at the TPM22 Conference organized by The Journal of Commerce in Long Beach, California.
The FMC could take legal action against carriers “if the rapid inflation of rates is due to some kind of artificial limitation on the supply of cargo space,” Maffei said. “But even after we’ve increased the reporting requirements and deepened our analysis so far, we have found no evidence of anything like that that’s actionable and furthermore neither has the European Union or China.”
Under the agreement between the FMC and the Justice Department, the two agencies will share resources in any enforcement actions they bring related to federal shipping and an antitrust laws. The partnership grew out of Biden’s executive order last year calling on a government-wide effort to promote competition in the economy.
President Biden to Target Container Shipping Alliances in ‘State of the Union’ Address
Major U.S. ports have faced backups that caused shortages and price increases through much of the two-year coronavirus pandemic. Some carriers found it more lucrative to send containers back to Asia empty rather than use them for U.S. exports.
“What we’ve seen and we heard this from the administration back in the summer — we tried to correct their facts, then — we’re just seeing some language that talks about suggesting that the industry is not competitive,” World Shipping Council CEO John Butler said. “And the fact of the matter is, it is a competitive industry.” The organization, which represents the container carriers, and has lobbied against the House version of a shipping law overhaul.
Change Exemption
President Biden will urge lawmakers to address the antitrust exemption, a provision that is not included in House or Senate versions of a shipping reform bill currently moving through Congress, according to a senior administration official.
Lawmakers have a few options, the official said Tuesday. They could repeal it outright, or repeal it and replace it with a system resembling that used by airlines, where the carriers submit code-share agreements to the Department of Transportation, the official said, adding this would be subject to a public-interest review before it’s granted.
Another FMC member who spoke at the conference in Long Beach Monday said he thought the issue of anti-competition might be misplaced, although there are plenty of other issues for the FMC to look at within the shipping industry.
“The president and the White House are frustrated as I think everyone is on supply and demand challenges,” FMC Commissioner Carl Bentzel said. “And they’re trying to find a scapegoat. And it’s a pretty easy scapegoat to identify, but I don’t know if it’s real.”
The spot rate for a 40-foot container between China and the U.S. West Coast was $15,898 including surcharges and premiums as of Feb. 27, about nine times higher than the cost in February 2019, according to Freightos data.
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