FMC's Khouri Faces Tough Questioning From Lawmakers Over Shipping Alliances
House lawmakers grilled Federal Maritime Commission Acting Chairman Michael Khouri on May 3 about whether recently approved shipping alliances benefit U.S. interests and uphold the spirit of U.S. antitrust laws. During a hearing of the House Transportation Coast Guard and Maritime Transportation Subcommittee, Rep. Peter DeFazio, D-Ore., pointed to comments sent in November by the Justice Department’s Antitrust Division to the FMC (see 1611280024), concerning recent convictions related to a scheme of price fixing of shipping services for cars and trucks and carriers of domestic freight between the continental U.S. and Puerto Rico.
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Khouri said those price fixing scandals fell outside the FMC's regulatory scope. “But now some of them are in THE Alliance, and the same people are running the companies,” DeFazio said. “So that’s who you’re dealing with.”
Subcommittee Chairman Duncan Hunter, R-Calif., said the FMC isn’t protecting U.S. interests, because the only shippers are foreign entities that are “basically ganging up” to form alliances “to where we have almost no competition whatsoever.” FMC’s recent approvals of alliances fail to take into account the impacts to marine terminal operators and tugboat operations, Hunter said. “So all the American companies, basically in your mind, as you follow the law, and quote law, and cite law, there’s no law making it so that you have to look out for the best interest of the American companies, because the law says you look at shippers, and that’s it,” he said. “That’s what you’re looking out for.” Khouri responded that the FMC looks to protect competition, and not “competitors in any one area.” Full competition benefits the U.S. consumer through lower prices, and the U.S. exporter through less expensive transportation, Khouri said. “With all respect, we are not singularly focused on shippers in that regard.”
American Waterways Operators CEO Thomas Allegretti raised the possibility of eliminating the caveat in the Shipping Act allowing joint purchasing negotiations between foreign carriers and port service providers “provided that it doesn’t otherwise violate antitrust laws.” Outside of that phrase, the Shipping Act has an express prohibition against foreign carriers negotiating with domestic service providers, Allegretti said. He raised the concern that if the law isn’t amended, carriers that represent significant shares of port business could continually push to pay lower rates to port service providers, creating a difficult dilemma for those providers. Khouri said if that situation were to be presented to the FMC, the agency's general counsel could "have an injunction on that hypothetical out of this U.S. District Court here in the District of Columbia before 5 o’clock today,” Khouri said. “What [Allegretti] described was a very clear abuse of market power.”
Khouri added that while he didn’t have a formed opinion about whether Allegretti’s proposed amendment would be positive or negative, he said he didn’t have any current opposition to it, and that he wanted to consult with his fellow commissioners on their opinions. Subcommittee ranking member John Garamendi, D-Calif., said the panel is “probably less than a month away” from writing a new Coast Guard and maritime law, and asked for FMC opinions on drafting changes to carrier competition language within two weeks.