Supply Chains: Shipping Lines in the Cross Hairs of U.S. Authorities

Supply chains are back in the news, perhaps a welcome distraction from the coverage of events in Ukraine.

Late last week, the Biden Administration followed up on its year earlier “Executive Order 14017” from the newly inaugurated President Joe Biden, which set out to develop strategies enabling supply chain “resilience”. On Feb. 24^th, 2022, multiple government agencies issued reports on proposed actions.

The Department of Transportation’s report is lengthy- with the Executive Summary encompassing 27 pages alone! Transport policy is complicated, involving seemingly impossible bits of coordination and balancing among multiple layers of government, and private players, across the national geographical stage and beyond. 

One thing that will be happening is that ocean carriers will be coming under greater scrutiny, and may find themselves in the punitive cross-hairs. Policy recommendation 43, in the Feb 24, 2022 U.S. DOT report, states: “Support the Federal Maritime Commission (FMC) in regulating ocean carriers to promote free and fair competition.”

Recommendation 44, in the report, says: “Urge Congress to enact ocean shipping regulatory reform. The House has already passed legislation that would increase FMC resources and provide FMC with additional authorities to protect exporters, importers, and consumers from unfair practices.”

This is a reference to the Ocean Shipping Reform Act of 2021, which is now up for action by the U.S. Senate- cargo interests support the bill; carriers- not so much. Interestingly, recommendation 50 involves combining the role of the FMC with that of the Surface Transportation Board (which looks after surface transportation, mainly railroads), “…with respect to regulating and providing oversight for the freight and logistics industry.” Presently, the FMC is an independent agency (ie not part of the Department of Transportation, Commerce, etc). 

Meantime, coinciding with the U.S. DOT, the FMC and U.S. Department of Justice today announced plans to strengthen a previously established partnership to promote fair competition in the shipping industry. Referring to an earlier memo between the FMC and DOJ (from July, 2021) in which they agreed to cooperate, the two agencies announced new actions to enforcing competition laws in the ocean shipping industry. “The Justice Department will provide the FMC with the support of attorneys and economists from the Antitrust Division for enforcement of violations of the Shipping Act and related laws. The FMC will provide the Antitrust Division with support and maritime industry expertise for Sherman Act and Clayton Act enforcement actions.” 

Related: United States Ramping Up Competition Enforcement in Ocean Shipping

In his keynote address at Capital Link’s conference on U.S. shipping matters, held on February  25^th (the second day of the two-day event), Mr. Carl Bentzel, one of the FMC Commissioners, had said: “As a result of the challenges in what’s going on in international [shipping], we’re having to take a lot of actions at the FMC to review the practices of the carriers, to implement new requirements, as a result of some of the challenges of shipping- it’s been a huge undertaking.”

The spears, or cross-bows, aimed at the carriers are bound to get sharper. In a Feb 25^th announcement from the FMC, the U.S. Attorney General was quoted: “The Justice Department will continue to aggressively enforce our antitrust laws – no matter the industry, no matter the company, and no matter the individual,” said Attorney General Garland. “Competition in the maritime industry is integral to lowering prices, improving quality of service, and strengthening supply chain resilience. Expanding joint enforcement partnerships like the partnership between the FMC and DOJ is one of our most powerful tools for promoting competition. Lawbreakers should know that the Justice Department will provide the Federal Maritime Commission all necessary litigation support as it pursues its mission of promoting competition in ocean shipping.”

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