Chemical Mfrs. Ass'n v. Federal Maritime Com'n, s. 88-1850

• Decision Date: 06 April 1990
• Docket Number: Nos. 88-1850,88-1894,s. 88-1850
• Citation: 900 F.2d 311
• Parties: , 283 U.S.App.D.C. 327 CHEMICAL MANUFACTURERS ASSOCIATION, Petitioner, v. FEDERAL MARITIME COMMISSION, and United States of America, Respondents, Transpacific Westbound Rate Agreement, Trans-Pacific Freight Conference of Japan, et al., North Europe-U.S. Pacific Freight Conferences, et al., American Paper Institute, U.S. Atlantic-North Europe Conferences, et al., Asia North America Eastbound Rate Agreement, et al., National Industrial Transportation League, Intervenors. E.I. DUPONT DE NEMOURS & COMPANY, Petitioner, v. FEDERAL MARITIME COMMISSION, and United States of America, Respondents, Asia North America Eastbound Rate Agreement, et al., U.S. Atlantic-North Europe Conference, et al., North Europe-U.S. Pacific Freight Conferences, et al., Trans-Pacific Freight Conference of Japan, et al., Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 311

900 F.2d 311

1990 A.M.C. 1225, 283 U.S.App.D.C. 327

CHEMICAL MANUFACTURERS ASSOCIATION, Petitioner, v. FEDERAL MARITIME COMMISSION, and United States of America, Respondents,

Transpacific Westbound Rate Agreement, Trans-Pacific Freight

Conference of Japan, et al., North Europe-U.S. Pacific

Freight Conferences, et al., American Paper Institute, U.S.

Atlantic-North Europe Conferences, et al., Asia North

America Eastbound Rate Agreement, et al., National

Industrial Transportation League, Intervenors.

E.I. DUPONT DE NEMOURS & COMPANY, Petitioner, v. FEDERAL MARITIME COMMISSION, and United States of America, Respondents,

Asia North America Eastbound Rate Agreement, et al., U.S.

Atlantic-North Europe Conference, et al., North Europe-U.S.

Pacific Freight Conferences, et al., Trans-Pacific Freight

Conference of Japan, et al., Intervenors.

Nos. 88-1850, 88-1894.

United States Court of Appeals District of Columbia Circuit.

Argued Nov. 20, 1989.

Decided April 6, 1990.

On Petition for Review of an Order of the Federal Maritime commission.

Michael D. Esch, with whom John L. Oberdorfer, Washington, D.C., David F. Zoll, for Chemical Mfrs. Ass'n, Peter A. Friedmann, Portland, Or., and Julie Simon, for E.I. DuPont de Nemours & Co., were on the joint brief, for petitioners in Nos. 88-1850 and 88-1894.

Robert J. Wiggers, Atty., Dept. of Justice, with whom James F. Rill, Asst. Atty. Gen., Michael Boudin, Deputy Asst. Atty. Gen., and John J. Powers III, Dept. of Justice, Washington, D.C., were on the brief, for respondent, U.S. in Nos. 88-1850 and 88-1894.

James P. O'Sullivan, Atty., Fed. Maritime Com'n, with whom Robert D. Bourgoin, Gen. Counsel, Fed. Maritime Com'n, Washington, D.C., was on the brief, for respondent, Fed. Maritime Com'n, in Nos. 88-1850 and 88-1894 R. Frederic Fisher, with whom Lawrence N. Minch, San Francisco, Cal., for Transpacific Westbound Rate Agreement, Howard A. Levy, for North Europe Conferences, Stanley O. Sher, Marc J. Fink and Anne E. Mickey, Washington, D.C., for Asia North America Eastbound Rate Agreement, et al., David Nolan for North Europe U.S. Pacific Freight Conference, et al., Charles F. Warren, George A. Quadrino, Washington, D.C., and Benjamin K. Trogdon, Arlington, Va., for Trans-Pacific Freight Conference, et al., were on the joint brief for intervenors, Ocean Rate Conferences in Nos. 88-1850 and 88-1894.

William Karas, Washington, D.C., for U.S. Atlantic-North Europe Conference, et al., and F. Conger Fawcett, for North Europe-U.S. Pacific Freight Conferences, et al., also entered appearances for joint intervenors, Ocean Rate Conferences.

Nicholas J. DiMichael and Mark K. Nasseri, Washington, D.C., entered appearances for intervenor, Nat. Indus. Trans. League in No. 88-1850.

Peter A. Friedmann, Portland, Or., entered an appearance for intervenor, American Paper Institute in No. 88-1850.

Before WALD, Chief Judge, RUTH BADER GINSBURG, Circuit Judge, and FRIEDMAN, Senior Circuit Judge. ^*

Opinion for the Court filed by Senior Circuit Judge FRIEDMAN.

FRIEDMAN, Senior Circuit Judge:

These petitions to review challenge a decision of the Federal Maritime Commission (Commission) that the Shipping Act of 1984 (Act or 1984 Act), 46 U.S.C.App. Secs. 1701-1720 (Supp. V 1987), permits a conference of ocean common carriers to prohibit its members from using "loyalty contracts," under which a carrier provides lower transportation rates to a shipper who agrees to ship all or a fixed portion of its cargo with the carrier. We affirm.

I

A. Under the 1984 Act, conferences of ocean common carriers are required to file with the Commission all agreements and modifications thereof that, among other things, "(1) discuss, fix, or regulate transportation rates, including through rates, cargo space accommodations, and other conditions of service; ... and (7) regulate or prohibit the use of service contracts." 46 U.S.C.App. Secs. 1703(a)(1) & (7) (agreements within scope of chapter) and 1704(a) (filing requirements). The Commission is required to "reject" any agreement that does not meet specified requirements. 46 U.S.C.App. Sec. 1705(b). If the Commission does not reject an agreement within specified time limits, the agreement becomes effective. 46 U.S.C.App. Sec. 1705(c). After an agreement has become effective, the Commission may review it to determine its consistency with the Act. 46 U.S.C.App. Sec. 1710(c).

The Act makes the antitrust laws inapplicable to specified agreements and activities, including agreements filed under section 1704 that are effective. 46 U.S.C.App. Sec. 1706(a).

The Act distinguishes among three types of arrangements between carriers and shippers by which the shipper receives more favorable treatment in return for giving the carrier or its conference a specified portion of its business. These arrangements are loyalty contracts, service contracts, and time-volume rates.

The Act defines a "loyalty contract" as "a contract with an ocean common carrier or conference, other than a service contract or contract based upon time-volume rates, by which a shipper obtains lower rates by committing all or a fixed portion of its cargo to that carrier or conference." 46 U.S.C.App. Sec. 1702(14).

The Act defines a "service contract" as "a contract between a shipper and an ocean common carrier or conference in which the shipper makes a commitment to provide a certain minimum quantity of cargo over a fixed time period, and the ocean common carrier or conference commits to certain rate or rate schedule as well as a defined service level...." 46 U.S.C.App. Sec. 1702(21).

Both loyalty and service contracts are bilateral agreements between a carrier and a shipper. The critical difference between them is that under the former the shipper's commitment is made in terms of a "portion" (i.e., a percentage or fraction) of its cargo, whereas under the latter it is a specified minimum "quantity" of cargo.

Although the Act does not define time-volume rates, the filing requirements indicate that the term means rates that "vary with the volume of cargo offered over a specified period of time." 46 U.S.C.App. Sec. 1707(b).

The Act provides different filing requirements for (1) loyalty contracts and time-volume rates, 46 U.S.C.App. Sec. 1707(a), and (2) service contracts, 46 U.S.C.App. Sec. 1707(c). The Act requires every water common carrier and conference to file with the Commission "tariffs showing all its rates, charges, classifications, rules, and practices," 46 U.S.C.App. Sec. 1707(a)(1), and provides that these "[t]ariffs shall ... include sample copies of any loyalty contract...." 46 U.S.C.App. Sec. 1707(a)(1)(E). Time-volume rates, like other rates, are required to be filed in "tariffs under subsection (a) of [section 1707]." 46 U.S.C.App. Sec. 1707(b).

Service contracts are not required to be filed under section 1707(a). Instead, section 1707(c) requires that "each" service contract (with certain exceptions) "shall be filed confidentially with the Commission, and at the same time, a concise statement of its essential terms shall be filed with the Commission and made available to the general public in tariff format, and those essential terms shall be available to all shippers similarly situated." 46 U.S.C.App. Sec. 1707(c).

Unlike service contracts and time-volume rates which, if used pursuant to an effective conference agreement, are covered by the general antitrust immunity for such agreements, "[n]o common carrier ... may ... use a loyalty contract, except in conformity with the antitrust laws...." 46 U.S.C.App. Sec. 1709(b)(9).

One other provision of the Act is critical to the issue before us. This is the so-called independent action provision, 46 U.S.C.App. Sec. 1704(b)(8), which requires that each conference agreement

provide that any member of the conference may take independent action on any rate or service item required to be filed in a tariff under section 1707(a) ... upon not more than 10 calendar days' notice to the conference and that the conference will include the new rate or service item in its tariff for use by that member, effective no later than 10 calendar days after receipt of the notice, and by any other member that notifies the conference that it elects to adopt the independent rate or service item on or after its effective date, in lieu of the existing conference tariff provision for that rate or service item.

B. The present case began in 1987 when the intervenor, Transpacific Westbound Rate Agreement (Transpacific), filed with the Commission an amendment to its basic agreement providing that "[n]o party may enter into a loyalty contract," Art. 5(e), or, by independent action, establish any loyalty contract, Art. 13(h)(ii). The agreement continued to provide, as required by 46 U.S.C.App. Sec. 1704(b)(8), that "any party may take independent action on any rate or service item." Art. 13(a).

The Commission issued an order to Transpacific to show cause why the provision barring loyalty contracts did not violate the Act. The Commission broadened the proceeding to cover five other conferences that also had filed amendments to their conference agreement prohibiting loyalty contracts.

After full briefing and oral argument, the Commission issued a lengthy opinion upholding the Conference prohibition upon the use of loyalty contracts and dismissed the proceeding. Transpacific Westbound Rate Agreement, Loyalty Contracts, Report & Order, Nos. 87-26 & 88-1 (Oct. 31, 1988) [hereinafter Report & Order ]. Noting that "[b]oth sides have advanced credible arguments in support of their respective positions in their pleadings and at oral argument," slip op. at 30, the Commission concluded that after

[h]aving reviewed this record, [and] based on the language of the statute, its extensive legislative history, and the overall purposes and objectives of the 1984 Act ... the use of a loyalty contract is not the type of subject matter that was intended to be covered by the...