Ocean carriers came under fire in President Joe Biden’s State of the Union Tuesday evening, even as the head of the Federal Maritime Commission (FMC) says there is no evidence at this time to indicate violations of the law.
The disconnect in messaging comes as the White House ramps scrutiny around the container shipping industry amid record rates and carrier profits. The president warned in his State of the Union, “the watchdogs have been welcomed back.”
The warning followed the Department of Justice (DOJ) and FMC announcement Monday that DOJ would lend attorneys and economists from its Antitrust Division to help enforce the Shipping Act.
“When corporations don’t have to compete, their profits go up, your prices go up and small businesses and family farmers and ranchers go under,” Biden said in his State of the Union. “We see it happening with ocean carriers moving goods in and out of America. During the pandemic, these foreign-owned companies raised prices by as much as 1,000 percent and made record profits. Tonight, I’m announcing a crackdown on these companies overcharging American businesses and consumers.”
The World Shipping Council, which represents carriers, criticized the president’s remarks Wednesday.
The organization’s president and CEO John Butler said in a statement that prices are the result of record demand and not ocean carrier collusion.
“Here are the facts: container shipping is a competitive industry with multiple ocean carriers actively challenging one another in the global marketplace and on the shipping lanes most relevant for U.S. trade,” Butler said. “It is disappointing that unfounded allegations are being levied against an industry that is moving more cargo right now than at any time in history in order to meet the unprecedented demand for imported goods during the pandemic.”
FMC chairman Daniel Maffei also painted a picture different from the president’s remarks when he spoke Monday during the annual TPM22 Conference produced by IHS Markit in Long Beach, Calif. While the FMC may be swimming in allegations from shippers alleging wrongdoing on the part of carriers, Maffei said there has been no evidence presented for the FMC to take action.
Maffei went on to say there are currently three active orders of investigation against carriers that the FMC is working on and encouraged as many facts be included in any formal complaint filed around alleged bad behavior. Shippers, he said, also have the right to bypass the FMC and file a complaint in court if they are not satisfied with the Commission.
“Certainly, if those [allegations] are true, we would love to investigate. We’ve looked into a lot of such cases,” Maffei said. “Too often, we find that the spirit of the law was not followed, but the letter of the law was.”
The partnership with the DOJ could help, but does not mean the DOJ is assuming more control over the Commission, Maffei said, adding, “the independence of the FMC is sacrosanct.”
“Does it mean the FMC will have the resources it needs to go after behavior against the Shipping Act if we find it? Yes, it does.”
Monday’s announcement by the FMC and Justice Department is a follow-on from a memorandum of understanding signed between the two last July in which they agreed to share information and work with one another to help carry out the president’s executive order on promoting competition.
Maffei reiterated while the FMC “will continue to scrutinize and keeping looking” for anticompetitive behavior to ensure a free market, the commission does not set or establish ceilings on rates. Congress has the power to change the scope of the FMC, which could occur with the passage of the Ocean Shipping Reform Act (OSRA21).
The closely watched legislation is the first time in more than 20 years that Congress is looking at major changes to how the maritime industry is regulated. A House version of the bill passed in December, followed by introduction of the bill in the Senate last month.
Maffei said that while the proposed legislation is not perfect, it does aim to modernize the law and perhaps help the FMC help shippers.
Frustration has set in on the part of shippers, who Maffei said often leave his office unhappy that his ability to help them is currently rather limited, despite all contracts and contract amendments having to be filed with the FMC.
“The law that we currently operate under specifically says that disputes on contracts go to the appropriate court, meaning not us. They go to a different court. I have written dissenting opinions on such things,” Maffei said in response to a question on why contracts must go through the FMC if no enforcement action occurs. “I think we should do more, but I do think some clarity in terms of legislation would be helpful. But, I will also say this: People do have to be a little bit more careful. The letter of the contract and the spirit of the contract are two different things.”