Federal Maritime Commission votes to block port concessions

user-gravatar

The Federal Maritime Commission on Wednesday, Oct. 29, determined by a 2-1 vote that implementation of certain portions of the Clean Truck Program by the Ports of Los Angeles and Long Beach are likely, by a reduction in competition, to produce an unreasonable increase in transportation cost or unreasonable reduction in service.

The commission authorized staff to file a complaint with the U.S. District Court for the District of Columbia pursuant to section 6(h) of the Shipping Act of 1984, to enjoin aspects of FMC Agreement No. 201170, including concession requirements that mandate exclusive use of employee-drivers.

In authorizing this action, the commission said it appreciates the potential environmental and public health goals of the ports’ CTP, and recognizes that some transportation cost increases may be necessary to generate clean air and public health benefits. However, the commission concluded that the reduction in competition resulting from certain agreement-related activities will result in substantial transportation cost increases, beyond what is necessary to generate the public benefits asserted by the ports. The commission said it believes that surgical removal of substantially anti-competitive elements of the agreement, such as the employee mandate, will permit the ports to implement on schedule those elements of the CTP that produce clean air and improve public health.

The Shipping Act directs FMC to evaluate the potential anti-competitive impacts of all agreements. The Ports of Los Angeles and Long Beach are marine terminal operators under the Shipping Act, and are permitted to collectively develop and implement their CTP pursuant to an agreement on file with the FMC.

Subject to the commission’s jurisdiction and ongoing oversight, parties to agreements receive immunity from the U.S. antitrust laws. This oversight ensures that activities of the agreement parties do not result in unreasonable increases in transportation cost or reductions in service, or otherwise give rise to unreasonable practices under the Shipping Act.

Commissioners Harold Creel and Rebecca Dye, casting the majority vote, commented that FMC must ensure that foreign trades operate free from substantially anticompetitive activities, and that the shipping public should be afforded the full benefit of the protections of the Shipping Act. Commissioner Joseph Brennan dissented from the determination.

The American Trucking Associations is continuing its challenge of the ports’ CTP with some high-powered help: the U.S. Department of Justice. In an Oct. 20 filing with the U.S. Court of Appeals for the Ninth Circuit, the Justice Department addressed the question of whether the regulation of motor carrier operations at the ports violates federal law that preempts state and local laws that impact motor carrier rates, routes and services. The district court ruled that the plans directly affected motor carrier rates, routes and services, but it found them to be protected from preemption because they generally advanced port safety and security interests.

While the federal preemption provision exempts state regulation of motor vehicle safety, the Justice Department argued that motor vehicle safety is a “circumscribed realm” that “does not encompass requirements loosely based in a general notion of public safety.” The district court’s broad view on the issue would “permit the exception to swallow the rule,” the department said. Several aspects of the concession plans clearly have no relationship to motor vehicle safety, including prohibiting the use of independent contractors and imposing financial oversight of carriers granted concessions, the Justice Department said.

With the courts refusing to block the concession agreements initially, 598 companies had signed up as of Oct. 1 to participate in the concession program. The district court held that carriers would not suffer irreparable harm because they could seek damages if they later win on the merits. But ATA argues in its appeal that securing individual damages would be difficult, if not impossible, and that forcing companies to either accept the illegal terms or stop doing business at the ports is itself irreparable harm.

ATA isn’t challenging other elements of the CTP that went into effect Oct. 1. The program immediately banned trucks built before 1989 – more than 10 percent of port trucks as of Oct. 1 – and requires that all trucks meet 2007 emissions standards by 2012.