Biden Expands Antitrust Enforcement and Calls for Shipping Act Reform

Citing the dominance of the three global ocean shipping alliances and business practices that are contributing to inflation and hurt American businesses, the White House announced a series of new initiatives which it says will contribute to lower prices and level the playing field in ocean shipping. The Biden administration is expanding efforts between the Department of Justice and the Federal Maritime Commission to promote competition and enforce antitrust laws while also calling on the U.S. Congress to reform the Ocean Shipping Act.

In announcing its new initiatives, the White House said it was necessary to ensure that the ocean freight companies cannot take advantage of U.S. businesses and consumers. They cited the rapid growth in the three alliances noting that from 1996 to 2011 the alliances operated about 30 percent of global container shipping compared to today where they control 80 percent of global containership capacity and 95 percent of the east-west trade lines. 

The White House said that the three alliances currently have the power to raise prices for American businesses and consumers through a broad range of well-publicized practices that shippers have been complaining about, especially since the onset of the pandemic. The new programs are justified by the administration which highlights the 100 percent increase in spot freight rates since January 2020 between Asia and the U.S. and the 1,000 percent increase in rates between the U.S. and Asia over the same timeframe. They point to detention and demurrage fees that shippers have been complaining about as well as rules that impact the speed and who carries containers out of the ports. The White House cites data that says consumer prices are expected to increase by one percent due to the costs of shipping and businesses practices such as these.

The market power of the ocean alliances they also content gives them the ability to cancel or change bookings and impose additional fees without notice. The unpredictable practices they said are especially damaging U.S. exports and specifically farmers when the container lines rush back to Asia with empty boxes instead of spending time to dock at other U.S. ports and load U.S. exports.

President Biden is calling on the U.S. Congress to pass robust reforms to the Ocean Shipping Act, including “reforms that address the current antitrust immunity for ocean shipping alliances.” The House of Representatives passed its version of the reforms in December 2021, while the Senate is working on its version of the reforms but is yet to begin debate.

Today, the FMC and DOJ also announced that they would be strengthening their existing cooperation to further promote competition in the ocean freight transport system. DOJ will be providing the FMC with attorneys and economists from the Antitrust Division of enforcement of violations of the Shipping Act. The FMC will provide DOJ with the maritime-specific expertise to apply existing antitrust regulations including the Sherman Act and the Clayton Act.

“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 Merrick Garland. “Expanding joint enforcement partnerships like the partnership between the FMC and DOJ is one of our most powerful tools for promoting competition.”

The FMC will also be ramping up oversight of the global ocean shipping industry. Last summer, the FMC established a new audit program to address complaints about carriers charging unfair fees, demanded justification from the carriers about their fees. They highlighted that this led to launching 42 cases investigating port congestion charges. The FMC has already addressed barriers to filing complaints and launched a new data initiative and recently also sought comments on reforms to how carriers charge shippers' fees. These expanded efforts will continue as part of the new coordinated “whole of government” approach by the Biden administration to promote competition across industry.

Recently, DOJ was also one of five competition agencies from the U.S., U.K. Canada, Australia, and New Zealand which agreed to work together to share information and identify anti-comparative practices in the container shipping industry. With analysts reporting that the container shipping industry made a record $190 billion in profits in 2021, the regulators believe additional efforts are required to ensure competition and fair business practices are maintained for all shippers.