Remarks of Commissioner Rebecca Dye National Industrial Transportation League Transportation Summit
Thank you for the invitation to appear here to today. I have been involved with the NITLeague on many deregulatory matters, beginning with the Ocean Shipping Reform Act of 1998.
Today I’d like to focus on two topics.
First, the Federal Maritime Commission’s primary law enforcement responsibility: preserving competition through effective analysis and oversight. One of my 2017 New Year’s resolutions is to clarify “what we do” and “why we do it,” particularly as it applies to the four – soon to be three – major carrier alliance groups.
Second, I’ll bring you up-to-date on my highest priority — the FMC’s Supply Chain Innovation Teams initiative that began last May.
Competition Analysis under the Shipping Act of 1984
I would like to briefly emphasize several points concerning competition analysis under 6(g) of the Shipping Act.
First: The FMC’s approach to competition analysis is in most ways similar to the competition analyses conducted by the Department of Justice’s Antitrust Division and the Federal Trade Commission.
The model for FMC agreement review is the portion of the Hart-Scott-Rodino Act governing premerger clearance of proposed acquisitions and mergers. Our review begins with defining and analyzing the relevant markets, market concentration levels and market entry conditions.
Also like the Antitrust Division and the FTC, our role is to protect the American consumer from unreasonable restrictions on market competition – in our case by ocean carriers or marine terminal operators.
The Commission is neither pro-alliance nor anti-alliance. We are pro-competition. Our goal is to ensure that the dynamics of the marketplace determine economic outcomes.
Second: The rise of operational alliances is a market-driven phenomenon. The alternative to operational alliances is not the status quo. The dynamics of our liner shipping markets will continue to produce commercial and economic change.
Recently, the Commission was briefed on a staff working paper by one of the PhD.s in our Office of Economics and Competition Analysis about the likely impact of the shift from four to three major alliances on the trans-Pacific trade.
I hope it will be available on our website soon, but by way of a teaser: Our research indicates that the impending reduction from four to three strategic alliances should, considered in isolation from other factors, actually decrease freight rates.
That freight rate decrease may, however, be offset by upward rate pressure due to expected mergers.
Third: Those of you who have been closely following trade press articles about the FMC’s review of carrier and terminal agreements may have noticed that the Commission has been “tightening up” on agreements filed with the Commission and rejecting those that do not conform to our regulations.
In this regard, the limited antitrust immunity Congress grants under the Shipping Act is available only where an agreement’s authorities are presented in clear and definite terms and embody the complete, present understanding of the parties.
An agreement must set forth the specific authorities and conditions under which the parties will conduct their operations and regulate the relationships among the agreement members.
Carrier and terminal agreements must conform to these regulatory requirements so that the Commission can fully analyze the likely competitive impact of the agreements under section 6(g) of the Shipping Act.
Finally, is this statement “True or False?”
“The Federal Maritime Commission approves agreements under the Shipping Act of 1984.”
That statement is false. The only way the Commission may stop an agreement from entering into effect, is to successfully pursue an injunction in United States District Court based on legal theories relevant to the competition analysis under 6(g) of the Shipping Act of 1984.
FMC Supply Chain Innovation Teams
Now let me shift to my favorite topic: the Supply Chain Innovation Teams project I have been pursuing, beginning last May, under a Commission Order I received.
Because of our working relationships with the different industries engaged in international ocean transportation – both those that we regulate (like ocean carriers, ports, marine terminal operators and ocean transportation intermediaries) and others that we regularly interact with (exporters and importers, drayage trucking companies, chassis providers, railroads, and port labor) – the Commission is ideally suited to bring these stakeholders together to develop commercial, private sector solutions to supply chain systemic challenges.
Following up on what we learned in port forums held in late 2014, the Commission took the lead in setting up three innovation teams composed of leading industry executives to develop commercial solutions to U.S. supply chain operational challenges – initially focused on U.S. imports and the San Pedro Bay ports in California and the Port of New York and New Jersey.
The first phase of the initiative is largely complete. An executive summary of the Interim Report that went to the Commission is posted on the agency website. That summary also explains what we hope to do during phase two beginning in early 2017.
The Supply Chain Innovation Teams initiative is built on two fundamental concepts: innovation and teamwork. It relies on creative engagement among committed industry leaders operating in small multi-industry teams interacting in candid give-and-take sessions.
During their initial meeting, I directed the teams to step out of their enterprise silos and identify one innovative supply chain improvement that would increase supply chain reliability and resilience, and to develop a plan to implement it. In response, all three teams determined that improved supply chain visibility would provide the greatest supply chain performance improvement.
The teams’ implementation plan to increase overall supply chain visibility to all supply chain actors centered on developing a national seaport information portal. As one member put it: “Information technology is the new infrastructure.”
The teams grappled with how to best provide the right information, to the right person, at the right time, in order to more fully integrate and harmonize the supply chain system.
By mid-October, they had developed lists of the critical information needs of the various actors; likely sources of that information; relevant timing requirements; and the expected operational improvements likely to result from access to that critical information.
On the import-side, the high-priority information needs of key supply chain actors they identified mainly deal with port and marine terminal operations, such as container availability, chassis availability, and more efficient drayage trucking operations.
In phase two of the initiative we will organize three “export” Supply Chain Innovation Teams to develop critical information requirements for our export supply chains– with a geographic focus on the Ports of Houston and Charleston and the Northwest Seaport Alliance.
I will also continue to pursue options for the development of a robust conceptual model or a pilot project for a national portal for critical supply chain information.
I am dedicated to this project because a well-functioning national information portal, integrating our international supply chain system, will provide a boost to American economic growth.
Thank you for your interest and attention. I appreciate it, and look forward to answering any questions you may have. Thank you.
Rebecca Dye is a Commissioner with the U.S. Federal Maritime Commission. The thoughts and comments expressed here are her own and do not necessarily represent the position of the Commission.