Opinion ID: 428294
Heading Depth: 1
Heading Rank: 3

Heading: the commission's authority to impose capacity limitations

Text: 23 Dart advances two grounds for its contention that FMC lacked authority to impose capacity limitations: that section 15 does not empower the Commission to impose conditions on an agreement over the objection of the proponents, and that Dart already had been granted authority to effect the stock transfer by approval of the original Agreement. Neither contention has merit. 24 Section 15 grants FMC express authority to modify agreements which are submitted to it for approval (putting aside, for the moment, the question whether approval of this particular amendment was required): 25 The Commission shall by order, after notice and hearing, ... modify any agreement, or any modification or cancellation thereof, whether or not previously approved by it, that it finds ... to operate to the detriment of the commerce of the United States, or to be contrary to the public interest .... 26 46 U.S.C. Sec. 814 (1976 & Supp. V 1981) (emphasis added). Accordingly, this Court has held that FMC may modify an agreement to alleviate its anticompetitive effects. See Sea-Land Service, Inc. v. United States, 683 F.2d 491, 502-03 (D.C.Cir.1982); United States Lines, Inc. v. FMC, 584 F.2d 519, 528 (D.C.Cir.1978) (citing FMC v. Pacific Maritime Ass'n, 435 U.S. 40, 53-54, 98 S.Ct. 927, 935-36, 55 L.Ed.2d 96 (1978)). 27 Against such express authority Dart interposes a series of weak arguments. First, Dart insists that in the past FMC has imposed capacity limitations only in space charter and pooling agreements, i.e., arrangements between shippers who are in direct competition at the time the agreements are filed. But the Commission found--from Dart's own evidence--that Centennial was a potential competitor which had considered other less anticompetitive modes of entering the trade. Further, it is difficult to see how FMC's statutory authority to impose conditions can be made to turn on whether Centennial is a present or potential competitor, especially in view of this court's decision to remand, for failure to consider antitrust consequences, an agreement which would have added a potential competitor as a party to an existing joint venture. See United States Lines, Inc., supra, 584 F.2d at 530, 543. 28 Second, Dart maintains that FMC has clearly recognized its inability to impose capacity limitations on single carriers. Brief for Petitioner at 12 (footnote omitted) (citing Agreements Nos. 9902-3, et al. (Modification of Euro-Pacific Joint Service), 19 S.R.R. (P & F) 141, 146 (1979)). Dart's claim to single-carrier status for section 15 purposes, however, is no more convincing in this respect than in the jurisdictional context. 29 Third, Dart nonetheless maintains that FMC cannot impose limitations on a section 15 agreement over Dart's objection. Technically, this is correct. As the Commission has explained, 30 [t]he power to modify is not the power to compel acceptance of the modification. When a new agreement filed for approval comports with the requirements of section 15, save in one or even a number of its provisions, we are empowered to modify the objectionable provisions and condition our approval of the agreement upon the acceptance of those modifications. Thus, while the parties to the agreement, should they desire to act in concert, must accept the conditions imposed upon their concerted action by the modifications, they are always free to reject the modifications and continue their operations as before. 31 Inter-American Freight Conference--Cargo Pooling Agreements Nos. 9682, 9683 and 9684, 14 F.M.C. 58, 62 (1970) (emphasis added). Accordingly, the FMC has promulgated a regulation providing that if parties to a conditionally approved agreement do not accept the conditions, the conditional approval becomes null and void and the agreement, as filed, is reconsidered by the Commission. See 46 C.F.R. Sec. 522.7 (1982). In fact, Dart did acquiesce to the conditions by modifying its agreement to conform to the order. See Appendix A to Brief for Respondent. Dart could have continued under its prior organization and sought reconsideration. In that light, Dart's acquiescence has a devastating effect on the position it advances in its present petition. 32 Finally, Dart continues to maintain that FMC's approval of the original Agreement granted Dart the authority to transfer its stock without FMC approval. See Brief for Petitioner at 15-16. Having been granted the authority to organize as a corporation under the original Agreement, Dart insists its proposed sale of stock is now governed by general principles of corporation law and that FMC's finding that substituting Centennial would constitute a new entity is contrary to basic corporate law. Id. Again, corporate law is not dispositive where FMC is charged under section 15 with the duty to consider the anticompetitive impact of a proposed exemption from the antitrust laws. Given the commonality of ownership among potential competitors that would result from Dart's restructuring of its North America/Europe service, this is not the simple amendment that petitioner would have us shrug off. 33 Moreover, the statute expressly makes subject to the approval requirements of section 15 every agreement ..., or modification or cancellation thereof, ... in any manner providing for an exclusive, preferential, or cooperative working agreement. 46 U.S.C. Sec. 814 (1976 & Supp. V 1981) (emphasis added). With or without a sale or stock, Centennial proposes to enter into a cooperative working arrangement with two of Dart's present coventurers. The Shipping Act does not exempt from review arrangements brought about by the operation of Bermuda corporate law. Furthermore, even if the amendment were deemed not subject to section 15, FMC nonetheless may elect to review the original Agreement because changes wrought by Centennial's substitution could have anticompetitive consequences. See Agreements Nos. 8200, et al., 19 S.R.R. (P & F) 245 (1979) (prior approval does not create a vested right of approval).IV. SUBSTANTIAL EVIDENCE AND REASONABLENESS 34 As FMC notes in its brief, there was ample evidence provided by petitioner's own submissions and witnesses to support imposition of capacity limitations. See Brief for Respondent at 22-24. The Commission based its decision to substitute a capacity limitation for the original Agreement's seven-vessel limitation on two factors. First, FMC noted that the original vessel limitation was attached to an agreement which included a Canada and Europe service (now deleted), and a vessel limitation had no relevance to the present commercial realities in the trade now covered by the [new] Agreement--U.S. to the U.K. and Europe. Second, the Commission found that the proposed capacity of Dart's four vessels, the basis of the FMC's capacity limitation, does not appear unreasonable because the vessels would no longer call at any Canadian ports while adding only one new American port of call. Moreover, FMC viewed overtonnage and trade instability as considerations affecting its approval, based in part on the evidence that Dart itself offered to support the existence and relevance of these concerns. FMC not unreasonably concluded that it should grant only such authority as Dart itself maintained would not alter its container capacity. The Commission thereby avoided exacerbating the overtonnage and trade instability problems. In addition, Dart's own submissions from Centennial provide substantial evidence that a potential competitor would be folded into the arrangement.