Opinion ID: 303595
Heading Depth: 1
Heading Rank: 3

Heading: The Legislative History of the Shipping Act of 1916

Text: 37
38 Besides the specific language of Section 15 itself, the legislative history accompanying the Shipping Act of 1916 lends support to the view that Congress did not intend to vest the Federal Maritime Commission with jurisdiction over the type of agreement involved in the case at bar. The work of the House Committee on the Merchant Marine and Fisheries of the 63d Congress, under the direction of its Chairman, Representative J. W. Alexander, formed the basis for the enactment of the Shipping Act. As the Supreme Court described it, [this Committee] undertook an exhaustive inquiry into the practices of shipping conferences. The work of this Committee is set forth in two volumes of hearings, a volume of diplomatic and consular reports, and a fourth volume containing the Committee's report, known as the Alexander Report. 17 The Alexander Report includes a questionnaire sent to the steamship lines engaged in the American foreign trade, inquiring into cooperative working arrangements with other lines and railroads. 18 As the Report itself summarizes: 39 The facts contained in the foregoing report show that it is almost universal practice for steamship lines engaging in the American foreign trade to operate, both on the in-bound and out-bound voyages, under the terms of written agreements, conference arrangements, or gentlemen's understandings, which have for their principal purpose the regulation of competition through either (1) the fixing or regulating of rates, (2) the apportionment of traffic by allotting the ports of sailing, restricting the number of sailings, or limiting the volume of freight which certain lines may carry, (3) the pooling of earnings from all or a portion of the traffic, or (4) meeting the competition of non-conference lines. Eighty such agreements or understandings, involving practically all the regular steamship lines operating on nearly every American foreign trade route, are described in the foregoing report. . . . The report also presents the economic advantages and disadvantages of steamship agreements and conference arrangements as presented to the Committee by steamship line representatives and the exporting and importing interests of the United States . . . 19 40 As the foregoing indicates, the subject of the Committee's investigations was agreements, conference arrangements, [and] gentlemen's understandings, all of which envision the continued existence of the parties and their participation in such agreements (e. g., in fixing rates, apportioning traffic, pooling earnings, etc.). 20 There is no intention on the part of the Committee to include, nor is there any language in fact so including, the type of arrangements involved in the case at bar-the acquisition of all the assets of one steamship line by another. The Committee employed terms other than the word agreement to refer to transactions not of a continuing nature: 41 The numerous methods of controlling competition between water carriers in the domestic trade, referred to in the preceding pages, may be grouped under three headings, viz., (1) control through acquisition of water lines or the ownership of accessories to the lines; (2) control through agreements or understandings; and (3) control through special practices. 21 42 It would be superfluous, then, for the Committee to have made this distinction if the Commission were correct in asserting that the Committee used the term agreement to encompass transactions other than those constituting cooperative working arrangements. 22 43 The Committee recommended against a complete prohibition of cooperative working arrangements among steamship lines since it found that, in the absence of such agreements, rate wars would occur which would have the ultimate effect of eliminating the weaker lines through failure or consolidation. 23 44 In order to forestall the outbreak of rate wars, the Committee concluded that the several [steamship] lines in any given trade [should be permitted] to cooperate through some form of rate and pooling arrangement under Government supervision and control. 24 The Committee went on, however, to find that [w]hile admitting their many advantages, the Committee is not disposed to recognize steamship agreements and conferences, unless the same are brought under some form of effective government supervision. 25 To this end, it urged, inter alia, that parties to such agreements be required to file for approval with the appropriate governmental authorities a copy of all agreements with other lines engaged directly or indirectly in the American trade or with American shippers, railroads or other transportation agencies. 26 45 The clear tenor of the Committee's analysis, the problems it faced and the solution it proposed, all related to agreements of a continuing nature. Section 15 embodied the Committee's solution; the arrangements it had considered were to be placed under government supervision and control. The Committee had neither sought information nor had discussion on ship sale agreements. They were neither part of the problem nor part of the solution. 46 Congress, in enacting the Shipping Act of 1916, followed the basic recommendations of the House Committee on the Merchant Marine and Fisheries as contained in the Alexander Report. 27 It is clear, then, that Congress intended to tolerate only the minimum anticompetitive behavior necessary to preserve an essentially competitive structure in the maritime industry by striving to avoid either the failure or consolidation of independent steamship lines by the method of government supervision of anticompetitive working arrangements. While Congress recognized that in order to accomplish this result a measure of competition might have to be sacrificed, such as permitting agreement on rates or pooling of earnings, it did not intend thereby to remove all effective competition or to have those agreements permitted under Section 15 of the Shipping Act be considered as permanent in every instance. Congress preserved ample room for competition in a variety of areas other than rates, especially those which relate to the quality of service provided by the various steamship lines. 28 Congress also provided that the agreements permitted under Section 15, none of which are invariably permanent, may be cancelled or modified by the Commission in the event changing circumstances warrant. 47
48 The Commission contends that Congress has indicated by its actions subsequent to the enactment of the Shipping Act in 1916 that Section 15 provides the FMC with authority to approve, and thereby exempt from the antitrust laws, not only agreements of a continuing nature but also those such as presented by the case at bar-a sale of all assets of one common carrier by water to another. 49 In support of this assertion the Commission points first to the 1950 amendment of Section 7 of the Clayton Act. Section 7, which prohibits the acquisition by one corporation of the stock or assets of another where it tends substantially to lessen competition or to create a monopoly, provides: 50 Nothing contained in this section shall apply to transactions duly consummated pursuant to authority given by the . . . [listing various regulatory agencies] . . . United States [now Federal] Maritime Commission . . . under any statutory provision vesting such power in such Commission, Secretary, or Board. 29 51 The Commission then refers to the legislative history accompanying the 1950 amendment of Section 7, in which the Senate Committee on the Judiciary stated: The purpose of the amendments is to include in the bill the recommendations of the United States [now Federal] Maritime Commission [to the effect that transactions duly consummated pursuant to the Commission's authority are exempted from the bill] . . . . 30 The FMC neglects to add, however, that the Senate Report noted that the proposed bill then before the Senate differed from the bill as passed by the House in the following manner: 52 . . . (2) The Maritime Commission, at its request has been included in the category of agencies to which the act does not apply when transactions are duly consummated pursuant to authority given to that Commission. In making this addition, however, it is not intended that the Maritime Commission, or, for that matter, any other agency included in this category, shall be granted any authority or powers which it does not already possess. 31 53 The Commission's argument that Congress would not have included the FMC in the exemption provision in the 1950 amendment of Section 7, 32 if the Commission had no authority whatever with respect to acquisitions, is a bootstrap attempt to derive a positive statutory grant of authority from what is merely a list of agencies whose then-existing authority Congress did not intend to affect, either affirmatively or negatively. That effort has been rebuffed in advance by the Supreme Court: The words 'transactions duly consummated pursuant to authority' given [the Commission] 'under any statutory provision vesting such power' in it are plainly not a grant of power to adjudicate antitrust issues, since Congress did not intend by Section 7 to confer on any agency mentioned therein 'any authority or powers which it does not already possess.' 33 54 Of course, as we have made amply clear above, the Commission does have authority in regard to some types of transactions which otherwise would run afoul of the antitrust laws. The whole purpose of this opinion is to determine whether this particular transaction-a sale of all ships and assets-was the type transaction to which authority has been given to the Commission to pass on. The logic of our analysis is not aided by reference to congressional action which explicitly and only recognized authority of the Commission previously granted-and no more. 55 The Commission's attempt to discover an affirmative grant of power by Congress in the context of the 1956 hearings on proposed legislation affecting corporate mergers is equally unpersuasive. The FMC points to the statement of the Chairman of the maritime regulatory agency to the Acting Chairman of the Senate Subcommittee on Antitrust and Monopoly to the effect that merger agreements approved by the Board [now the Commission] under Section 15 . . ., and the resulting mergers are exempt from Section 7 [of the Clayton Act]. 34 The FMC then concludes that, since no view to the contrary was expressed by any subcommittee or other Senate member at that time, 35 Congress must have intended Section 15 to encompass mergers as well as agreements of a continuing nature. It would be illuminating in this regard to examine all of the statements from various administrative agencies which were filed with the subcommittee and left uncontradicted by the committee or by Congress. The volume of law inferentially approved by Congress in this manner would probably be enormous. 56 The third legislative action cited by the Commission is the 1962 investigation by the Antitrust Subcommittee of the House Committee on the Judiciary into the ocean freight industry. The Subcommittee's Report (the Celler Report) describes a merger of two shipping firms, American Export Lines and Isbrandtsen Co., Inc., and its subsidiary, Isbrandtsen Steamship Co., as an agreement recently approved by the Maritime Commission 36 and notes the word 'agreement' in the [Shipping] act is defined broadly so as to encompass all 'understandings, conferences and other arrangements.' 37 The Commission's effort to deduce that the Subcommittee thereby agreed with the Commission that the latter possesses the authority to approve acquisition agreements, nowhere specifically mentioned in the Celler Report, and to exempt such agreements from Section 7 of the Clayton Act, is no more convincing than its interpretation of the events (or nonevents) of 1950 and 1956. In fact, the Celler Report, in summarizing its approach to Section 15, reveals one type of agreement which it had in mind: 57 It is clear to the subcommittee that the language in Section 15 defining agreements that must be filed should not be modified in any respect. It appears that one of the Board's [now the Commission's] principal motives for requesting legislative clarification was to divest itself of statutory authority which could be invoked by an energetic agency at some future time to require filing and approval of conference rate schedules. 38 58 All that the congressional action since 1916 cited to us by the Commission reveals is that the Commission has indulged in some wishful thinking in regard to its own jurisdiction over certain type contracts, which raise antitrust questions but which are not specifically included within Section 15, yet Congress has never acted to transform those daydreams into the concrete reality of statute. 59