The head of the Federal Maritime Commission and an official of the Justice Department's antitrust division clashed today over whether the U.S. government should push to eliminate the rate-fixing practices now used by the world's shipping industry, as advocated by the department.
"There is no question that our current antitrust and related shipping policies have brought the United States into conflict with most of the rest of the world," Maritime Commission chairman Karl E. Baake said in a speech before a two-day conference sponsored by American Shipper Magazine.
He urged a thorough reappraisal of current government policy, and said the "challenge we face is whether to harmonized our maritime laws and practices with those of the world, or to continue to 'go it alone.'"
"Will the antitrust tail wag the dog or will we establish a national ocean transportation policy, attuned to the 'real world' and to the realities of the industry, that will serve the interests of a healthy U.S. merchant marine and of stable U.S. ocean trades?" Baake asked.
At issue is whether the U.S. should continue to support the "conference system" by which shipping rates for different areas of the world are fixed by the lines serving those areas and approved, in turn, by the regulatory authorities for the respective governments or whether this system has led to higher than necessary rates and inefficiencies due to a lack of competition and should therefore be abandoned or at least modified.
The Justice Department took the latter position in a recent report.
"The basic conclusion of the division's study is that the benefits of the conference system are much lower than congress believed" when it passed the Shipping Act of 1916 (amended in 1961), Bruce E. Fein, an aide to the assistant attorney general in charge of an antitrust division told the meeting.
The Shipping Act gave shipping lines protection from the antitrust laws if they participated in conferences.
The report also concluded, Fein said, that the "anticompetitive harms" of the conference system are also "much greater" and that "a careful reexamination of its justification seems required in the achievement of good government."
Fein suggested that an outright repeal of the Shipping Act "is one possibility," but said the Justice Department might accept modifications short of this step, such as the elimination of "dual rate contracts" which give shippers that use lines that participate in the conferences preferential lower rates.
In any case, it looks likely that Congress will undertake its first comprehensive review of shipping regulation in more than 15 years in 1977.
Sen. Daniel K. Inouye (D-Hawaii), the new chairman of the Senate's Merchant Marine Subcommittee, told the conference on Monday that his panel will hold hearings this year into nearly all aspects of maritime regulation, including the question of rebating, "the most serious problem the American flag carrier faces today," and "the effectiveness of the Shipping Act."
"I have tentatively concluded that many of the laws passed in 1916 and perhaps even as late as 1970, have either become obsolete by technological improvements, by innovative minds, or have become isolated by the laws of other countries which have destroyed their utility value," he said.
Inouye, in his speech, noted that while American foreign trade has increased from 125 million tons in 1950 to 600 million tons in 1976, the percentage of world trade carried on American-flag cargo ships has dropped from 42.3 per cent to less than 5 per cent of the total.
The remarks by the Justice Department official drew an almost uniformly negative reaction, and even some snickers, from representatives of U.S. and international shipping concerns in the audience.
The trend of discussions in the conference here is that the Justice Department's position is out of touch with what is going on in shipping and that what is needed if anything, is a strengthening of the conference system.
Karl-Hein Sager, deputy chairman of West Germany's Hapag-Lloyd A. G. Line, one of the world's largest, said "fierce competition exists amongst the individual lines in most conferences," and he recommed that the shipping conference "be allowed to form pools and to rationalize in order to adjust supply and demand of ships' capacities," and that the conferences should "be allowed to merge where new ship's systems make the traditional geographical areas obsolete."
Sager said "the present excessive antitrust philosophy" in the U.S. was hurting world trade because it was "preventing conference lines in the American trades from offering their clients a better and cheaper service . . . by not permitting them to handle their business in the same manner as is customary in all others parts of the world." He said this was of particular concern in light of the challenge from the rapidly expanding Soviet maritime fleet.