The Shipping Act bars Clayton Antitrust Act Relief
November 20, 2017
Types : Alerts
In re Vehicle Carrier Services Antitrust Litigation, 846 F.3d 71 (3d Cir. 2017), involved claims by plaintiff purchasers of vehicles that defendant ocean carriers had entered into “secret agreements” to fix transportation prices and reduce service capacity; all in violation of federal antitrust laws and various state law causes of action. The alleged “secret agreements” entered into by the ocean carriers included: (1) price coordination agreements; (2) agreements not to compete, including coordinated responses to price reduction requests from customers; and (3) agreements to restrict capacity by reducing available fleet. Plaintiffs claimed economic injuries and sought relief under the federal Clayton Antitrust Act of 1914 and state antitrust, consumer fraud, and unjust enrichment laws. Defendants moved to dismiss on the basis of immunity from federal antitrust liability and preemption of state law claims pursuant to the Shipping Act of 1984, 46 U.S.C. § 40101, et seq. (the “Shipping Act”). The District Court of New Jersey agreed that such immunity existed and dismissed the complaints with prejudice. The plaintiffs appealed.
On appeal, the Third Circuit Court of Appeals examined the purpose and legislative history of the Shipping Act. One of the relevant purposes of the Shipping Act was “to establish a non‑discriminatory regulatory process for the common carriage of goods by water in the foreign commerce of the United States with a minimum of government intervention and regulatory costs.” 46 U.S.C. 40101(1). A second purpose was to ensure that U.S. flag ships were on a level economic playing field vis-à-vis their foreign counterparts, who were not subject to the threat of U.S. antitrust prosecution. 46 U.S.C. 40101(2). To achieve these twin goals, the Shipping Act expressly immunized agreements that were filed, or which should have been filed, with the Federal Maritime Commission from federal antitrust laws to combat the “perception . . . that the threat of U.S. antitrust prosecution weighs more heavily on U.S. operators than their foreign‑flag competition” and which would otherwise place the U.S. operators at a “competitive disadvantage vis-à-vis their foreign‑flag competitors.” In re Vehicle Carrier Services Antitrust Litigation, 2017 A.M.C. 1, 6, 846 F.3d 71 (3d Cir. 2017), quoting the Report of the House Committee on Merchant Marine and Fisheries, H.R. Rep. No. 98-53(I). In light of the comprehensive and predictable federal framework set forth by the Shipping act to ensure efficient and nondiscriminatory international shipping practices, the Third Circuit affirmed the District Court determination that the Shipping Act prohibited carriers from operating under un‑filed agreements and the so‑called “secret agreements” at issue, which were not filed with the Federal Maritime Commission, constituted conduct prohibited by and governed by the Shipping Act. Any violation of the Shipping Act would be actionable by or before the Federal Maritime Commission, but would be immunized from the federal antitrust laws.
With regard to the state law claims, the Third Circuit turned to the preemption doctrine of the Supremacy Clause, which provides that: “The laws of the United States . . . shall be the Supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the contrary notwithstanding.” U.S. Const. Art. VI, cl. 2. The Supremacy clause empowers Congress to preempt state law. Arizona v. U.S., 567 U.S. , 132 S.Ct. 2492, 2500 (2012)(citation omitted). As noted in the discussion concerning federal antitrust, one purpose of the Shipping Act was the establishment of a non‑discriminatory regulatory process for the common carriage of goods by water . . . with a minimum of government intervention and regulatory costs.” 46 U.S.C. 40101(1). Through the provisions of the Shipping Act, Congress sought to limit the application of the antitrust laws to enable U.S. carriers to compete with their foreign counterparts. The Third Circuit thus held that “to allow state antitrust claims to proceed would interfere with this goal” and “essentially undo Congress’ work in expanding antitrust immunity and undermine its efforts to assist” U.S. carriers. In re Vehicle Carrier Services Antitrust Litigation, 846 F.3d 71, (3d Cir. 2017). In addition, the regulation of maritime commerce has historically been the purview of Congress. Accordingly, the Third Circuit held that the Shipping Act also preempted state law antitrust, consumer protection and unjust enrichment claims. Thus, plaintiffs state law causes of action were likewise properly dismissed.
In the end, plaintiffs seeking relief under antitrust-like causes of action against ocean carriers must seek redress before the Federal Maritime Commission. A number of the plaintiffs have since filed complaints before the FMC to seek an agency determination. It will be interesting to see how this tale ends.