Pacific Coast European Conference v. Federal Maritime Commission

439 F.2d 514
CourtCourt of Appeals for the D.C. Circuit
DecidedOctober 16, 1970
DocketNos. 22407, 23330
StatusPublished
Cited by1 cases

This text of 439 F.2d 514 (Pacific Coast European Conference v. Federal Maritime Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pacific Coast European Conference v. Federal Maritime Commission, 439 F.2d 514 (D.C. Cir. 1970).

Opinions

WILKEY, Circuit Judge:

This combined appeal arises from two decisions of the Federal Maritime Commission. The first invalidated the self-policing procedures of the Pacific Coast European Conference as not measuring up to the principles of fundamental fairness required by our decision in States Marine Lines, Inc. v. Federal Maritime Commission (States).1 Subsequently, the Conference adopted new self-policing procedures which satisfied the fairness principles of States, and in so doing made the application of these procedures retroactive to the date of the States decision. In the second of the two decisions here in issue, the Federal Maritime Commission approved the latter provision under Section 15 of the Shipping Act, as amended,2 thereby allowing the Conference to prosecute States Marine for alleged infractions of the Conference Agreement during membership according to the new procedures, although prior to their adoption States Marine had resigned from the Conference.3

I. Background

A. Shipping Conferences and Their Self-Regulation

Shipping conferences are made up of ocean carriers sailing under the flags of many nations. Only a minority of the lines in shipping conferences serving the foreign trade of the United States fly the American flag. Conferences were first formed about 100 years ago in order to eliminate destructive competition between ocean carriers arising out of over-tonnage. In order to provide stability, the conference agreements normally contained provisions fixing rates, sailings, and practices over routes in which members’ ships were engaged.4

The Shipping Act of 1916 was enacted in response to abuses which had become evident in the conference systems affecting the foreign trade of the United States. It eliminated the most dangerous predatory weapons in the hands of the conferences, and expressly granted antitrust immunity to the conferences in their rate-fixing and adoption of uniform practices, provided that the conferences submitted their agreements to the appropriate United States regulatory body for approval.5

Despite their obvious anticompetitive effect, conferences were not eliminated from the foreign trade of the United States, because they were viewed as necessary to American shippers and because of supposed advantages to this nation’s trade. Conferences were thought to produce “greater regularity and frequency of service, stability and uniformity of rates, economy in the cost of service, better distribution of sailings, maintenance of American and European rates to foreign markets on a parity, and equal treatment of shippers through elimination of secret agreements and underhanded methods of discrimination.” 6

[517]*517Since a conference’s effectiveness, and ultimately its very existence, is dependent upon the extent to which its members live up to the conference agreement and refrain from such violations as granting shippers secret rebates, it is of vital importance that conferences regulate their own members and police their own agreements.7 The Shipping Act of 1916 recognized the need for self-regulation of international shipping through the means of shipping conferences, and most of the conference agreements approved under the Shipping Act up to 1961 contained such provisions. However, in that year Congress, concerned by the laxity of the conferences in policing their own memberships, amended Section 15 of the Shipping Act to require the appropriate regulatory body (then the Federal Maritime Board) to disapprove any conference agreement not including “effective provisions for policing the obligations under it,” and further directed the F.M.B. to disapprove any conference agreement if it should find inadequate policing in fact despite any language in the agreement.8

The self-policing provisions of shipping conferences came to the attention of this court in 1967 in States. In that case, we followed the lead of the Supreme Court in Silver v. New York Stock Exchange,9 where the Court in relation to stock exchanges, which like shipping conferences are given limited statutory immunity from the antitrust laws, said: “Congress in effecting a scheme of self-regulation designed to assure fair dealing cannot be thought to have sanctioned and protected self-regulative activity when carried out in a fundamentally unfair manner.”10 Consequently, we found that conference agreements falling within the scope of the Shipping Act must provide a fair self-regulatory process.

But it was not essential, we said, that to be “fair” to an accused line, a conference had to accord it all the due process requirements that have evolved in our criminal law. We recognized the elusiveness of the concept of fairness and noted its dependence “upon the particular institutional setting involved.”11 Because of the economic power wielded by shipping conferences we did hold them to a higher standard of procedural formality than that required for voluntary non-economic organizations. This standard, we found, requires that the “self-regulatory process must provide specific, realistic guarantees against arbitrary and injurious action.”12

B. The Pacific Coast European Conference and Origins of the Current Controversy

Pacific Coast European Conference is composed of numerous foreign and domestic shipping lines operating between ports on the United States Pacific Coast and ports in Europe. It was established in 1937 pursuant to an agreement approved by the Federal Maritime Commission under Section 15 of the Shipping Act of 1916. Under the self-policing provisions of this agreement, the determination of guilt for infractions and the penalties assessed therefor were left to a three-fourths vote of the membership present at a duly called meeting, with the accused line casting no vote. No procedures were set forth in the agreement giving the accused line access to the evidence to be used against it, or allowing the accused to rebut or explain the evidence, and there was no guarantee of an original or appellate [518]*518hearing before a disinterested and impartial tribunal on either the matter of guilt or the assessment of penalties.

On 13 March 1967 counsel for the Conference recommended that the above procedures be changed to include “fairness” provisions consonant with our States decision, which had been handed down less than two weeks before. Under the conference agreement, all major changes had to be approved unanimously by the members before adoption, and at a meeting in June 1967 attended by 21 of the 22 conference members, including States Marine, all 21 voted for adoption. However, shortly thereafter States Marine withdrew its affirmative vote; still later Weyerhauser Lines, the absent member, cast a negative vote on the proposal. Thus no changes were made to the self-policing provisions of the Agreement.

In August 1967 the comptroller of the Conference informed the chairman of the results of an investigation that he had conducted which indicated that States Marine had paid rebates to certain shippers in violation of the conference agreement. The chairman formally notified States Marine of the charges.

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439 F.2d 514, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pacific-coast-european-conference-v-federal-maritime-commission-cadc-1970.