international shipping federal antitrust law

Carriers Defend Towards Shipper’s Grievance to FMC

In the beginning of August, we shared a narrative in Common Cargo’s weblog a few U.S. shipper, MCS Industries, submitting an official grievance with the Federal Maritime Fee (FMC) that accused Cosco Delivery and Mediterranean Delivery Firm (MSC) of collusion. It’s been broadly acknowledged as truth within the business and its information retailers that shippers don’t make such formal filings towards carriers for worry of retaliation.

For extra in regards to the grievance, you may click on right here to return to that authentic weblog put up.

Why Is This Case Essential?

This case is value watching as a result of, relying on how the FMC handles it, there might be ramifications on the continuance of provider alliances that now dominate worldwide transport. The FMC has threatened to place injunctions on vessel sharing agreements, which create provider alliances, if the alliances are discovered to be violating the Delivery Act of 1984 that MCS claims MSC and Cosco violated.

Because the failed P3 Community started the pattern of provider alliances in ocean transport, in 2013, I’ve thought of these alliances as a shrinking of competitors within the business. I’ve argued for years that shrinking of competitors by way of provider alliances could be dangerous for shippers – and imply increased freight charges – in the long term. Sadly, I’ve by no means seen sufficient from the FMC to make me assume the fee was prone to shut down or considerably prohibit these alliances.

In its grievance, MCS Industries claimed that MSC solely honored a few third of the volumes contracted with the shipper, and Cosco delivered only one.6 p.c of contracted capability. Then, MCS claimed, for the present 12 months, the 2 ocean freight carriers “collectively refused to offer MCS ample commitments of their advance service contracts, as an alternative offering solely a fraction of the area MCS wanted at considerably increased costs…”

Nevertheless, with President Biden’s govt order asserting his administration’s antitrust push particularly citing worldwide transport’s provider alliances together with the FMC and DOJ carriers for Delivery Act violations whereas Congress is contemplating an enormous rewrite of the Delivery Act of 1984, provider alliances do seem like going through extra hazard of being shut down than ever earlier than.

Thus, they’re not going to take accusations of collusion and Delivery Act violations mendacity down. MSC and Cosco have filed responses to MCS’s accusations, they usually’re not holding again. With the billions carriers have been making, you understand they’ll afford the very best legal professionals cash can purchase to reply.

Cosco filed a 13-page official response with FMC whereas and MSC filed a 20-page official response.

Cosco’s Response

Cosco’s protection begins by claiming that MSC fails to state a declare for which aid may even be granted:

At its core, the Grievance facilities on MCS’s declare that CSL has breached the service contract between it and MCS. Nevertheless, neither the details pled within the Grievance nor the textual content of the contract itself assist such a declare. The contract’s period runs from January 1, 2021 by way of April 30, 2022, and CSL’s service dedication requires it to hold 500 MCS TEUs. There aren’t any month-to-month or quarterly carriage necessities. So far, CSL has carried roughly 92 MCS TEUs; eight months stay as of the time of submitting this reply to finish CSL’s service dedication requirement.

On high of that, Cosco claims the FMC doesn’t have the subject material jurisdiction below the Delivery Act, quoting it as saying, “the unique treatment for a breach of a service contract is an motion in an applicable court docket.”

After that, the gloves actually come off. Cosco calls the regulatory claims made by MCS “bogus.”

“…MCS’s non-specific assertion that CSL discriminated towards MCS in favor of different shippers in reference to its service contract lacks any alleged proof, and is completely false,” Cosco says. Then they add that even when MCS’s accusations had been true, the’d fail to fulfill a reputable declare below the Delivery Act of 1984 because it’s presently drafted.

Repeatedly, Cosco factors to MCS’s accusations as unfaithful.

“Furthermore, MCS ‘s allegations that CSL colluded with different carriers to drive up freight charges, that it created synthetic shortage, that it unjustly and unreasonably exploited clients, and that it refused to barter with MCS are utterly and completely false,” Cosco claims.

Cosco factors at congestion and carriers incapability to maintain up with demand being triggered by unexpected, report progress in U.S. imports and shoreside COVID restrictions. Cosco says it “has not colluded with another carriers to drive up freight charges, nor has it created synthetic shortage. Somewhat, COSCO has been working intensively with shipper clients to offer the best ranges of service high quality and amount below extraordinary circumstances.”

Cosco goes as far as to say, in Fall of 2020, it reopened negotiations of current service contracts with MCS to extend the variety of containers shipped from Qingdao to the U.S., “regardless of MCS’ poor observe report of contract efficiency in previous years.”

Then Cosco actually goes after MCS’s declare the provider solely delivered 1.6% of contracted capability in Might by way of July of 2021 as “a false assertion of fabric truth to the tribunal.”

“Because the precise information will present,” Cosco claims, “MCS didn’t verify any bookings with CSL [COSCO SHIPPING LINES CO., LTD.] throughout the month of June 2021 at any origination ports typically utilized by MCS to current its containers to CSL for carriage, and even did not make the most of all area provided and confirmed to MCS in July 2021.”

MSC’s Response

MSC Joanna
MSC Joanna – picture by Alf van Beem

MSC solutions MCS’s allegations in 60 numbered paragraphs to start earlier than laying out 9 factors of protection. The paragraphs give particulars and make numerous related statements to those I highlighted above from Cosco. Thus, I’ll skip to their record of defenses towards MCS’s filed grievance:

1. The Fee lacks jurisdiction over this matter as a result of Complainant’s claims come up out of the Ocean Provider Settlement between MSC and the Complainant, and are topic to arbitration in New York.

2. Complainant fails to state a declare upon which aid could be granted.

3. Complainant’s claims are barred in entire or partially as a result of any damages Complainant allegedly incurred resulted from its personal inaction, negligence or different fault.

4. Any alleged damages sustained by the Complainant had been proximately, straight, and solely brought on by the acts of third individuals over whom MSC had and has no path or management.

5. Complainant’s claims are barred in entire or partially by the doctrines of waiver, estoppel, and/or laches.

6. Any alleged nonperformance of the contract or violations alleged herein had been excused by pressure majeure and MSC isn’t accountable for damages ensuing therefrom.

7. MSC’s practices had been neither unjust nor unreasonable.

8. MSC reserves any jurisdictional defenses or rights to arbitrate or proceed in one other discussion board.

9. MSC reserves the precise to amend this Verified Reply to boost any further defenses or affirmative defenses that will come up in the middle of this continuing.


Clearly, this has all of the makings to be a bitter battle between MCS and the carriers, MSC and Cosco, the shipper makes claims towards.

It’ll be attention-grabbing to see if MCS’s case makes different shippers extra prone to deliver ahead claims themselves or be reaffirmed of their worry of retaliation. Most likely extra attention-grabbing might be if any of the accusations stick, and the FMC decides there may be justification to deliver injunctions towards any vessel sharing agreements.

It’s vital to notice, MSC and Cosco are in separate alliances. MSC is a part of the 2M Alliance whereas Cosco is a part of the Ocean Alliance. Assuming the FMC is set to have the jurisdiction for this grievance and decides collusion or different Delivery Act violations exist, would these carriers be punished utterly individually or would each of their alliances face injuction?

I’ll be maintaining a tally of this case and its ramifications for the worldwide transport business. And the place else would I write about all of it than right here in Common Cargo’s weblog?

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