Feds investigating ocean carriers ignoring cease-and-desist order to quit predatory chassis contracts

Six months after the Federal Maritime Commission issued a landmark ruling giving truckers more freedom of choice when selecting a chassis, the agency is looking into claims that ocean carriers are not following the new rules.

FMC has launched an investigation to determine if the Ocean Carrier Equipment Management Association (OCEMA) and its members are complying with a ruling from February establishing the right of trucker choice in selecting certain chassis. The ruling ended the widespread practice of forcing truckers to use certain chassis, which drove up rates.

February’s ruling found that OCEMA, 11 of the largest ocean carriers and chassis providers, violated the Shipping Act by requiring motor carriers to use default providers in port-to-port shipments, also called merchant haulage. Although agreements with chassis providers and ocean carriers give truckers freedom of choice, ocean carriers are allowed to veto a motor carrier’s decision to choose a certain chassis provider. According to a 2020 complaint filed by the Intermodal Motor Carriers Conference, ocean carriers abused that veto power.

That complaint also revealed a practice of ocean carriers intentionally stifling competition in merchant-haulage chassis in order to enjoy lower rates for carrier haulage. Truckers pay for the chassis in merchant haulage, whereas ocean carriers foot the bill in carrier haulage. Consequently, merchant-haulage rates were artificially inflated, while carrier-haulage rates declined or remained stagnant.

The Maritime Commission’s ruling earlier this year included a cease-and-desist order requiring OCEMA and its members to end their predatory chassis business model. The order applies to only four regions: Chicago; Los Angeles/Long Beach; Memphis, Tenn.; and Savannah, Ga.

Allegedly, at least some ocean carriers may not be adhering to that cease-and-desist order, which went into effect immediately with no grace period.

“The Commission does not currently have reliable assurance that (OCEMA and its members) are complying with the cease-and-desist order, and is therefore exercising its authority to conduct a non-adjudicatory investigation and designates the Director of (the Bureau of Enforcement, Investigations, and Compliance) to conduct the investigation under the authority of 46 C.F.R. Section 502.281,” the Commission stated in its investigation order.

The Commission’s investigation will examine whether OCEMA and its members have altered their policies and practices. The agency also will investigate any continuing contractual relationships and practices through which OCEMA can use merchant-haulage volume to lower carrier-haulage rates when motor carriers have no choice of chassis providers.

At least one commissioner appears open to the idea of exclusive chassis arrangements being a good thing in certain situations.

Although Commissioner Max Vekich agreed with the investigation in a concurring statement, he also suggested that the Commission consider that some contracts that include exclusivity could be beneficial.

“Exclusive arrangements may be justified by corresponding benefits, which can offset the anticompetitive impacts,” Vekich wrote. “I believe review of exclusive chassis arrangements should include a careful analysis of the benefits to the industry. There are indications that exclusive chassis arrangements give rise to improved safety and roadability of chassis due to enhanced safety inspections and maintenance and repair programs.”

If the investigation finds evidence of noncompliance, the Commission may seek an injunction in a federal district court. The Bureau of Enforcement, Investigations and Compliance also may initiate its own enforcement action and seek civil penalties for noncompliance.

Anyone with information that may be useful to the investigation, including evidence of noncompliance, is encouraged to send that information to BEIC@fmc.gov or call 202-523-5783. Retaliation against a party for making a complaint is a separate offense of the law that carries significant penalties. The Commission will pursue any allegation of retaliatory conduct and hold offending parties fully accountable. LL