3) A conference chairman, secretary, or committee 4) Every neutral body, including those bodies on 5) There shall be confidentiality for the complainants and sources of information. 6) The investigatory body can compel production of records and testimony as well as investigate in any area it deems necessary so long as it can demonstrate a reasonable basis therefor. 7) Conference decisions initiating or modifying existing self-policing systems shall be on a basis other than unanimity. 8) Conferences shall set out the burden of proof for establishing a violation. Reasonable proof or common sense is suggested. 9) An investigatory body may initiate an investigation of a malpractice up to two years after its commission, and a charge of wrongdoing must be presented to the line within two years after the initiation of the investigation. 10) Fines levied shall be computed by taking into The only exception to the requirement for a permanent neutral body shall be for those conferences covered by number 2 above. These conferences must incorporate the remaining provisions into their self-policing agreements. The conditions for the Commission's annual granting of exemption to the permanent neutral body are that: (1) the lines can demonstrate that the costs for the neutral body are not commensurate with the profit from the cargoes carried; (2) the trade is clean, with stated reasons for this condition, e.g., limited membership, pools, cargo allocation, over-tonnaging not present, equipment considerations; (3) the conference chairman, secretary, or Owners committee has the time and expertise to police the conference (specifically, what self-policing functions they perform); (4) there are guidelines for referring serious malpractices to a competent neutral body which is on retainer, as well as giving it the authority to self-initiate investigations; (5) initially, each line shall have, at the minimum, one office audit a year; and (6) the head of each line shall file with the Commission an annual advice to the effect that there are no known malpractices in the conference and there is no need for a permanent neutral body. Those conferences which use the arbitration system will have to designate some conference official or line member to assume self-policing responsibilities. (See Part IV (C), infra.) Again, the thrust of the Commission's position should be that the decisions on self-policing will be those of the lines, once the essential provisions have been adopted. Some degree of oversight should be formulated to protect both the interests of the lines and those of the Commission. There must be an oversight approach whereby neutral body, conference and line officials are interviewed, and intelligence sources contacted, so that there is a verification of the statements required of the conference to meet the above-noted conditions. (See Parts V and VII (B).) The oversight mechanism should be a communication channel between the shipping officials and the Commission The oversight should also be considered as a vehicle for the continued development of the present self-policing systems so they do not flounder as in the past. Finally, if in the future the condition arises where there are unchecked malpractices despite a neutral body's efforts, it shall continue to be Commission policy that the Bureau of Enforcement not stand by passively and watch, but direct its activities towards those lines which are violating their agreements. III. SELF-POLICING A. LEGISLATIVE HISTORY On the issues of whether there should be a self-policing body for each conference, how effective it should be, and what degree of Commission oversight is required, a reading of the remarks from the Congressional Record indicates rather conclusively what the Congress intended when the Shipping Act was passed. The following comments will be recognized by most readers, but they are repeated to bring back into focus the joint obligations of the conferences and the Commission in the area of self-policing. The shipping conferences were given the dual-rate system because the Congress felt it to be an effective tying device. The obvious motivation was to prevent rate wars, thus ensuring stability in the trades. Without this stability, it was felt that the commerce of the United States would be seriously impaired. Congress let it be known that, if the conferences were not prepared to police themselves, there were to be no dual-rate contracts. The Congress recognized that the antitrust law was unique and that the result of the Shipping Act was a regulation of the foreign commerce of the United States as well as that of the countries with whom we shared an ocean trade. The unilateral regulation by the United States of other countries' foreign commerce was the subject of much comment at the hearings. The Congress understood fully the international ramifications of an attempt by the U.S. Government to enforce the Act. Recognizing the limitations a federal agency would encounter in enforcing a U.S. law in a foreign country, the Congress looked to the conferences to police their own agreements. Reliance upon the U.S. Courts and their discovery procedures, as advocated by some witnesses, failed to take into account the problem of obtaining testimony and records from the many foreign companies involved in U.S. trade but not subject to the U.S. judicial process. In the 1960's, Congressional investigators and the Justice Department encountered problems with obtaining records in foreign jurisdictions just as today the Justice Department is facing a confrontation with foreign governments over access to their records. Understanding the above-noted problems, Congress explored in-depth the neutral body concept. The extensive remarks in the Record indicate that the Congress foresaw some type of neutral body as the policing agent of the conferences. The Courts have approved of the antitrust exemption enjoyed by the shipping industry. However, in so approving, former Supreme Court Justice William O. Douglas, in a recent decision, noted that an antitrust exemption is not something one accepts passively, but is something which requires positive effort on the part of the recipient in order to retain the exemption. It can be drawn from the above that the Legislative and Judicial Branches of the United States Government look to the conferences to provide an effective method of self-policing. Positive implementation is a prerequisite to the Court's sanction of the antitrust exemption. The laxity in self-policing which permeated the trades until the recent past is not the kind of self-policing the above bodies will condone. With respect to the Commission's role, the Congress expected a "supervised self-regulation," and the Court has noted the Commission's requirement for "continuing supervision under the Act." The Douglas Report leaves no doubt that the Commission's duty in the self-policing area is "a strict surveillance," "a close supervision." The Congress was under the impression that, at the time of the 1960 hearings, the Commission would be forthcoming with a study on the effectiveness of neutral bodies the hoped-for answer to self-policing. With respect to the Commission's oversight, see Parts V and VII (B). - In summation, then, the Congress and the Supreme Court require that the shipping industry employ a self-policing body for each conference, and they require that it be an effective one. The Federal Maritime Commission has a Congressional mandate to oversee the self-policing systems of the conferences with much more than a perfunctory, routine acquiesence. B. SELF-REGULATION Some of the firmer advocates of the industry policing itself maintain that this should be done without regulation by the Commission. Their position on having a strong self-policing body for their conferences flows not from These advocates also make the well-taken point that, in the final analysis, an effective self-policing system can never be imposed on those members who do not want one. The first principle for effective self-policing is the often-expressed statement that the top officials of the lines must want self-policing and must inform their personnel that committing malpractices not only violates conference agreements but, more importantly, is contrary to company policy. Some of these witnesses are also the officials who want any basic change in a conference self-policing agreement to be approved by unanimous vote. This position again stems from the principle that the owner must be persuaded that self-policing is for the good of the lines, the conferences, and the industry. Only the owners can prevent meaningful malpractices. Therefore, self-policing must be accepted and not imposed. If the former is the case, the owners will direct that self-policing be implemented by their employees. (The officials acknowledge their industry's track record over the years for well-intentioned reform but eventual apathy.) It is within this context that I have made my recommendations for improvement of the self-policing systems. The basic revisions in the self-policing agreements are those which the majority of officials have agreed upon as essential for a viable self-policing system. In fact, several conference agreements already contain some provisions in whole or in part. What is sought is a basic uniformity in all the self-policing agreements. It is the opinion of many owners that imposition of regulations upon foreign lines transgresses upon the traditional international freedom of the seas. Accepting this, and upon incorporation of the provisions into the agreements, the Commission's role should be limited to that of its statutory duty to determine on an annual basis the adequacy of the conferences' various self-policing systems. 25-684 0 - 78 - 8 |