The Shipping Act of 1984 prohibits common carriers from unreasonably refusing to deal or negotiate with would-be shippers. In 2022, Congress passed the Ocean Shipping Reform Act, directing the Federal Maritime Commission to define what constitutes an unreasonable refusal to deal regarding vessel space accommodations. The Commission issued a Final Rule in 2024 that includes non-binding factors for evaluating reasonableness, such as whether a carrier followed a documented export policy, engaged in good faith negotiations, or based a refusal on legitimate transportation factors. The rule also lists specific examples of unreasonable conduct, including quoting rates so far above market rates they cannot be considered a good faith offer. The World Shipping Council, representing about 90% of global liner services, challenged the rule, arguing the Commission exceeded its statutory authority and that the rule was arbitrary and capricious.
The court applied the arbitrary and capricious standard under the Administrative Procedure Act to review the Commission's Final Rule. First, addressing the Council's claim that the Commission cannot consider price, the court distinguished between setting shipping rates and evaluating whether a specific quoted rate is unreasonably high in a specific context. The court reasoned that an extreme rate quote, such as one billion dollars, is functionally equivalent to a refusal to deal, and the Commission must have the authority to assess such offers to prevent carriers from evading the statute by quoting unrealistic prices. The court noted that the National Labor Relations Board similarly considers wage proposals when assessing good-faith bargaining duties without having ratemaking authority. Second, regarding the documented export policy requirement, the court interpreted the Shipping Act's grant of authority to require reports on 'facts related to the business' as broad enough to include prospective information like pricing strategies and service descriptions. The court found the Commission's explanation that this data helps determine if a carrier's conduct aligns with its general policies was reasonable. Finally, the court addressed the removal of the phrase 'business decisions' from the rule's factors. The court found this was not arbitrary because the Commission's preamble explicitly stated that information on business decisions remains relevant to the analysis, meaning the Commission has not abandoned the consideration of such factors.
The Final Rule defining unreasonable refusals to deal regarding vessel space accommodations remains in effect. Ocean common carriers must continue to submit annual documented export policies detailing their pricing strategies and services. The decision clarifies that the Federal Maritime Commission can consider price levels and business practices when adjudicating refusals to deal, but it must evaluate the totality of circumstances in each case rather than relying on a single factor.
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