are deemed contrary to the public interest unless they are "required by serious transportation need, necessary to secure important public benefits, or in furtherance of a valid regulatory purpose of the Shipping Act." Investigation of Passenger Travel Agents, 10 FMC 27, 34-35 (1966) aff'd sub nom; FMC v. Aktiebolaget Svenska Amerika Linien, 390 U.S. 238, 243 (1968).

Under section 4, particularly subsection 4 (c), of S. 3, it would appear that the Attorney General would have unlimited power to determine whether a Commission hearing has been held, whether the criteria of section 3 (a) had been met, and, if not, what type of proceeding should be held. We strenuously oppose any provision which would convey to the Attorney General powers which would interfere significantly with the independence that is essential to the effective operation of the Federal Maritime Commission.

In regard to judicial review of agency actions, section 5 of the bill assigns the burden of proof for establishing compliance with section 3 (a) upon the agency, thereby, in effect, establishing a prima facie case of noncompliance which the agency must rebut by "...substantial evidence based on the record as a whole..." We believe that it is inappropriate to create a statutory presumption that an agency has not complied with its regulatory responsibility to incorporate antitrust considerations into its administration of its governing statutes.

Section 6 would require the Commission to review its statutes, practices and procedures and take steps to bring them into compliance not only with S. 3, but with U.S. antitrust statutes as well. It should be emphasized that the Federal Maritime Commission has been granted, and the Congress has repeatedly re-affirmed, statutory authority to accord limited antitrust immunity to activities in the international shipping industry, an obligation which the Commission already exercises in a way so as to accomplish the stated purpose of the subject legislation.

The Commission is a small agency with a staff of 350 people operating on a budget of only $8,901,000 for Fiscal Year 1978. It has neither the manpower nor the funding to comply with the extensive reporting and rulemaking requirements envisioned in S. 388. We are not convinced that the provisions of this bill would improve our regulatory functions, much less to such an extent that the budgetary and administrative costs of compliance would be outweighed. In fact, at a time when all Federal regulatory agencies are under criticsm for cumbersome procedures that cause lenghty delay in agency proceedings, we cannot support legislation which contains provisions that, if enacted, would result in additional delays.

Although we share your concern that the public interest be protected from unnecessary anticompetitive activity, we believe that this laudatory goal can better be accomplished through continuation of existing regulatory policies toward ocean shipping rather than incorporation of the principle of S.

382.

Sincerely,

Richard J. Daschbach
Chairman

This is in response to your May 24, 1979 request for the comments of the Federal Maritime Commission on proposed changes to S. 382, the "Competition Improvements Act of 1979."

These changes would eliminate most of the specific problems that we outlined in our February 27, 1979 letter to you, and they would clearly improve the original bill. However, the specific problems were symptomatic of a fundamental deficiency in S. 382's philosophical and economic approach to ocean shipping. Since this underlying defect has not been remedied, the Commission's objection to the subject legislation remains.

The domestic concept of free competition is presumed by the legislation not only to be workable in international shipping, but preferable to the cooperative activity authorized by the Shipping Act, 1916, and this view is antithetical to our perception of our regulatory responsibilities and to the intent of Congress in enacting the shipping statutes we admininster.

Normal market factors which make open competition function well in most aspects of the U.S. domestic economy are distorted in international shipping by the influence of foreign governments on the financing and operations of their steamship lines and by the absence of antitrust prohibitions in most foreign countries. Combinations, mergers, and other types of coordinated activity which may be considered in restraint of trade in this country, for example, are often viewed as good business practices abroad.

Cognizance of the political and economic characteristics that distinguished international liner shipping from many domestic U.S. industries led Congress to create the antitrust exemption for ocean shipping in 1916 and to reinforce that exemption in 1961. As recently as the 95th Congress, an extreme example of the extent to which government influence can distort the normal market process was acknowledged and

addressed by enactment of the "controlled-carrier" legislation (P.L. 95-483).

In spite of specific positive changes, the suggested new age in S. 382 which perpetuales our problem with the legislation is contained in subparagraph (a) on page 3(a) of the marked-up copy enclosed with your letter. That language would preclude the Commission from approving or modifying agreements in foreign ocean commerce unless

"it has considered the competitive effects
of such action and concluded that such
action is the least anticompetitive
alternative legally and practically
available to achieve statutory goals"

We believe that this language has traditionally been used to implement rigorous application of domestic antitrust standards to domestic industries, and its application to the approval of section 15 agreements under the Shipping Act, 1916, may be in direct conflict with the purpose of that law, which is intended to accord antitrust immunity to an international industry.

Conference and rate agreements by their very nature are generally anticompetitive in varying degrees. By authorizing the Commission to approve these agreements without consideration of U.S. antitrust law, the Congress essentially declared that the anticompetitive method is not always the best method in the ocean shipping industry we regulate. The proposed new language of S. 382 would thus conflict with the mandate of section 15 of the Shipping Act, 1916, unless the modifying phrase "legally and practicably available to achieve statutory goals" were strictly interpreted to conform to the purposes of the Act.

We do not believe that this interpretation would be clear. On the contrary, the language is so vague that it will be the cause for litigation in virtually every case in which the Commission approves an agreement over the objections of other parties. This vagueness is compounded by the fact that the Shipping Act, 1916 does not enumerate specific statutory goals, but instead vests in the Commission the discretion to evaluate various factors affecting the approvability of section 15 agreements.

There are at least two ways to eliminate the problem that we have described. One method would be to delete subparagraph (d) on page 3(a). Another would be to insert language into S. 382 which would limit its provisions to domestic

industries. With either of these changes, the Commission would no longer object to the proposed legislation.

This is in further response to your letter of June 27 requesting comments on S. 1291, the "Administrative Practice and Regulatory Control Act of 1979," a bill "to improve the procedures for agency rulemaking; to require agencies to adhere to a procompetition standard; to require the Congress and the President to review certain regulatory agencies; to provide public participation funding; and for other purposes."

The Board's comments will be limited to those areas of principal concern in the operations of the Federal Reserve. The Board supports the efforts of Congress to improve the regulatory process, to enhance public participation, and to strengthen Congressional oversight of Federal programs.

Some progress toward these goals has been made as the result of Executive Order 12044 of March 23, 1978, that required the need for regulations to be clearly established and meaningful alternatives to be considered and analyzed.

For example, the Federal Reserve, consistent with the purposes of that order, has adopted expanded rulemaking procedures that, in most cases, requires more detailed analyses of the potential cost and benefits of regulatory and nonregulatory alternatives.

The Board has also undertaken a regulatory improvement program that involves a substantive zero-base review of each Federal Reserve regulation to determine (1) fundamental objectives and the extent to which the regulation is meeting current policy goals, (2) costs and benefits of the regulation, (3) any unnecessary burdens imposed by the regulation, and (4) nonregulatory alternatives that might be used to accomplish the same objectives. The Board's program also contemplates procedures for reviewing each regulation at least once every five years.