for pursuing the alternative approach of Government 
regulation. Basically, foreign maritime nations have | \ 
objected to the United States regulating the competi- 
tive” See aaah aie Dene JOBE ale 
mane 
y, the policy adopted by the United 
States with enactment of the Shipping Act of 1916 
imposed strict new requirements on the competitive 
practices ofa ocean common carriers in both for- 
antitrust_immunity to—approved conferences and 
certain —other competition-limiting associations or 
agreements.*? The competitive practices prohibited 
by the law extended to individual companies as well 
as to conferences, and all competition-limiting ar- 
rangements and associations were required to recsve| 
prior approval from the Government before activa- 
tion. Furthermore, all such arrangements were re- 
quired to provide for “. . . reasonable and equal 
terms and conditions for admission . . .” of non- 
affiliated shipping companies.** Hence, the 1916 Ac 
while allowing the conference system to exist in the 
U.S. trades, limited this authorization to so-called 
“open” conferences only. The “closed” conference, 
which limits membership and which is common else- 
where in the world was, and remains, prohibited in 
U.S. commerce.’ 
Although the Alexander Report had recommended 
that the regulation of shipping be added to the re- 
sponsibilities of the Interstate Commerce Commis- 
sion, the Shipping Act instead established a new 
i to discharge these eee 
tates Shi Board, 
hese 
aNis. wine _nemeTae alee ten Inioeul nusnatanal 
responsibilities with respect to U.S. shipping and was 
authorized to build and operate ships for govern- 
32 Among the major types of agreements regulated by FMC 
(and requiring specific FMC approval before implementation) 
are the following: 1) Conferences and Rate Agreements which 
contain provisions for fixing and requiring adherence to uniform 
rates, charges and practices relating to the receipt, carriage, and 
delivery of cargo for all members in a particular trade. Gen- 
erally, rate agreements provide for the right of independent 
action by member lines. Conference agreements authorize rates 
for specialized commodities to be open. Conference and rate 
agreements with a membership of three or more must contain 
provisions describing the method or system used by the parties 
in policing the obligations thereunder. 2) Pooling Agreements 
which provide for the division of cargoes or revenues among 
Participants according to a prearranged formula. 3) Talking 
Agreements which allow antitrust immunity to carriers in a par- 
ticular trade who wish to discuss certain subjects related to the 
trade or who wish to hold talks preparatory to the establishment 
of some other type of agreement. 4) Interconference Agrec- 
ments which are generally agreements between conferences serv- 
ing naturally competing adjacent trades which are typically de- 
signed to achieve rate parity between conferences. Agreements 
of this last type are required to preserve the right of independent 
action for member conferences upon notification of other parties 
to the agreement. 
33 Shipping Act, 
1916 (as amended), Section 15, 39 Stat. 728, 
Chapter 451, 
September 7, 1916. 
NG Var 0 
ment account under the Emergency Fleet Corpora- 
tion. At the time the Shipping Act was passed, the 
threat of war and the need to expand U.S. shipping 
capacity rapidly to meet wartime requirements fo- 
cused most of the attention on the emergency pro- 
visions of this legislation rather than its regulatory 
provisions. In the aftermath of World War I, how- 
ever, the emergency provisions of the Shipping Act 
passed into history, while the regulatory provisions 
have remained central to contemporary U.S. shipping 
regulation. 
Over the peri —61 the regulatory activities 
of the Federal Government wi ect to foreign 
trade ocean shipping were consistently vested in the 
same organization that carried ederal_promo- 
tional programs relating to a- 
tine. While this arrangement resulted in numerous 
problems over the years, it was a central feature of 
the United States Shipping Board (an independent 
agency from 1917 to 1933 and a component of the 
Department of Commerce from 1933 to 1936), the 
United States Maritime Commission (an independent 
agency from 1936 to 1950), and the Federal Mari- 
time Board/Maritime Administration (both Depart- 
ment of-Commerce units from 1950 to 1961). Not 
until Holgi vate. thellveteralspromot ort and _regu- 
latory responsibilities in this area finally separated 
with the. eaablighiment ofl ansineienerricn mt eae 
Federal Maritime Commission! to carry out-the regu- 
latory_duties and with the assignment of all-promo- 
tional and subsidy functions to the Maritime Admin- 
istration in the Department of Commerce. This is the 
present organizational arrangement of these func- 
tions, and today the foreign trade regulatory provi- 
sits of the Shioelig Actor TDL apeher Gabor 
regulatory responsibilities) are carried out by the 
FMC. 
In an effort to regulate the liner shipping industry 
effectively and yet allow a limited form of the con- 
ference system to persist, the Congress specified in 
Section 14 of the Shipping Act four types of com- 
petitive behavior which would be illegal for all com- 
mon carriers (and/or conferences) engaged in US. 
commerce. These specific prohibitions, which are 
still in force, and which apply to both foreign and 
US.-flag carriers, will be briefly discussed in the 
following paragraphs. 
The first practice to be specifically prohibited was 
the deferred rebate. Before 1916 such rebates were 
used to maintain shipper patronage and are still used 
for that purpose today in many non-US. trades. 
Essentially, ship operators offering such rebates 
agree to return a portion of the total freight paid for 
services in an earlier period to any shipper who 
“agrees to ship all or some specified portion of his 
cargoes for some future period on vessels owned by 
the operator offering the rebate or, in the case of 
conferences, on vessels of conference members. This 
V-20 
