FMC Boosts Penalty Against German Container Firm to $17.6 Million
The Federal Maritime Commission this week ordered German container shipper Hamburg Sud to pay $17.6 million to OJ Commerce, an American e-commerce business, adding millions of dollars to the penalty an administrative law judge imposed last year after Hamburg retaliated against OJC for threatening to file a complaint with the FMC. The commission also appeared to adopt a broader interpretation of carrier "refusal to deal" violations.
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While the FMC affirmed the judge’s ruling that Hamburg Sud, which is owned by major shipping line Maersk, violated the Shipping Act’s anti-retaliation provision and refused to fulfill contact terms (see 2306080062), the FMC added $7.8 million to the $9.8 million penalty levied by the judge, saying it conducted its own assessment of damages and came up with a higher total amount.
"The ALJ correctly found that [Hamburg Sud] refused to deal with OJC and retaliated against OJC," the commission wrote in its order. "As to damages, we modify the ALJ’s damages calculations to reflect more accurately the harm suffered by OJC."
The FMC said the judge "calculated damages based on OJC’s lost profits calculation, but that calculation is an inaccurate reflection of OJC’s average profits for the periods in question." The agency also said there is “substantial evidence” that the parties would have doubled the minimum quantity commitment, to 400 forty-foot equivalent units, if they had renewed their 2020-2021 service contract for the 2021-2022 year.
At the center of the FMC’s order was a “novel” discussion about whether Hamburg Sud’s alleged refusal to negotiate a service contract with OJC -- along with the carriers' offer to continue to ship OJC containers at spot rates -- constituted a “refusal to deal” and violated U.S. shipping laws. Hamburg Sud argued that because it was still offering spot rates to OJC, the carrier wasn’t “shutting out” the e-commerce business and therefore wasn’t refusing to deal with the company.
But the FMC, like the ALJ, disagreed, saying that spot shipping rates aren’t the same as the “guarantees provided” by a service contract.
The ALJ found that “providing higher spot market rates does not ameliorate the problems caused by not having a predictable, year-long service contract,” the FMC said, adding that Hamburg Sud offered “no persuasive argument or evidence from the record rebutting that conclusion, only evidence that it did provide spot market space. … Accordingly, [Hamburg Sud’s] argument that it did not refuse to provide cargo space accommodations is not persuasive.”
The FMC added that “relevant precedent considering whether refusing to sign a service contract but continuing to ship containers through the spot market qualifies as a refusal to provide cargo space accommodations is rare.” The commission in July issued new regulations to address ocean carriers that unfairly refuse vessel or cargo space to shippers (see 2407220019).
OJC and Maersk didn't immediately respond to requests for comment on the FMC’s decision.
While the award is higher than most penalties levied in FMC cases, it is less than the record-high $63.2 million fine the agency has proposed against major shipping carrier Mediterranean Shipping Company for allegedly violating U.S. shipping laws (see 2404100065).