Hearings were held before the FMC on the time charter and equipment lease agreement, and on July 28, 1970, the Chief Hearing Examiner for that Commission recommended approval of the charter agreement. Subsequent additional hearings were held and a supplemental decision rendered by the Chief Hearing Examiner of the that Commission upholding the previous approval of the time charter and equipment lease agreement. No action was required by this Commission as to the earlier charter agreement as at that time U. S. Lines held no water carrier authority from the Interstate Commerce Commission. In July 1970, Kidde transferred its intercoastal permit W-497 to U. S. Lines and in September of that year U. S. Lines instituted intercoastal services between Baltimore, Md., and New York, N.Y., on the one hand, and, on the other. Los Angeles and San Francisco, Calif. The United States Department of Justice filed an action in the United States District Court for the District of New Jersey (U. S. v. R. J. Reynolds Tobacco Company, et al., 325 F. Supp. 656), seeking to enjoin implementation of this transaction and to invalidate the supplemental agreement on the grounds that they violate section 7 of the Clayton Act and section 1 of the Sherman Act. FMC intervened seeking a stay or dismissal of the Court action until completion of its consideration of the merger agreement and arguing that it had primary jurisdiction under the 1916 Shipping Act to consider and pass on the proposed transaction. The Court refused to enjoin continuance of the proceedings before FMC or this Commission, and denied the application for a stay or dismissal of the Court action finding that section 15 of the Shipping Act does not grant FMC authority over merger agreements. On October 21, 1971, the presiding examiner of FMC issued his initial decision relative to the proposed merger, which decision additionally considered the supplemental agreement relative to the disposition of U. S. Lines if approval were not granted for the merger, holding that the merger would be anticompetitive in character and not "required by serious transportation need necessary to secure important public benefits or in furtherance of a valid regulatory purpose of the Shipping Act." He also held that the supplemental agreement regarding disposition of U. S. Lines was not subject to approval under section 15 of that act. Sea-Land is a water common carrier operating in foreign and domestic commerce and providing regularly scheduled common carrier containership service in the intercoastal and coastwise service among others. This service is performed pursuant to a permit issued by this Commission, No. W-376 authorizing the transportation of (1) passengers and commodities generally between Boston, Mass., New York Harbor. Philadelphia, Pa., Baltimore, Md., Georgetown and Charleston, S.C., Jacksonville, Miami, Tampa, Port Saint Joe, Panama City, and Pensacola, Fla., Mobile, Ala., New Orleans, La., and Houston and Galveston Tex., but not including operations over the Gulf Intercoastal Waterway between Pensacola, Galveston, and Houston, or between those three ports, on the one hand, and, other Gulf of Mexico ports, on the other; (2) general commodities between Los Angeles Harbor, San Francisco, Oakland, Alameda, Richmond, and Stockton, Calif., Portland, Oreg., and Seattle and Vancouver, Wash., on the one hand, and, on the other, Boston, Mass., Albany, N.Y., New York Harbor, Philadelphia Harbor, Baltimore, Md., Norfolk and Newport News, Va., Charleston, S.C., Savannah, Ga., Jacksonville and Miami, Fla., serving Port Everglades, Fla., in connection with the aforementioned routes; from Los Angeles Harbor, Calif., to Portland, Oreg., and Seattle and Vancouver, Wash.; between San Francisco, Oakland, Alameda, and Richmond, Calif., on the one hand, and, on the other, Portland, Seattle, and Vancouver; and (3) passengers in coastwise and intercoastal movement between the ports named in (2) above except Baltimore, Norfolk, and Newport News, and, between the Pacific coast ports specified above, on the one hand, and, on the other, Galveston, Houston, New Orleans, Mobile, Panama City, and Tampa; and by nonselfpropelled vessels, with the use of separate towing vessels, in the transportation of general commodities betwen Oakland, Calif., and Portland, Oreg., restricted to the transportation of traffic moving from or to Atlantic coast ports. Sea-Land provides scheduled common carrier containership service in the intercoastal, coastwise, domestic offshore, and foreign trades, furnishing its shippers with containers of various types and capacity. The most common size utilized by vendee is a 35-foot dry cargo container, but it also offers open-top, insulated, or ventilated, controlled temperature, bulk liquid, platform and car carrier containers, all of which are mounted on specially designed chassis for overland transport by truck tractor. It should be noted that the containerships of U. S. Lines proposed to be utilized by vendee are generally loaded with 20- or 40-foot containers. Containerships carry containers above and below decks and are generally loaded and unloaded by shoreside cranes. Sea-Land does have certain vessels that are equipped with specially designed cranes to move containers from ship to shore and vice versa. As stated, SeaLand provides services between Baltimore, Charleston, and Jacksonville en route to San Juan, between Elizabeth, N. J., Jacksonville, and Houston, and intercoastal service from Elizabeth to Long Beach and Oakland via Panama. Sea-Land began the use of containerships in intercoastal trade in 1972 between Atlantic coast ports and Long Beach and Oakland. Due to the military action in the Far East in 1966 and 1967, Sea-Land redeployed its vessels engaged in domestic coastal and intercoastal services to serve the military effort, and because of the reliance of Puerto Rico for foodstuffs originating in California it discontinued transportation of cargo from California ports to Atlantic coast destinations, although westbound cargo was moved by relay at San Juan to intercoastal vessels originating on the Pacific coast and delivering foodstuffs to San Juan. Vendee now operates six vessels from California via Panama to Puerto Rico, to the east coast, and return, transporting in intercoastal service in 1970 some 193,000 tons of freight for a revenue of $9,243,528. For the first 6 months of 1971, it transported 4,862 containers westbound containing 86,128 tons of freight, and 148 boxes eastbound containing 2,736 tons of freight. Vendee has displayed steady growth as reflected by comparison of its operating revenues: Its coastwise containership service has been expanded to include service to Puerto Rico, Alaska, the Dominican Republic, Jamaica, and other Caribbean Islands. This carrier is also predominately concerned with the foreign commerce between the United States, North Atlantic and Northern European and Mediterranean ports, and between the Pacific coast and Far East ports, which services are not within the concern of this Commission. Sea-Land is purported to be one of the world's largest containership operators. It owns or charters over 60 line-haul containerships with a total capacity of 34,644 20-foot container equivalents, plus 646 40-foot containers. In addition, there are eight vessels under construction abroad each with a capacity of 1,948 20-foot container equivalents that are to be chartered by Sea-Land. These vessels under construction along with two other ships operated by Sea-Land offer more container capacity than that of any other American flag operator. Applicant operates 17 vessels in the domestic trades which number also exceeds the number of ships operated by any other U.S. flag operator in both foreign and domestic services. Most of the presently owned fleet is composed of vessels constructed during World War II and later converted, which vessels are slow and of limited capacity, and applicant proposes to retire this equipment shortly. U. S. Lines is a common carrier by water holding I.C.C. authority under permit No. W-497 which was transferred to it by Kidde in July 1970, authorizing operation as a common carrier by self-propelled vessels in interstate or foreign commerce, transporting passengers and commodities generally between New York, N.Y., and Baltimore, Md., and Los Angeles Harbor and San Francisco, Calif., via the Panama Canal. For many years it operated a large number of break-bulk vessels under a Government subsidy contract which expired in 1969. Beginning in 1968, U. S. Lines put into service in the North Atlantic eight "Lancer" class containerships having individual capacity of 1,200 20-foot container equivalents, and also converted eight mariner vessels into containerships with individual capacity of 929 20-foot container equivalents. These two types of vessels are modern up-to-date containerships and constitute the second largest containership fleet in the world. Six leaders are used in two weekly services between Atlantic ports and western Europe, and represent the largest containership operation in this sphere. The other two leaders, together with the eight Lancers, operate on a 6-day schedule between east and west coast ports, on the one hand, and the Far East, on the other, which service was begun in September 1970. Transshipment at New York, eastbound and westbound, enables U. S. Lines to supply a through service between Europe, the North Atlantic, the west coast, Hawaii, and the Far East, as well as an intercoastal service. Feeder services are utilized at foreign destinations. In addition to the above-mentioned fleet it has 14 "Challenger" class break-bulk vessels under charter to the military. U. S. Lines operated profitably until 1966. Thereafter, in 1967, it sustained an operating loss of $2 million, in 1968, a loss of $9 million, accounted for in some degree to writeoffs; in 1969, it realized a profit of $8 million, which in part occurred through the use of reserves otherwise its profits would have been only $600,000; and in 1970, it sustained a loss of $3 million. Again this loss would have exceeded $12 million had it not been for reserves held. Its net cash outflow in 1970 was approximately $5.7 million excluding the cost of long-term debt. In the last quarter of 1970, it was unable to meet day-by-day expenses and obligations. For the first 6 months ending June 13, 1971, vendor submitted the following consolidated statement of income, and its balance sheet: 348 I.C.C. |