U.S. Justice Requests Maritime Commission Decision on Puerto Rico Port Agreement

Lawmaker Warns Puerto Rico Ports Authority to Not Sign Before Federal Gov’t Opines

SAN JUAN — The U.S. Department of Justice has asked the Federal Maritime Commission (FMC) to determine whether it has jurisdiction over the cooperative agreement between Luis Ayala Colón Inc. (LAC) and Puerto Rico Terminals (PRT) because in the agency’s analysis, the agreement appears to be, in effect, a merger of operations that would affect competition in that sector.

The opinion published March 17 by the Justice Department would confirm the position already put forth by the FMC itself and reported by Caribbean Business, in the sense that the agreement, which is already in effect, is actually a merger of operations of two of the three main companies in charge of maritime cargo in Puerto Rico, and potentially could affect the prices and access of products to Puerto Ricans.

Upon being notified of Justice’s letter, Puerto Rico Rep. José Aponte Hernández, who is investigating the transaction through a legislative resolution, asked the director of the Ports Authority, Joel Pizá, to not sign an agreement with Puerto Nuevo Terminals (PNT), a limited liability company created as part of the transaction between PRT and LAC.

“Whoever does not understand what is said in that letter from the Department of Justice is because they do not want to understand,” the representative said.

The cooperative working agreement to create Puerto Nuevo Terminals (PNT) was presented before the Federal Maritime Commission in early 2019. According to the then-Ports Authority Director Anthony Maceira, the government of Puerto Rico learned of the transaction in March and, on the orders of former Gov. Ricardo Rosselló Nevares, remained on the sidelines and did not oppose the agreement.

The matter was not brought up for consideration by the Ports board either, Maceira acknowledged to the House Federal Affairs Committee investigating the potential impact of the agreement.

Under the original agreement, PNT, LAC and Puerto Rico Terminals (PRT) formed PNT, with its membership units held 50/50 by the two owners. PNT would acquire, through assignments, leases, subleases, transfers and other corporate means, all terminal services agreements, land leases, cranes, yard equipment and other related assets from the LAC and the PRT, according to the document presented to the FMC in March. Much of that equipment belongs to TOTE Maritime, co-owner of PNT.

The Justice Department letter refers to some amendments made to the original agreement that have not been disclosed.

Related story:

Oligopoly: When Maritime Shipping Options Shrink

The letter from Justice’s antitrust division states that if the FMC determines it does not have jurisdiction over the agreement under the Shipping Act of 1984, it would imply that the transaction would be under the scrutiny of the Justice Department.

If the FMC “determines that it does have jurisdiction, the Department urges the Commission to consider carefully whether the Amended Agreement is narrowly tailored to achieve procompetitive benefits while limiting the risk of anticompetitive harm,” Assistant Attorney General Makan Delrahim wrote, adding that “if the Amended Agreement is not so tailored, the Commission should seek to enjoin the agreement or require its modification.

Caribbean Business left requests for comment with Ports’ Pizá and the FMC.

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