E-Alert Case Updates
The Rotation System of the Association of Maryland Pilots Does Not Violate the Maryland Antitrust Act
Krause Marine Towing, Corp., et al. v. Association of Maryland Pilots, et al.
In this case, the Court of Special Appeals affirmed the trial court’s grant of the Association of Maryland Pilot’s (“Association”)’s Motion for Judgment on Krause Marine Towing Corporation’s (“KMTC”)’s antitrust claim. The Court held that the Association’s work rotation schedule does not violate Maryland’s Antitrust Act. Upon analysis, the Court found that the work rules administered by the Association do not unreasonably restrain competition as they affect pilotage and tug services rendered to cargo ships in the Port of Baltimore.
The dispute centers on tug services in the Port of Baltimore. Large ships, such as vehicle transport or bulk carrier ships, are unable to maneuver the narrow channels of ports and require the assistance of tug-boats. Docking pilots, also referred to as docking masters, have the responsibility of coordinating and directing the tugs contracted to assist the large ships dock and undock. The docking pilots are members of the Association, which pursuant to its work rules, determines their working rotation. Docking pilots are entirely independent from the shipping agents for ships entering the port and the tug-boat companies. The docking pilot determines the tugs that are necessary to safely complete the maneuver.
KMTC argued that, if a docking pilot decided he or she could not safely perform the job using KMTC’s tug-boats, it should be able to seek out another docking pilot who is willing to do the job, as opposed to simply getting passed over for work. At trial, KMTC testified that there were several instances in which docking pilots obstructed KMTC’s work “under the guise of safety, to prevent [KMTC] from executing its contracts with the shipping companies.” KMTC argued that the Association’s work rules and the rotation system raised prices in the towing market and hurt the bottom line of the steamship companies serving the ports in Maryland. KMTC contended that these rules imposed an unreasonable restraint on competition.
The purpose of Maryland’s Antitrust Act, similar to that of its federal counterpart, the Sherman Act, is to prevent agreements that unduly restrain trade and harm competition. Maryland has adopted a “rule of reason” analysis when approaching an alleged antitrust violation. Under this “rule of reason” analysis, the Court will look at the facts peculiar to the relevant industry—in this instance, maritime pilotage—the history of the restraint, the evil sought to be addressed by the restraint, and the reason for the restraint.
The Court discussed the history of maritime pilotage at length. It noted that laws regulating pilots of vessels have existed in the state since 1787. In 2004, the Maryland General Assembly passed legislation prohibiting financial relationships between docking pilots, tug companies, and steamship lines so as to afford the docking pilots independence of judgment. MD CODE, BUS. OCC. & PROF. § 11-603. This law served to “ease the tension between the interests of a shipping line . . . and a docking master’s duty to the public to perform those duties safely.”
The Association’s fixed rotation system for docking pilots furthers the purpose of the legislation, because it has the effect of immunizing docking pilots from pressure from the master of a vessel. A docking pilot can make a decision without worrying that the owner of a ship will replace him or her with another docking pilot willing to attempt to perform the job with other tugs. Additionally, the designated rotation system provides each docking pilot with approximately the same workload, protecting against sending out fatigued docking pilots.
The Court concedes that the regulations do have an anti-competitive effect, but it is merely incidental, and the harm is very limited. Plaintiffs could only provide three instances in which the restriction prevented them from conducting business.
For these reasons, the Maryland Court of Special Appeals affirmed the trial court’s grant of judgment for the Association. The Court held that the docking pilot rotation system adopted followed by the Association was not an unreasonable restriction on trade.
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