Another Blockchain Supply Chain Shipping Consortium Files for Federal Antitrust Exemption

Proskauer - Blockchain and the Law
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Proskauer - Blockchain and the Law

In late May, the Global Shipping Business Network (GSBN), a consortium of ocean carriers and terminal operators, filed a petition with the Federal Maritime Commission (FMC) to obtain an antitrust exemption under the U.S. Shipping Act of 1984. The Act seeks to promote efficient ocean commerce and industry response to international shipping practices by, among other things, providing for antitrust immunity for ocean common carrier agreements filed with the FMC that concern activities outlined in the Act. The FMC is the independent agency charged with regulating oceanborne transportation related to foreign commerce and monitoring agreements among carriers for anti-competitive effects. If the FMC takes no action on a submitted agreement, that agreement becomes effective and federal antitrust laws do not apply to activities undertaken pursuant to the agreement.

In this instance, the requested exemption would allow the members of the GSBN to participate in the operation of a “blockchain-enabled, global trade digitized process” that will enable shippers, authorities and others within the consortium to exchange supply chain-related event data and documents and collaborate with the software provider, CargoSmart. According to the filed Cooperative Working Agreement, the GSBN platform will: (1) provide APIs to the parties for publication of event data with respect to cargo moving through the supply chain; (2) allow for storing and sharing of documents on the platform; and (3) display a user interface for viewing event data, documents and access permissions. Additionally, the agreement places limitations on the handling and internal disclosure of confidential information exchanged among the parties, and also prohibits the parties from sharing intimate details about particular customer agreements or practices or confidential pricing. The GSBN petition was filed on May 26, 2020 (and opened to public comment), and will become effective on July 10, 2020, unless the FMC moves to block the exemption.

This petition comes on the heels of the FMC’s granting of a similar antitrust exemption to another blockchain based shipping consortium, TradeLens, in February 2020. The popularity of blockchain-based shipping consortia is no surprise given the potential for cost savings and efficiencies in a space which is ripe for modernization. However, as one can see, it’s not just technology that is required to establish a blockchain platform for supply chain – parties to a blockchain consortium must ensure all of the appropriate governance is in place as well, which might include operating agreements, antitrust and regulatory approvals, and other related agreements. For deeper insight into the legal and practical issues in this area, please see our Practice Note, Blockchain and Supply Chain Management.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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