Friday, September 15, 2000

Big Red bummer

Premier Cruises may well have been a victim of the surge in newbuilding activity by industry giants Carnival, Royal Caribbean and Princess. Cruise bookings are breaking records . But while the industry giants have been filling cabins, to do so they have been slashing prices. As a result, travel agents have been switching customers who usually take budget cruises to mid-grade cruises and customers who usually take mid grade cruises to luxury ships. That has put the squeeze on smaller operators such as Premier.

Yesterday, nearly 3,000 passengers on Premier's Big Red Boats and other ships had their vacations terminated. Donaldson, Lufkin and Jenrette, which holds the mortage on the ships, repossessed four of Premier's ships in ports outside the U.S. A fifth ship used by Premier on a charter basis was also out of service.

Reportedly, DLJ decided to act after hearing that other parties were planning to seize the ships.

FMC to probe lower Mississippi tug arrangements
Federal Maritime Commission Chairman Harold J. Creel, Jr., has announced that the FMC is pursuing an inquiry into exclusive tug arrangements entered into between certain terminals and tug companies on the lower Mississippi River. Based upon various complaints from vessel operators, a competing tug company, and other organizations, the Commission issued a section 15 Order to sixty-seven ocean common carriers serving lower Mississippi terminals to gather information on the tug arrangements and their impact on competition and on users of the affected terminals. The Commission also is gathering evidence as to whether the terminal operators entering into these exclusive arrangements serve common carriers and, thus, are subject to the Commission's jurisdiction. In addition, the Director, Bureau of Enforcement ("BOE") has contacted terminal operators, tug companies, agents, ports, and certain other vessel operators serving the lower Mississippi River, seeking similar information from those entities.

In its 1999 decision in River Parishes Company, Inc. v. Ormet Primary Aluminum Corporation ("Ormet"), the Commission considered a complaint by a tug company concerning one exclusive tug arrangement at Ormet's dry bulk terminal at Baton Rouge, LA. In that case, the Commission determined that it had jurisdiction over the complaint because some of the vessels calling at Ormet's dry bulk terminal were engaged in common carriage, but also held that the complainant failed to demonstrate that Ormet's exclusive tug arrangement resulted in poor service or excessive costs, or produced unlawful anticompetitive effects. These exclusive arrangements allegedly have now spread to 17 of the 41 bulk terminals serving 89 percent of the dry bulk vessel calls on the lower Mississippi River. In view of the pervasive nature of these arrangements, and the complaints from numerous users, and one competitor, that costs have increased and competition has been stifled, the Commission commenced this inquiry to determine whether it has jurisdiction over the affected terminals, and, if so, whether these exclusive arrangements may violate provisions of the Shipping Act of 1984, as amended by the Ocean Shipping Reform Act of 1998.

Responses to both the Commission's section 15 Order and to BOE's requests are due on October 5, 2000. Any further action will be guided by the information contained in those responses.

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