Feds Advise on Venue for Thorny Maritime Antitrust Battle

PHILADELPHIA (CN) – In a rare move, the federal agency that oversees shipping agreements filed a brief with the Third Circuit in support of automakers and car dealerships that have accused shipping companies of colluding to fix prices.

While several amicus briefs are expected in the case, this one is notable in that the Federal Maritime Commission’s jurisdiction is at the heart of the case, and the amicus brief could hold sway.

The Nov. 30 brief comes nearly two weeks after the Third Circuit heard oral arguments in Newark, a special seating for the normally Philadelphia-based federal appeals court.

Though U.S. District Judge Esther Salas dismissed the multidistrict litigation last year, General Motors and the other plaintiffs say that the price-fixing was so egregious that it should be actionable under federal antitrust laws.

Meanwhile the Federal Maritime Commission on Wednesday pushed for the court to reverse only in part.

The 1984 Shipping Act, a maritime law, does preclude claims by entities that purchased shipping services directly, commission general counsel Tyler Wood argued.

Dealers of automobile and equipment and vehicle purchasers, on the other hand, should be allowed to bring state antitrust claims, the 31-page brief states.

Wood said nothing in shipping laws precludes claims from this group, known as indirect purchasers.

In the underlying lawsuit, various automotive companies and manufacturers claimed that high-ranking executives at shipping companies colluded to fix shipping volumes and prices, costing plaintiff companies millions of dollars in excessive fees to ship vehicles from overseas.

General Motors specifically claims to have paid one Japanese shipping company nearly $1 million a year in excessive car-shipping costs.

Without a reversal, the plaintiffs must make do with relief the Federal Maritime Commission, a venue where only double damages are available under maritime law. A civil lawsuit meanwhile offers the possibility of treble damages under the Clayton Act.

Defendants to the proceedings include Japanese shipping giant Nippon Yusen Kabushiki Kaisha and Norwegian company Wallenius Wilhelmsen Logistics.

Wednesday’s amicus brief by the commission echoes the argument by those shipping companies that capacity-restriction agreements, particularly those that go unfiled, are “particularly pernicious conduct covered by the [Shipping] Act.”

“Congress enacted the Shipping Act to curb the proliferation of secret agreements in the market,” Wood wrote.

The attorney emphasized, however, that this applies only to direct purchasers and for filed agreements.

“Congress left in place criminal and civil enforcement of the Sherman Act by the United States against those operating under agreements that have not become effective,” Wood wrote, noting that also traditionally includes state antitrust law.

The commission noted at several points that the Shipping Act is clear on allowing private lawsuits for unfiled or secret shipping agreements. “Congress did not intend to protect ocean carriers operating under unfiled and ineffective agreements,” Wood wrote. “To the contrary, it determined that regulation by only the FMC would be insufficient to deter and punish those who chose to collude covertly.”

The Shipping Act, which was amended in 1998, has been somewhat controversial in the antitrust realm. Under the law, shipping companies are regulated via the Federal Maritime Commission, exempted from federal antitrust laws and granted some leeway to engage in “horizontal collusion.”

The commission already has settled with seven ocean carriers. In multimillion-dollar settlements with the Justice Department, most of the defendants admitted to the conspiring with other maritime companies to form a cartel and rig bids, fix prices, and overcharge for their vehicle-transportation services to automotive companies and manufacturers.

Nippon Yusen Kabushiki Kaisha, which recently merged with two other Japanese shipping companies, pleaded guilty to price-fixing and paid a nearly $60 million fine in 2014.

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