GM Says Shipping Lines Took It for a Ride

     NEWARK, N.J. (CN) – Japan’s largest shipping line engaged in a 15-year conspiracy to quash competition and fix prices for car-shipping services, General Motors claims in Federal Court.
     Transferred on Tuesday to New Jersey, the complaint originally filed in New York on June 15 alleges that, between 1997 and 2012, Nippon Yusen Kabushiki Kaisha conspired to rig bids, fix prices, and ultimately overcharge it for vehicle transportation services.
     As a result, the world’s largest automaker says it paid as much as $800,000 annually in car-shipping costs.
     GM says Norwegian shipping line Wallenius Wilhelmsen Logistics AS also took part in the conspiracy, as did South Korean company EUKOR Car Carriers Inc.
     High-ranking executives at all the defendant companies were involved in the conspiracy, and that they had near-daily conversations with each other to share shipping volumes, bids, and confidential customer data to facilitate the scheme, General Motors claims.
     When GM issued a tender for car shipping services, the companies allegedly discussed and agreed upon bids to insure the incumbent company won the business, thereby stifling competition, the complaint says.
     Executives allegedly would “respect” current and agreed-upon business arrangements and shipping routes, such as those between Thailand and Europe or the Middle East and the United States, so that other shipping companies never had a chance to win GM’s tenders.
     During this process, GM says, the shipping companies occasionally engaged in “courtesy bidding,” in which conspirators submitted higher bids to give the impression of a legitimate competition for services and to make it seem the lower bidder’s price was fair.
     General Motors also alleges the defendant companies artificially reduced their shipping fleets by scrapping and permanently dry-docking vessels in order to boost shipping prices.
     Antitrust authorities in United States, Japan and Chile have already come down on the companies for similar charges, and NYK to date has paid more than $136 million in fines to U.S. authorities. Several NYK employees have also pleaded guilty to anti-trust violations and have been sentenced to prison terms.
     Last December NYK pleaded guilty and paid nearly $60 million in fines after a Justice Department investigation.
     NYK’s shares dropped last year as a result of the global investigation into the conspiracy, and in April appointed a new president. However, several of the company’s subsidiaries, such as Yusen Logistics-which is also named in the lawsuit-have seen profits this year go up.
     Vehicle shipping companies are few and far between, mostly because of the huge start-up costs involved, as a single specialized shipping vessel can cost upwards of $180 million. As a result, many shipping companies often “rent” vessels from one another. The defendant companies are estimated to represent nearly three-quarters of the entire car shipping industry.
     The lawsuit states that the shipping industry’s close-knit community was fertile ground for such a price-fixing conspiracy, as executives typically remain at a single company, or at least within the industry, their entire careers.
     The scheme was uncovered in September 2012 when Japanese anti-trust authorities raided NYK’s offices.
     Representatives of the Nippon Yusen Kabushiki Kaisha and the other shipping lines could not immediately be reached for comment Wednesday afternoon.

%d bloggers like this: