NEWARK, N.J. (CN) - International shipping firms accused of conspiring to fix prices they charge the world's largest automakers will ask a federal judge on Thursday to toss claims against them on the grounds they are exempt from U.S. anti-trust laws.
General Motors alleges that Japan's largest shipping line Nippon Yusen Kabushiki Kaisha conspired with other maritime companies to form a cartel and rig bids, fix prices, and overcharge for their vehicle transportation services.
In a complaint filed earlier this month is said it overpaid NYK nearly $1 million a year annually in car-shipping costs.
Other parties have also sued the shipping companies, including car dealerships and car buyers, which have since been consolidated into several classes in the multi-district class-action lawsuit.
Those two classes, considered indirect purchasers, are now being targeted by NYK to have their complaints thrown out of court.
NYK filed a motion to claim the 1984 Shipping Act, which regulates ocean shipping companies, preempts state anti-trust laws that protect indirect purchasers against price-fixing.
GM sued under federal anti-trust law, though it, too, faces a motion by NYK to have its complaint tossed on preemptive grounds.
If the judge in the case rules in favor of NYK and the defendant companies on Thursday, it would mean that car buyers and dealers who allegedly paid more for cars have no recourse to seek damages, even if there was collusion among the shippers.
Attorneys for the plaintiffs claim NYK's arguments are overreaching and reading too much into the Shipping Act's supposed anti-trust exemptions.
"They have a very high hurdle to get over under current law," Warren Burns, who is co-lead counsel for the car buyer class, said in an interview with Courthouse News. "I don't think it's a very good argument. They are trying to read too much into the [Shipping] Act."
The Shipping Act, which was amended in 1998, has been somewhat controversial in the anti-trust realm. Under the law, shipping companies are regulated via the Federal Maritime Commission, exempted from federal anti-trust laws, and granted some leeway to engage in "horizontal collusion."
Therein lies the rub for some. According to an American Bar Association's anti-trust commission, the Shipping Act "continues broadly to exempt harmful anticompetitive collusion by ocean carriers" and that the anti-trust exemptions the act contains "ought to be known as privileges rather than rights."
The Shipping Act contains a provision that states a person may not collect damages under federal anti-trust regulation. However, the indirect purchaser classes in the NYK suit are suing under state laws.
Supreme Court may bolster the plaintiffs' claims. In the 1970s, the U.S. Supreme Court determined that indirect purchasers had to sue under state anti-trust laws instead of the federal Clayton Antitrust Act. Thirty-two states have since passed additional anti-trust legislation to protect indirect purchasers.
However, most state anti-trust laws - even those that predate the original federal antitrust regulation, the Sherman Antitrust Act of 1890 - were passed to complement federal law, including the Shipping Act, Burns said. "Congress didn't intend to bar state claims," he said.
U.S. District Judge Esther Salas is scheduled to hear arguments on the issue tomorrow.
A representative for NYK could not immediately be reached for comment.
According to the underlying lawsuits against NYK and the other shipping companies, high-ranking executives at NYK and the other defendant companies had near-daily conversations with each other to share shipping volumes, bids, and confidential customer data to set shipping prices.
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.
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