More Antitrust Fines as Japanese RoRo Car Carriers Admit Freight Rate Fixing

JAPAN – US – WORLDWIDE – As was anticipated the Japan Fair Trade Commission (JFTC) investigation which stretches back to September 2012 into the alleged collusion of several major shipping lines in the matter of carrying automobiles using specialised RoRo car carrying vessels, seems to have come to a head. Kawasaki Kisen Kaisha, or K Line as it is usually known, announced today that the JFTC has issued it with cease-and-desist orders and administrative surcharge payment orders, fines by any other name, totalling around $56 million, this just a few days after our last report on US penalties for similar antitrust offences concerning the fixing of freight rates, with more listed below. 

Similar orders were also issued against NYK, Wallenius Wilhelmsen Logistics AS and Nissan Motor Car Carrier Co. Ltd, finding that they violated Article 3 of the Antimonopoly Act. MOL were also found to have violated but received no cease and desist orders or surcharges. Previously this has indicated cooperation with the authorities in uncovering the offences. All the offenders were found to have agreed to mutually refrain from competing for customers by not offering lower freight rates and to raise or maintain freight rates on various routes between Japan and North America, Europe the Middle and Near East and Oceania, in other words, worldwide.

The offences stretch from at least as early as around mid-January 2008 until September 6, 2012 and the prosecutions are believed to have been based largely on evidence seized in raids on the conspirators’ offices. Industry insiders predict heavy penalties to come for K Line’s co-conspirators with figures of $32 million and as much as $125 million for Wallenius Wilhelmsen, and possibly its subsidiary Eukor Car Carriers, and NYK respectively.

K Line has wasted no time in apologising for its offences with a formal apology to customers, shareholders and concerned parties and a promise to ensure strict compliance in future. Whilst the expected fine has been included as ‘an extraordinary loss’ on the firms books in Q3 2013 additionally the company says in light of the seriousness of the matter, the CEO, and the Directors and the Executive Officers who are in charge of the concerned sector, have decided to return voluntarily 10-30% of their monthly remuneration for three months.

It is hard to credit just how corrupt the shipping industry is now considered to be by many onlookers. Actions which historically have been either swept under the carpet or simply ignored as acceptable practice are now viewed severely and a quick search at the head of the page (News Search Box) with a suitable keyword, such as cartel, will show just how many billions of dollars in fines offences similar to those above have been levied in the past few years.

In the US, the Federal Maritime Commission (FMC) has reached compromise agreements with a vessel-operating common carrier and three non-vessel-operating common carriers (NVOCCs), recovering a total of $350,000 in civil penalties. Once again we find that none of the four carriers admitted to the violations under the Shipping Act or the Commission’s regulations but still settled and agreed to the penalties. This latest trend has been going around for the past few months with carriers such as CSAV, K Line, NYK, and MOL all protesting their innocence but paying out the fines levied against them by the FMC.

Heavy lift and break bulk shipping line Rickmers-Linie, the best known of the four carriers cited by the FMC, voluntarily contacted the Commission’s Bureau of Enforcement to disclose certain service contract and tariff violations of the Shipping Act with respect to its break bulk and container operations. BOE and Rickmers also determined that, since 2012, Rickmers-Linie had operated pursuant to an unfiled space charter agreement with a small, regional carrier primarily involved in inter-Asia service. Rickmers made a payment of $190,000 in compromise of these allegations.

Commission staff alleged that California based OBI Shipping, New Jersey based Benison Transport and Shenzhen, China based Shine International Transportation all violated the Shipping Act by ‘knowingly and willfully obtaining transportation at less than applicable rates by means of improperly accessing service contracts to which [each company] was not a party’. Under the terms of the compromise, Benison and Shine jointly paid $110,000 and OBI paid $50,000. Speaking Global Shippers’ Forum Annual Meeting, the FMC’s Commissioner William Doyle said:

“Basically, Rickmers cooperated and voluntarily disclosed to the Commission details relevant to its transportation activities and practices giving rise to alleged violations – providing service in the trade that was not in accordance with rates, charges, classifications, rules and practices contained in a published tariff or filed service contract; accepted cargo from unlicensed and unbonded OTIs; and operated pursuant to an unfiled agreement.

“Rickmers has now brought its service contracting practices into compliance with the Shipping Act and has conducted a comprehensive internal training program with regard to tariff publication and the carrier has taken steps to ensure it is not providing service to unlicensed, unbonded or unregistered entities.”

Continuing in the States, Sea Star Line and Horizon Lines have entered into agreements to resolve allegations that they violated the False Claims Act by fixing the price of government cargo transportation contracts between the continental United States and Puerto Rico. Under the settlement agreements, Sea Star Line has agreed to pay $1.9 million, and Horizon Lines has agreed to pay $1.5 million.

The government alleged that former executives of the defendant ocean shippers used personal email accounts to communicate confidential bidding information, thereby enabling each of the shippers to know the transportation rates that its competitor intended to submit to federal agencies for specific routes. This information allowed the shippers to allocate specific routes between themselves at predetermined rates. Among the contracts affected were US Postal Service contracts to transport mail and Department of Agriculture contracts to ship food. Both Sea Star Line and Horizon Lines previously pleaded guilty, in related criminal proceedings, to anticompetitive conduct in violation of the Sherman Act.

The Department of Justice’s investigation has already seen companies and the Executives pay a substantial amount in fines and settlements with the six Executives facing prison sentences. The civil settlements resolve allegations in a lawsuit filed in federal court in Jacksonville, Florida, by former Sea Star Line Executive William B. Stallings. He will receive $512,719 of the recovered funds.