Tuesday, December 30, 2014

RoRo Shipping Cartel Scandal Fines Reach $135 Million as Another Freight Carrier Settles

Violation of Sherman Act Continues to Cost Cargo Groups Dear
Shipping News Feature

US – Nippon Yusen Kabushiki Kaisha (NYK) has become the third shipping line to resolve allegations that it violated the Sherman Act by conspiring to fix prices, allocate customers and rig bids of international ocean shipping services for RoRo cargo, such as cars and trucks, to and from the United States and around the world. NYK agreed to plead guilty and to pay a $59.4 million criminal fine for its involvement in the conspiracy, bringing the total agreed-upon fines in this investigation, to over $135 million.

According to a one-count felony charge, NYK conspired to suppress and eliminate competition by allocating customers and routes, rigging bids and fixing prices for the sale of international ocean shipments of roll-on, roll-off cargo around the world, from at least February 1997 until at least September 2012. NYK has agreed to cooperate with the Department of Justice's ongoing antitrust investigation. Bill Baer, Assistant Attorney General in charge of the Department’s Antitrust Division, said:

“This is another step in the effort to restore competition in the ocean shipping industry to the benefit of US consumers. Including today’s charges, three companies have now agreed to plead guilty to participating in this long-running conspiracy. We are not done. Our investigation is ongoing.”

According to the charge, NYK and its co-conspirators conspired by agreeing on prices, allocating customers, agreeing to refrain from bidding against one another and exchanging customer pricing information. The department said the companies then charged fees in accordance with those agreements for international ocean shipping services at collusive and non-competitive prices. CSAV and K Line have previously plead guilty to the conspiracy charge with the companies penalised $8.9 million and $67.7 million respectively.

Violating the Sherman Act carries a maximum penalty of a $100 million criminal fine for corporations, with the potential for the maximum fine to be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine. In a statement, NYK said:

“NYK has been committed to complying with the spirit of laws and regulations of Japan and all other jurisdictions. Nevertheless, NYK wishes to express its sincere regret to shareholders, customers and all relevant personnel for the concern caused by this matter. NYK will continue to make a best effort to prevent recurrence and to recover trust as a company.”

NYK will record this penalty as an extraordinary loss in the third quarter of the consolidated cumulative term of the fiscal year ending March 2015. With consideration of the extraordinary gain due to the sale of some of it shares of the US based subsidiary that operates container terminals, NYK Ports, at approximately $288 million, and the extraordinary loss which will be recorded by this $59.4 million fine, several rationalisation costs and other costs, NYK says that its ‘consolidated net income of the fiscal year will most likely not be below the figure which NYK assessed and disclosed in a previous statement’, which is to say that this fine, despite its magnitude, will not heavily impact the company’s financial records.