Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Cargo shipping company allegedly acquired competitors to monopolize market, (Apr 29, 2015)

By Linda O’Brien, J.D., LL.M.

A leading provider of container and ocean transport services in the Caribbean acquired its competitors in the less-than-a–container cargo shipping market in order to charge supracompetitive prices for the consolidation and shipment of goods between St. Croix and Florida, according to a complaint filed in the federal district court in St. Croix, Virgin Islands (Danielson v. Tropical Shipping, Inc., April 28, 2015).

Consumers and small businesses purchase items and ship them from the United States to St. Croix or from St. Croix to the United States, using less-than-a-container (LCL) freight companies. Consolidators arrange for the shipment of goods that amount to less than one shipping container. Only large businesses have sufficient cargo volume to ship full container loads of goods between St. Croix and the United States. All of those businesses have warehouses in Florida and all shipments originate from or terminate in ports in Florida.

Leroy Danielson is a consumer who has purchased LCL services from Tropical Shipping in connection with the shipment of goods between St. Croix and Florida.

The complaint states that Tropical Shipping is a leading provider of container and ocean consolidation and transport services and the dominant firm in the LCL shipping market for many years. Two other companies—VI Cargo and Caribtrans—competed in the St. Croix LCL market. In 2008 and 2010, Tropical purchased the stock and assets for these competitors and boosted its market share in the market to 100 percent. Within months of the acquisitions, Tropical began increasing its prices and implemented a general rate increase every few months. With no competing firms to turn to, customers had no choice but to pay the higher prices.

In May 2013, Matthew Leonard, a former employee of VI Cargo, founded Paradise Freight, an LCL business in St. Croix. Paradise charged lower prices than Tropical for LCL services and, as a result, began attracting customers. Competition from Paradise forced Tropical to reduce its prices for major customers. By early 2014, Tropical lost 10 to 15 percent of its market share and its profit margins fell from 56 to 28 percent, according to the complaint.

The complaint also alleges that the higher margins realized by Tropical before Paradise’s entry into the market represent monopoly overcharges paid by customers who purchased LCL services from Tropical during that time frame. Customers who purchased LCL services after Paradise entered the market still paid supracompetitive prices because Tropical maintained its monopoly and Tropical’s reputation for predatory pricing caused Paradise to price less competitively that it would have otherwise done for fear of predatory retaliation by Tropical, Danielson asserted.

Danielson asserts claims for monopolization in violation of Section 2 of the Sherman Act and the Virgin Islands Antimonopoly Law. The action seeks declaratory and injunctive relief, treble damages, pre- and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:15-cv-00032-WAL-GWC.

Attorneys: Vincent A. Colianni (Colianni & Colianni, LLC) and Timothy S. Tomasik (Tomasik Kotin Kasserman, LLC) for Leroy Danielson.

Companies: Tropical Shipping, Inc.; VI Cargo Services, LLC

News: Antitrust VirginIslandsNews