Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Indirect Purchasers Allege Conspiracy to Fix Prices and Allocate Markets for Vehicle Carrier Services, (May 31, 2013)

By Tobias J. Gillett, J.D., LL.M.

A class of indirect purchasers of vehicle carrier services have filed a complaint in the federal district court in San Francisco against providers of those services, alleging that the vehicle carriers engaged in a five-year conspiracy to fix, raise, maintain, and/or stabilize the prices of the services, and allocated markets and customers (MacQuarrie v. Nippon Yusen Kabushiki Kaisha, May 28, 2013). The complaint seeks to represent a class of purchasers of vehicles that had the higher cost of transportation included in the price of their vehicles.

According to the complaint, Roll On/Roll Off ships, or vehicle carriers, are ships specifically designed to carry vehicles. Providers of vehicle carrier services generally use these ships to transport vehicles for manufacturers under long-term shipping arrangements. Entry into the market was alleged to be difficult, due to the high cost of acquiring a fleet of specialized ships and associated equipment, labor, energy, support services, and other costs; the need to establish a network of routes to serve customers and to form relationships with those customers; and the economies of scale presented by the fuel benefits of using larger ships.

Demand for vehicle carrier services is highly inelastic, due to the need to ship vehicles and the lack of substitutes for ocean shipping, the plaintiffs claimed. The market is highly concentrated, with the defendant carriers controlling over 70% of the market during the relevant time period. The services provided by carriers are highly homogeneous, with each carrier providing essentially the same services, and purchase decisions made primarily on price. The carriers allegedly had opportunities to conspire at industry events, through the Transpacific Stabilization Agreement forums, and through vessel sharing agreements, among other possibilities.

The market also contains significant excess capacity, which the carriers allegedly attempted to alleviate through coordinated “slow steaming,” a practice involving lowering a ship’s speed to conserve fuel that also increases the time required to make ocean crossings, thus permitting carriers to use more ships at the same time and creating artificial capacity shortages. The practice allegedly resulted in artificially high prices for carrier services.

The complaint charged that the carriers had a history of collusion. Since at least September 2012, United States, European Union, Canadian, and Japanese competition authorities have been investigating a possible cartel among them. In 2007, the Department of Justice and European Commission investigated price fixing among international air freight forwarders, including among subsidiaries and affiliates of the carriers in the present case. On March 18, 2009, the Japanese Fair Trade Commission (JFTC) ordered 12 companies, including some of the present defendants, to pay $92 million in fines for violations of the Japanese Antimonopoly Act. The Department of Justice and European Commission, in 2013 and 2012 respectively, have fined companies for participating in air cargo cartels and fixing freight forwarding fees for air cargo.

The complaint alleges that the indirect purchasers suffered injury from the anticompetitive activities of the vehicle carriers because the higher shipping costs were incorporated in the prices of vehicles they purchased. The purchasers claim that the amount of the price increases can be determined through regression analysis. According to the complaint, the statute of limitations would not prevent or limit their recovery, because they did not have knowledge of the anticompetitive activities prior to JFTC raids on the carriers’ offices on September 6, 2012, or alternatively because the carriers fraudulently concealed their conduct.

The complaint asserts that the carriers’ conduct constituted unreasonable restraint of trade in violation of Section 1 of the Sherman Act. The complaint also alleges violations of the antitrust laws of 22 states and the District of Columbia, as well as the consumer protection statutes of ten states and the District of Columbia. It also asserts a claim for unjust enrichment.

The plaintiffs seek certification as a class action; a declaration that the carriers’ conduct violated the laws under which the purchasers asserted claims; damages to be trebled to the extent permitted by the relevant laws; restitution and disgorgement of profits; a permanent injunction against future anticompetitive conduct; and an award of interest, costs of suit, and attorneys’ fees.

The case is No. 3:13-cv-02409-JSC.

Attorneys: Steven N. Williams (Cotchett, Pitre & McCarthy, LLP) and Elizabeth C. Pritzker (Pritzker Law) for Joan MacQuarrie.

Companies: Nippon Yusen Kabushiki Kaisha; NYK Line (North America) Inc.; Wilh. Wilhelmsen Holding ASA; Wilh. Wilhelmsen ASA; Mitsui O.S.K. Lines, Ltd.; Kawasaki Kisen Kaisha, Ltd.; “K” Line America, Inc.; Eukor Vehicle Carriers Inc.; Wallenius Welhelmsen Logistics AS; Wallenius Welhelmsen Logistics Americas LLC; Wallenius Lines AB; Compania Sud Americana de Vapores S.A.; Toyofuji Shipping Co., Ltd.; Nissan Motor Car Carrier Co., Ltd.

News: Antitrust CaliforniaNews