Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Vehicle carrier services charged with price fixing conspiracy, (Oct 14, 2014)

By Linda O’Brien, J.D., LL.M.

Providers of vehicle carrier services restrained trade and engaged in unfair competition by conspiring to fix the prices for the services and allocate markets and customers, according to a complaint filed in the federal district court of San Francisco (So v. NYK Line (North America) Inc., October 13, 2014).

Ocean transportation companies, NYK Line Inc., Nippon Yusen Kabushiki Kaisha, Mitsui O.S.K. Lines, Ltd., Kawasaki Kisen Kaisha, Ltd., EUKOR Vehicle Carriers Inc., Wallenius Wilhelsen Logistics AS, Compania Sud Americana De Vapores S.A., Toyofuji Shipping Co., Ltd., Nissan Motor Car Carrier Co., Ltd., Nissan Motor Car Carrier Co., Ltd., and Hoegh Autoliners AS operate specialized cargo ships known as Roll On/Roll Off vessels that transport large numbers of newly assembled cars, trucks, and other vehicles. Joshua So purchased a vehicle that had the cost of transportation included in the price of the vehicle.

The complaint alleges that the ocean transportation companies provide vehicle carrier services to original equipment manufacturers (OEMs) that are mostly large automotive, construction, and agricultural manufacturers. Price negotiations include (1) renewal of carriage contracts, (2) price reduction requests, and (3) tenders where multiple operators bid for a new or renewal contract award. Contract freight rates for vehicle carrier services are set on a per unit price and include surcharges for fuel and currency adjustments. The market for the transportation of new, assembled motor vehicles manufactured overseas and imported into the United States is between $600 and $800 billion each year.

In February 1997, the defendant began discussing and conspiring to fix prices and allocate customers and routes for vehicle carrier services. Prices for vehicle carrier services remained relatively flat until 2006, when prices increased at a rate that far exceeded demand. Moreover, in 2007, the United States Department of Justice and European Commission (EC) launched investigations into price fixing among international air freight forwarding companies that included affiliates and subsidiaries of the defendants and twelve companies were ordered to pay $94.7 million in fines for violations of the Japanese Antimonopoly Act, the complaint charged.

According to the plaintiff, the structure and characteristics of the vehicle carrier services market are conducive to a price fixing conspiracy. There are substantial barriers that make entry into the market difficult, since highly specialized equipment, resources, and industry knowledge are required to transport motor vehicles across oceans without damage. Demand for vehicle carrier services is highly elastic as there are no close substitutes for this service. The market is highly concentrated and the defendants control over 70 percent of the vehicle carrier services market. Furthermore, vehicle carrier services are highly homogenous and customers make purchase decisions based primarily on price.

Competition authorities in the United States, European Union, Canada, and Japan began investigations into a global cartel among vehicle carriers in September 2012 for unlawful, anticompetitive conduct in the market for ocean shipping of cars and trucks. The Japanese Fair Trade Commission (JFTC) and EC conducted coordinated raids at the Tokyo and European offices of several of the defendants, the complaint alleged.

The statute of limitations does not bar the plaintiff’s claims because he had no knowledge, and could not have discovered through the exercise of reasonable diligence, the existence of a conspiracy until September 2012 when the JFTC announced the raids of certain defendants’ offices for their roles in the criminal price fixing conspiracy. Moreover, the defendants communicated in secret and employed deceptive practices to avoid detection and keep the facts of their collusive conduct from being discovered by the public or any purchasers with whom they did business.

The plaintiff asserts claims for monopolization, unjust enrichment, and violations of Section 1 of the Sherman Act, the California Cartwright Act, and the California Unfair Competition Law. The action seeks declaratory and injunctive relief, damages, restitution, disgorgement, pre- and post-judgment interest, costs of suit, attorneys’ fees, and any other just and proper relief.

The cases are No. 3:14-cv-04559.

Attorneys: Robert C. Schubert, Willem F. Jonckheer, Noah M. Schubert (Schubert Jonckheer & Kolbe LLP) for Joshua So.

Companies: NYK Line Inc.; Nippon Yusen Kabushiki Kaisha; Mitsui O.S.K. Lines, Ltd.; Kawasaki Kisen Kaisha, Ltd.; EUKOR Vehicle Carriers Inc.; Wallenius Wilhelsen Logistics AS; Compania Sud Americana De Vapores S.A.; Toyofuji Shipping Co., Ltd.; Nissan Motor Car Carrier Co., Ltd.; Nissan Motor Car Carrier Co., Ltd.; Hoegh Autoliners AS.

News: Antitrust CaliforniaNews