A U.S. District Court agreed in August to have antitrust lawsuits filed by shippers against roll-on/roll-off shipping companies dismissed. (In Re Vehicle Carrier Services Antitrust Litigation. U.S. District Court, N.J. No. 13-3306. MDL No. 2471. Aug. 8, 2015.)
Now some of the shippers are asking Judge Esther Salas to reconsider her decision or are appealing it to the U.S. 3rd Circuit Court of Appeals.
The lawsuits originated after a 2012 investigation by Japan’s Fair Trade Commission for alleged violations of antitrust laws.
The investigation spread to the United States, Canada and Europe.
The U.S. Federal Maritime Commission has reached settlement agreements with several companies for alleged violations of the Shipping Act. Several companies pleaded guilty to criminal price-fixing charges filed by the Justice Department and paid hefty fines. Some executives of those shipping companies were sentenced to jail in related cases.
Eventually, many major carriers of cars and trucks were sued by shippers in various courts—both direct purchaser plaintiffs (DPPs), such as freight forwarders, and indirect purchaser plaintiffs (IPPs), such as consumers and automobile, truck and equipment dealers. The cases were eventually consolidated in New Jersey.
Using Section 4 of the Clayton Act, which allows consumers to sue for treble damages, the shippers claimed violation of Section 1 of the Sherman Act, which prohibits restraint of trade. The IPPs also sued under various state antitrust, consumer protection and unjust enrichment laws.
The shippers alleged the carriers entered into collusive, secret agreements to fix and increase the prices for vehicle carrier services to and from the United States by coordinating price increases, agreeing not to compete, and coordinating responses to price-reduction requests made by original equipment manufacturers, allocation of customers and routes, and restricting capacity by agreeing on fleet reductions.
In her decision, Salas wrote “Because the Shipping Act of 1984 bars Clayton Act claims and preempts state law claims under the theory of conflict preemption, the motions to dismiss are granted.”
The shipping companies asserted the conduct alleged in the complaints—namely agreements to fix prices, allocate customers and routes, and restrict capacity—are prohibited by the Shipping Act, thus triggering the statutory bar against private antitrust actions under section 40307(d) of the same law.
The DPPs conceded that claims relating to price fixing and market allocation are prohibited by the Shipping Act, but contended agreements to restrict capacity are not prohibited by the Shipping Act and are therefore subject to private antitrust suits.
They said there was a lack of explicit reference to “capacity restriction” in the Shipping Act. Even if agreements to restrict capacity were covered, the shippers argued they are not “prohibited acts” sufficient to trigger the bar against Clayton Act claims.
But Salas pointed to a section of the Shipping Act that said it applied to ocean common carrier agreements to “control, regulate, or prevent competition in international ocean transportation.” The complaints alleged that the defendant ro/ro carriers reduced capacity by agreeing to scrap and lay up ships, which resulted in an artificial rise in price.
She wrote the “DPPs and IPPs allege—and defendants do not dispute—that the agreements to reduce capacity were not filed with the FMC.” Because ocean common carriers are prohibited from operating under an agreement that is not filed with the FMC, the Shipping Act provides an exemption for claims under the Clayton Act.
While capacity restrictions are not explicitly referenced within the sections of Chapter 411 of the Act “this is not dispositive as DPPs contend, because of the broad scope of the ‘general prohibitions’ section” (Section 41102), Salas explained.
She also found the state law claims at issue are preempted by the Shipping Act. An article by John Longstreth and Allen Bachman posted on the K&L Gates website said this was the first time a federal court has held the Shipping Act preempts state antitrust laws.
Following Sala’s decision, General Motors said its claims should not be barred because it buys ro/ro services through service contracts, and service contracts for new, assembled motor vehicles are exempt from FMC regulation and that breach of contract cases belong in the courts. GM also said its state law claims also belonged in federal court.
The law firm Ballard Spahr, representing several ro/ro carriers, responded by calling GM’s letter brief raising these issues “an exercise in misdirection” that focused on an inapplicable chapter of the Shipping Act. They said the state law claims should be dismissed for lack of jurisdiction or failure to state a claim.
No matter how Sala rules on GM’s request, appeals are considered likely.
If unsuccessful in the courts, shippers could still pursue complaints against the carriers at the FMC, and in fact in September GM filed a complaint against several car carriers saying that it wants double reparations for the artificially inflated prices it paid for shipping.