By Keith Norbury

Those wishing to make a claim in a U.S. federal court class-action price-fixing lawsuit against several large international freight forwarding companies have until Nov. 22, 2013 to file a claim form, according to a court-authorized notice. That notice and many other documents relating to the class action can be found on the website, The Freight Forwarders Settlement Website provides details of settlements totaling about US$105.6 million that the plaintiffs have reached with ten defendants and their subsidiaries in the class action. The site also provides a list of about thirty other companies and subsidiaries that are named in the action but have not settled.

Defendants “vigorously deny” allegations

In all cases, whether they settled or not, the defendants “vigorously deny” any of the wrongdoings alleged by the plaintiffs. For the settling defendants, they agreed to pay up “to avoid risks inherent in uncertain complex litigation, and thereby put to rest this controversy,” as stated in several of the agreements filed with the U.S. District Court for the Eastern District of New York. Nevertheless, those agreements, as posted on the Freight Forwarders Settlement Website, outline the allegations that precipitated the lawsuit, which is called Precision Associates, Inc. v. Panalpina World Transport.

While Panalpina is the first-named defendant in the suit, it is among the companies that have not settled. Other non-settling defendants as of press time included Deutsche Post AG, DHL Express (USA) Inc., Agility Logistics Corporation, Geodis S.A., Kintetsu World Express Inc., and DSV Air & Sea Ltd.

Settling defendants include Kuehne + Nagel Inc., Schenker Inc., ABX Logistics Worldwide, Expeditors International, EGL Eagle Global Logistics LP, and United Aircargo Consolidators Inc.

A full list of the defendants can found at Plaintiffs in the case include Precision Associates Inc., Zeta Pharmaceuticals LLC, Kraft Chemical Company, and the parent companies of Mail Boxes Etc. and Meridian Electric. However, the settlement class includes “at least thousands of persons and entities,” according to a memo the plaintiffs filed in September 2012 in support of a preliminary settlement with Kuehne + Nagel.

Attempts to reach lawyers for plaintiffs and defendants were not successful. Messages left with lawyers for two of the co-counsel law firms were not returned. Nor were messages left with lawyers for three of the defendants. However, Joseph Bruckner, one of the lead co-counsels for the plaintiffs, was cited by Reuters News Agency in 2011 as estimating that the settlement class of plaintiffs might number in the tens of thousands.

Alleged incidents date from 2001

Plaintiffs consist of businesses and individuals who directly purchased freight forwarding services from any of the defendants within, to or from the U.S. from Jan. 1, 2001 to Sept. 14, 2012, according to an FAQ on Government entities and defendants in the case or their subsidiaries or affiliates aren’t eligible to make claims.

Another significant date in the case is August 9, when a “fairness hearing” is scheduled at 10 a.m. in U.S. District Court for the Eastern District of New York. The notice posted on points out, however, that the hearing date or time could change “without additional notice.”

Judge John Gleeson, who had earlier authorized the class action, gave preliminary approval to the settlement agreements “subject to further consideration” at the fairness hearing,” according to an exhibit in the case. The deadlines for objecting to the settlement or otherwise commenting on it, and to be excluded from the settlement class were on June 25, after the deadline for this article.

According to the court-authorized notice, the plaintiffs allege that the defendants “conspired with other freight forwarding companies to fix prices for freight forwarding services worldwide.” Details of those allegations are outlined in the settlement agreements. For example, the plaintiffs allege that Kuehne + Nagel engaged in five “unlawful agreements,” namely the 2001 Security Surcharge; the 2002 New Export System Fee Agreement; the 2005-2006 Chinese Currency Adjustment Factor; The 2005, 2006, 2007 Peak Season Surcharge Agreement; and the 2004 Automated Manifest Surcharge.

United Aircargo Consolidators Inc. meanwhile was accused of taking part in three such agreements: a 2002 Fuel Surcharge Agreement; a 2004 U.S. Customs AMS Charge Agreement; and a 2006 Surcharge Agreement regarding security and explosives examination charges. In all cases, the defendants denied that they engaged in any unlawful conduct that injured the plaintiffs.

Guilty pleas to criminal charges noted

Despite such protests, several of the settlement agreements note that the defendants, such as Kuehne + Nagel, had earlier pled guilty to violations of the Sherman Antitrust Act in the U.S. Those charges included fixing and imposing “certain freight forwarding service fees” from 2002 to 2007. Kuehne + Nagel agreed to pay a fine of US$9.8 million on those charges.

Robert Lande, a professor at University of Baltimore School of Law and a Director of the American Antitrust Institute, said it is common for lawsuits to follow criminal sanctions in antitrust cases. “But there are a couple of things you have to remember,” Prof. Lande said. “So defendants pled guilty; if it’s price-fixing, they cannot deny they fixed prices, but the plaintiff has a lot more work to do before they get any money. They have to prove how they fixed prices because the Department of Justice doesn’t prove how high they fixed prices, only the act of fixing prices.” While Prof. Lande was not familiar with the freight forwarding case, he has studied price-fixing cases extensively. One case he is familiar with is the Air Cargo antitrust class action case of a few years ago that resulted in awards totalling US$278 million against many of the world’s major airlines, including Lufthansa and Air Canada. Prof. Lande included that case in a paper he recently co-authored with University of San Francisco law professor Joshua Davis that summarizes 20 successful antitrust lawsuits.

Defendants give up awards in Air Cargo case

Ironically, the successful plaintiffs in the Air Cargo case include many of the defendants in the class-action against the freight forwarders. In fact, as part of their settlement deals, several companies have agreed to surrender most or all of what they won in the Air Cargo case to the plaintiffs. For example, Kuehne + Nagel has agreed to pay 99.7 per cent of what it won in the Air Cargo matter. That’s on top of another $28 million it also agreed to pay out. Expeditors agreed to pay 70 per cent of its winnings from the Air Cargo case. Other companies agreed pay to lump sums from the Air Cargo case — up to $10 million in the case of EGL — or percentages ranging from 72.5 per cent to 100 per cent.

While the present case concerns freight forwarding services within, to, or from the U.S., the plaintiffs claim the “conspiracies were worldwide, including on shipping routes between the United States and China, Hong Kong, Japan, Taiwan, and the United Kingdom,” said the class-action notice.

Court documents also suggest a link with recent allegations of price-fixing in Europe that resulted in the European Commission leveling fines totaling 169 million euros (about C$225 million) last spring against 14 leading freight forwarders. That case gained notoriety in part because one of the alleged cartels became nicknamed the “gardening club” after it was alleged that participants communicated with vegetable code words, such as “asparagus.”

The ABX settlement in the U.S. class-action, for example, allows lawyers for the plaintiffs to review in Europe copies of documents the company “produced to the European Commission related to the European Commission’s decision adopted on March 28, 2012.” Similarly, in the agreement with Schenker Inc., the company agrees to make available for depositions any directors or employees who have been interviewed by the European Commission regarding the plaintiffs’ claims.

Settling defendants agree to assist plaintiffs

Most of the companies that have settled have agreed to cooperate with plaintiffs’ counsel in other ways, including, as stated in the Kuehne + Nagel agreement, “by providing documents turned over to the U.S. Department of Justice and any other antitrust regulators in any jurisdiction” that relate to the case. An exception is Expeditors, which has not agreed to cooperate with the plaintiffs’ lawyers in the lawsuit against the non-settling defendants.

Prof. Lande said such cooperation is common in these types of cases. “If you help us collect from your fellow cartel members we may get less from you — if you turn in someone else,” Prof. Lande said. “It makes perfect sense.” The vast majority of price-fixing cases never go to trial, however, he said. So if this case goes to true to form, most or all of the other defendants will settle. A few years ago, he did a survey of every price-fixing case since 1890 and found only 26 cases that went to trial out of hundreds or possibly thousands of cases, he said. A recent exception is Apple Computer, which chose to go on trial this June on charges of e-book price-fixing despite all the publishing companies who were alleged co-conspirators having settled out of court with the U.S. Department of Justice.

People in the freight forwarding industry are averse to talking about the price-fixing allegations and the legal ramifications. Ruth Snowden, Executive Director of the Canadian International Freight Forwarders Association, would only say, “no comment.”

CIFFA does, however, have a notice on its website stating that “full compliance with both the letter and the spirit of the antitrust laws is a fundamental commitment” of the association. That notice also states a CIFFA directive that all meetings comply with the provisions of the Competition Act. “Meetings will not discuss or take action on any subject related to restraint of trade, price fixing, compensation, reimbursement, rate setting, marketing strategies and any other topics that could be considered anti-competitive,” the directive says.

Price-fixing sanctions inadequate, study finds

One company, Copenhagen-based DSV A/S, has initiated a Competition Compliance Policy that compels its companies to “restrict their membership” in trade organizations to “an absolute minimum.” That means “no active involvement in meetings, conferences, forums, committees and the like.” The policy even requires an employee attending a meeting where “matters presumed to be contrary to competition law are discussed in general” to leave the room immediately and “request that their departure and refusal to participate in illicit activities be entered into the minutes of the meeting.” And if no minutes are kept, the employee is to request that such minutes be prepared. Which leads to the question, are trade organizations themselves fertile ground for price-fixing conspiracies? Prof. Lande noted that renowned economist Adam Smith pondered that very question more than two centuries ago in The Wealth of Nations. “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices,” Mr. Smith wrote. He went on to say that while it would be impossible for the law to prevent such meetings, the law shouldn’t facilitate them.

Prof. Lande said that his research shows that so far legal sanctions, both criminal and civil, haven’t been adequate to discourage price-fixing. He and John Conner, professor emeritus at Purdue University, recently analyzed sanctions against 75 price-fixing cartels and studied the voluminous academic literature on the subject. They concluded that only about a fifth to a quarter of cartels face any financial sanctions. Then they added up all the fines and the payouts in lawsuits and found that they were only nine to 21 per cent as large as they needed to be to act as an optimal deterrent. “If all you have to do is give the dollar back if you’re caught, where’s your disincentive to forming a cartel?”