AJOT Insights

Triple Indemnity Sought Under The Shipping Act

Dec 05, 2016

In September of 2012 the Department of Justice found evidence among eleven Roll-On/Roll-Off carriers of misconduct under maritime regulations. The FMC (Federal Maritime Commission) allows carriers to jointly set pricing and make adjustments to combined capacity, if these events are filed in advance. Un-documented action is subject to fines and compensation to injured parties up to twice the value of assessable damage.

Shippers file for Anti-Trust Compensation

Subsequent to the investigation, the FMC began a series of reviews and penalties levied against participants in the above investigation. In separate actions, shippers began to come forward seeking compensation from the federal courts under the Clayton Anti-Trust Act. In June 2013 a consolidated lawsuit was filed in the U.S. District Court for New Jersey. The suit alleged anti-trust immunity had been violated and requested three times the compensation for damages.

Clayton verses the Shipping Act

In 1890 Congress passed the Sherman Act as a means of preserving free and competitive trade. It was designed to prohibit collusion among business interests at the expense of the consumer. The Clayton Act passed in 1914 refined the definition of unfair competition and further prohibited the creation of business trusts. It also allowed injured parties to collect three times the value of damages in cases of proven wrong doing. In 1984 the Shipping Act outlined procedures for collective activity among ocean carriers including rate agreements filed with the FMC. It further defined exemptions from antitrust legislation.

Section 40307 outlines these to include “an agreement or activity relating to transportation services within or between foreign countries, whether or not via the United States ….” It further stated under subsection (d) that “A person may not recover damages under section 4 of the Clayton Act (15 U.S.C. 15), or obtain injunctive relief under section 16 of that Act (15 U.S.C. 26), for conduct prohibited by this part (i.e. the Shipping Act as outlined above). So, the civil case against the carriers was dismissed on August 28, 2015 finding on behalf of the defendants. The Plaintiffs retain their right to request damages at twice the value from any review and judgment filed with the FMC.

The Case goes to Appeal

Last month the U.S. Court of Appeals heard the opening arguments on the civil antitrust case against the Ro/Ro Carriers. Shippers in the collective lawsuit are still vying for triple damages. So far initial reaction by the three-judge panel appears to support the District Court’s dismissal. This would return the matter to the FMC for disposition. Plaintiffs who pursue it further would only be entitled to compensation under the current regulations. If however the judges overturn the ruling! The implications of this action are mindboggling. For one thing it would set a new precedence for further lawsuits. Not only that, but it creates a major riff in the Shipping Act which clearly defines antitrust exemptions. Taking the punch out of that section, would that leave the rest of the Shipping Act open to interpretation?

Author Photo
Matt Guasco
INF Marketing and Logistics, Inc.