Business Continues Even After Container Shipping Line and Car Carrier Fined $125 Million

JAPAN – US – VIETNAM – Kawasaki Kisen Kaisha (K Line) has entered into a plea agreement with the US Department of Justice (DOJ), agreeing to pay a $67.7 million criminal fine to resolve allegations that the container and specialist automobile shipping line violated US antitrust laws by colluding with other ocean freight carriers in connection with the sale of shipping services for RoRo cargo, to and from ports around the world in a thinly veiled anti-trust cartel agreement.

According to a one-count felony charge filed in a US District Court, K Line conspired to suppress and eliminate competition by allocating customers and routes, rigging bids and fixing prices for the sale of international ocean shipments of roll-on, roll-off cargo around the world. K Line participated in the conspiracy from at least as early as February 1997 until at least September 2012. K Line has agreed to cooperate with the Department’s ongoing antitrust investigation which may well reveal other partners in crime. The plea agreement is subject to court approval and Bill Baer, Assistant Attorney General in charge of the DOJ’s Antitrust Division said:

“Our efforts exposed a long-running conspiracy that operated globally, affecting the shipping costs of staggering numbers of cars, into and out of the Port of Baltimore, and other ports in the United States and across the globe. [This] announcement demonstrates our continuing resolve to bring the members of this conspiracy to justice. We are continuing our efforts to ensure that both the corporations and individuals involved in this cartel are held accountable for their acts and the harm they inflicted on American consumers.”

According to the charge, K Line and its co-conspirators conspired to a variety of things including agreeing on, during meetings and in communications, prices, allocating customers, refraining from bidding against one another and exchanging customer pricing information. The department said the companies then charged rates in accordance with those agreements for international ocean shipping services for certain roll-on, roll-off cargo to and from the United States and elsewhere at collusive and non-competitive prices.

K Line is charged with price fixing in violation of the Sherman Act, which carries a maximum penalty of a $100 million criminal fine for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine. As was declared in a previous financial statement K Line will record an extraordinary loss of around $64 million in the second quarter of the consolidated cumulative term of the fiscal year ending March 2015.

K Line has already had to pay out quite a bit in fines so far this year, having handed over $1 million in civil penalties after reaching a compromise agreement with the US Federal Maritime Commission (FMC), and a cool $56 million penalty from the Japanese Fair Trade Commission (JFTC) as part of separate investigations to resolve allegations that the company colluded in similar circumstances with other car carriers to fix rates on the shipment of automobiles and other motorised vehicles by RoRo or specialised car carrier vessels.

Business however inevitably goes on and, with all this aside, K Line has also announced that it has established a joint venture cold storage business with Cool Japan Fund and Japan Logistic Systems, to construct and operate a cold storage business, with total floor area of approximately 9,300 square metres on land with an area of approximately 20,000 square metres, to be based on the outskirts of Ho Chi Minh City, Vietnam. The yet-to-be-named warehouse business plans to start operations in January 2016.