Tuesday, February 3, 2015

Millions in Fines, Another Jail Sentence - the Ocean Freight and RoRo Sector Disgraced Again

Antitrust Activity, Cartels, Rate Rigging - Scandals Go On and On
Shipping News Feature

US – CHILE – As the US jails a shipping executive for his involvement in a conspiracy stretching over fourteen years to fix rates on certain cargo services, Chile has fined several ocean freight carriers a total of $75 million over allegations that the companies colluded to prevent competition on RoRo routes bound for Chile from Europe, Asia and the US.

The executive, from Japan-based Kawasaki Kisen Kaisha (K Line), pleaded guilty and was sentenced to 18 months in a US prison for his involvement in a conspiracy to fix prices, allocate customers and rig bids of international ocean shipping services for RoRo cargo, such as cars and trucks, to and from the United States and elsewhere. According to the one-count felony charge filed in US District Court for the District of Maryland, Baltimore, Hiroshige Tanioka, who has held many managerial positions in K-Line’s car carrier division, took part in the antitrust practices from at least as early as April 1998 until at least April 2012. Assistant Attorney General Bill Baer for the Department of Justice’s Antitrust Division, said:

"For more than a decade this conspiracy has raised the cost of importing cars and trucks into the United States. Today’s sentencing is a first step in our continuing efforts to ensure that the executives responsible for this misconduct are held accountable.”

This sentence was the first to be imposed against an individual in the DOJ’s ocean shipping investigation. Previously, three corporations have agreed to plead guilty and to pay criminal fines totalling more than $136 million, including Tanioka’s employer K Line, which was sentenced to pay a criminal fine of $67.7 million in November 2014.

Pursuant to the plea agreement, which was accepted by the court, Tanioka fell on his sword and was sentenced to serve an 18 month prison term and pay a $20,000 criminal fine for his participation in the conspiracy. In addition, Tanioka has agreed to assist the department in its ongoing investigation into the ocean shipping industry.

Tanioka was charged with a violation of the Sherman Act, which carries a maximum sentence of 10 years in prison and a $1 million criminal fine for an individual. 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.

Down in Chile, the country’s National Economic Prosecutor (FNE) has handed down fines to CSAV, Chilean Oceanic Navigation Company (CCNI), Eukor Car Carriers, K Line, MOL, and NYK, for their role in a conspiracy to constrain competition in the matter of carrying automobiles using specialised RoRo car carrying vessels, an allegation similar to that brought forth against some of the same companies in the US, Europe, and Japan.

Eukor came off worst with a fine of US$25 million plus costs, and CCNI, K Line and MOL were each fined $12.5 million plus costs. The FNE reduced the penalty levied against NYK by 50%, under the terms of a leniency agreement being the second company to cooperate with the investigation, bringing the fine down from $25 million to also $12.5 million. CSAV on the other hand was granted full leniency, having cooperated with the investigation from the outset, presumably instigating the enquiry in the first place. As a result of the leniency agreement, CSAV have not been ordered to pay a fine or any other costs involved.

Yet again we have to ask, without denigrating the authorities which have diligently pursued the matter, how can the losers in these situations, in this case the individual vehicle purchasers, ever be reimbursed? Whilst these cases may once again see class actions launched by the importers, how can the money ever filter down to those whom they in turn passed on the excess costs? A full history of the corruption which has pervaded the industry, and the resultant costs and lawsuits, can be seen by entering a key search term, such as cartel, into the News Search box at the head of the page.