K-Line Settles Price Fixing Charges

By Mark Edward Nero

Attorneys representing a group of consumers and auto and truck and equipment dealerships in antitrust claims against more than a dozen international shipping firms have reached a settlement with Tokyo-based Kawasaki Kisen Kaisha Ltd., known as K-Line.

The settlement was announced during a July 23 hearing before Judge Esther Salas of the US District Court for the District of New Jersey in Newark.

The plaintiffs, which include the indirect purchasers of millions of vehicles transported to the United States, claim that K-Line and other maritime carriers have unlawfully conspired to rig bids, fix prices and overcharge for their services.

The lawsuit notes that the market for transporting new vehicles for sale in the US is almost $1 billion annually. Terms of the settlement have not been announced.

“We are delighted to announce the first major settlement in the vehicle carriers case with K-Line,” attorney Warren Burns of Burns Charest LLP, interim co-lead counsel for the end-payor plaintiffs, said July 23. “This is a very significant and substantial first step to assure that American consumers are compensated for the conspiracy to fix the price of international car-shipping services.”

Burns said his firms expects to make the dollar amount public “very soon” after the settlement approval is filed by federal authorities.

The other defendants include among others Nippon Yusen Kabushiki Kaisha (NYK Line) and Compania Sud Americana de Vapores (CSAV), both of which previously pled guilty to participating in the conspiracy that is still being investigated by the federal government.

Some maritime company defendants have sought to dismiss the claims by arguing that the 1984 Shipping Act, which regulates ocean shipping companies, preempts state antitrust laws that protect indirect purchasers against price-fixing.

Burns, however, countered with the argument that state antitrust laws complement the Shipping Act, and that Congress in no way intended to bar such state claims.

K Line, NYK Fined for Shipping Act Violations

Two ocean carrier companies operating pure car carriers (PCCs) and roll on/roll off (ro/ro) vessels in US inbound and outbound trades, have been penalized a combined $2.3 million by the Federal Maritime Commission for allegedly breaking rules regarding commercial shipping.

Under separate agreements, Tokyo-based companies Kawasaki Kisen Kaisha Ltd. (K Line) and Nippon Yusen Kaisha (NYK Line), paid $1.1 million and $1.2 million, respectively, in civil penalties, the FMC revealed Dec. 23.

The fines resolved allegations that K Line and NYK Line had violated provisions of the Shipping Act by acting in concert with other ocean common carriers for the shipment of automobiles and other motorized vehicles by ro/ro or specialized car carrier vessels, but did not file such agreements with the Commission.

“These penalties underscore the seriousness with which the Commission views the carriers’ obligation to file with the Commission any agreement with other carriers affecting working relationships in the US trades, both for import and export traffic,” Commission Chair Mario Cordero said. “The shipping public has a right to know the subject matter and scope of any such agreement.”

The fines also addressed related activities and violations. Commission staff had alleged that the practices persisted over a period of several years and involved numerous US trade lanes, including to and/or from the Far East, Europe, the Middle East and South America.

In reaching the compromise agreements, K Line and NYK Line did not admit to guilt, but agreed to provide ongoing cooperation with other Commission investigations or enforcement actions with respect to these types of activities.

The Commission’s enforcement bureau is now investigating whether additional carriers are involved in similar agreement activities, Cordero said.

NYK Begins Shoreside Power Usage

NYK Line has become the first Japanese shipping company to make use of the Port of Oakland’s shoreside electric power supply. In late October, the containership NYK Apollo was directly connected to the port’s unit.

NYK Apollo, which is equipped with a 6.6 KV alternative maritime power container unit, arrived at the Oakland International Container Terminal on the morning of Oct. 22 and was connected to shoreside power a few hours after docking and an initial test. The vessel continued to utilize shoreside power until late that evening.

Utilizing shoreside power instead of the onboard generator can greatly reduce or eliminate emissions from vessels at berth.

Of the many NYK-flagged vessels with AMP units currently installed, NYK Apollo is the first in NYK’s fleet to connect at the Port of Oakland and will continue to make use of shoreside power on subsequent visits. NYK says it continues to modify AMP units of containerships and will expand its use of shoreside power at the Port of Oakland.

Tacoma Port Approves Settlement Over Failed Terminal Project

The governing board for the Port of Tacoma on Thursday unanimously approved a settlement with NYK Line and NYK-subsidiary Yusen Terminal Tacoma, Inc., over the cancelled Blair Waterway NYK container terminal.

The board gave approval to port CEO John Wolfe to sign a previously negotiated release and settlement agreement between the three parties. Under the terms of the agreement, the port will pay YTTI $2 million and YTTI will pay the port $7.75 million.

The agreement states that the payments, "are agreed to represent a compromise and settlement of doubtful and disputed claims and shall not be construed as an admission of liability, which is hereby expressly disclaimed, on the part of [the port] or any of the YTTI Parties (YTTI and NYK)."

The settlement grew out of a 2007 agreement that called for the port to develop the east side of the Blair Waterway into a new terminal for NYK, after relocating tenant Totem Ocean Trailer Express and constructing road and rail infrastructure.

In October 2009, after spending more than $190 million on the project, the port and NYK cancelled the terminal development. The reasons for the cancellation of the project – at the time scheduled for completion in 2012 – were cited as unforeseen increases in projected costs and a drop in port revenue. Updated estimates of the project in late 2009 predicted a total bill $400 million higher than the $800 million original estimate for the terminal.

The port has already spent $35 million in design costs for the Blair Waterway NYK terminal, relocation of Totem to another site and infrastructure development. In addition, the port spent $146 million to acquire property and demolish vacant buildings, $6 million on site remediation and permitting, and $3 million in staff costs.

A new deal was signed with NYK in late 2009 that calls for NYK to begin using the port's existing APM Terminal by July, 2012. Maersk previously called at the terminal until the shipping line vacated the facility in May, 2009, to head to the Port of Seattle.

The collapse of the deal also led to the departure of then port executive director Tim Farrell after serving in the top executive role at the port for five years.

The $2 million payout to YTTI in the settlement approved Thursday is to cove the return of an "Excusive Negotiation Fee" to YTTI.

The $7.75 million settlement payout to the port "represented the amount expended by the port," for design work, "that was directly related to the YTTI terminal premises."

According to the port, the settlement will cause no profit and loss statement impact to the port in 2011 because the settlement expense was recognized in the port books for 2010. The settlement will cause the port's on-hand cash to rise by $5.75 million.

Farrell Out as Top Tacoma Port Exec

In what is being labeled by the Port of Tacoma governing board as a "transition" of power, port Executive Director Tim Farrell will step down at the end of the year. The decision brings to a close weeks of speculation about Farrell's future at the port, a future brought into question by the recent cancellation of a major container terminal development project at the port.

Farrell called for a closed door meeting two weeks ago to discuss "a transition in power," shortly after Farrell's announcement that a 168-acre container terminal project at Tacoma under development for ocean carrier NYK Line was being cancelled. The reasons for the cancellation of the project– under development for several years and scheduled for completion in 2012– were cited as unforeseen increases in projected costs and a drop in port revenue. Updated estimates of the project predicted a total bill $400 million higher than the $800 million original estimate for the terminal.

NYK and the port subsequently signed a deal that will bring the ocean carrier to an existing terminal at Tacoma by 2012.

A nearly 10-year veteran of the port, Farrell stepped into the top executive slot in 2004. He will leave the port with a nearly $250,000 wage, benefit, and compensation package. The 43-year-old Farrell will also be eligible for a pension from the port when he turns 65.

The commission hopes to have a replacement executive director in place by early next year following a national search.

The port's current Deputy Executive Director John Wolfe will serve as interim executive director during the search period.

Tacoma Port Pulls Plug on New NYK Terminal

After spending more than $190 million on developing a new 168-acre container terminal for Tokyo-based NYK Line, officials at the Port of Tacoma and the shipping line have officially terminated the project.

Port commissioners voted last week to officially scrap the 2007 deal and sign a new deal with NYK that will see the Japanese line use an existing Tacoma facility. In scrapping the old deal, port officials cited a drop in port revenue due to the downturn in the global economy and projections that the final NYK project could cost $400 million more than the original $800 million estimate.

The new deal calls for NYK to begin using the port's existing APM Terminal by July 2012. Maersk previously called at the terminal until the shipping line vacated the facility in May to head to the Port of Seattle.

The 2007 deal called for the port to develop the east side of the Blair Waterway into a new terminal for NYK, after relocating tenant Totem Ocean Trailer Express and constructing road and rail infrastructure.

The port has already spent $35 million in design costs for the Blair Waterway NYK terminal, relocation of Totem to another site and infrastructure development. In addition, the port spent $146 million to acquire property and demolish vacant buildings, $6 million on site remediation and permitting, and $3 million in staff costs.

In the wake of the decision to cancel the original NYK project, Tacoma port commissioners are expected to meet with port executive director Tim Farrell in closed session Thursday to discuss his future with the port.