Crowley fined $17M in PR price fixing

This case arose from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the coastal water freight transportation industry.

According to a one-count felony charge filed in the U.S. District Court for the District of Puerto Rico, Crowley Liner Services engaged in a conspiracy to fix base rates for water transportation of certain freight between the continental United States and Puerto Rico from as early as January 2006 until at least April 2008.

Jacksonville-based Crowley Liner Services transports a variety of cargo shipments, such as heavy equipment, cargo that would not fit into containers, used cars and liquids capable of being transported only in tanker containers, on scheduled ocean voyages between the United States and Puerto Rico.

According to the charges, Crowley Liner Services and co-conspirators carried out the conspiracy by agreeing during meetings and discussions to fix the base rates to be charged to non-government purchasers of water transportation of certain freight between the continental United States and Puerto Rico. The department said that Crowley Liner Services and co-conspirators also engaged in meetings for the purpose of monitoring and enforcing adherence to the agreed-upon rates and sold Puerto Rico freight services at collusive and noncompetitive rates.

“Including this sentencing, as a result of the Antitrust Division’s ongoing investigation, three freight companies have been sentenced to pay criminal fines totaling more than $45 million and five executives have been sentenced to serve prison time totaling more than 11 years,” said Scott D. Hammond, deputy assistant attorney general of the Antitrust Division’s Criminal Enforcement Program. “By agreeing to fix prices for coastal shipping services to and from Puerto Rico, Crowley Liner Services and its co-conspirators thwarted the competitive process by forcing consumers to pay inflated rates for these services.”

Sea Star Line LLC was sentenced to pay a $14.2 million criminal fine in December 2011.

Horizon Lines LLC was sentenced to pay a $15 million criminal fine in March 2011.

Additionally, five shipping company executives — Gabriel Serra, Peter Baci, R. Kevin Gill, Gregory Glova and Alex G. Chisholm — have pleaded guilty. Frank Peake, the former president of Sea Star Line, was charged in November 2011, and is scheduled to stand trial in January.

Crowley Liner Services pleaded guilty to price fixing in violation of the Sherman Act, which carries a maximum fine of $100 million 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.

The price-fixing scheme unleashed a flood of lawsuits against the shipping firms.

Kraft Foods, Kellogg Co., Coca-Cola, Frito-Lay, Quaker Oats, Sears, ConAgra, Nestle, Frito-Lay, Procter & Gamble, and trucking companies including YRC, New Penn and USF Reddaway are among the plaintiffs in two lawsuits filed against Sea Star and Crowley in federal court in April.

The plaintiffs in those suits are customers who opted out of a $52 million class-action settlement agreed to by Sea Star, Crowley and Horizon Lines over price-fixing in the Puerto Rico trade. Horizon Lines also settled with opt-out shippers for $13.75 million in November.

The lawsuits are canother legal chapter in a U.S. Department of Justice antitrust probe that came to light with simultaneous raids in April 2008 by large contingents of federal agents at shipping company facilities in Puerto Nuevo, Santurce, Guaynabo, Jacksonville, Fla., and Charlotte, N.C.

Shippers filed nearly three dozen civil antitrust lawsuits against the four major U.S.-Puerto Rico carriers — Horizon Lines, Sea Star Line, Crowley Maritime Corp. and Trailer Bridge Inc. — after news of a federal investigation into pricing practices in U.S. cabotage trades covered by the Jones Act, which restricts domestic waterborne service to U.S.-flagged operators. The shippers control almost all the traffic on the routes between Puerto Rico and the mainland.

The initial flood of antitrust lawsuits was consolidated into a class-action case against Horizon, Sea Star and Crowley. U.S. District Judge Daniel Domínguez freed Trailer Bridge from the case, determining there was no evidence it was involved in the price-fixing scheme.

Horizon, Sea Star Line and Crowley denied overcharging customers but agreed to a $52.25 million settlement in the class-action suit.

A number of shippers opted out of the direct purchasers’ class action, a move that allowed them to seek separate agreements with the lines.

Horizon agreed in February 2011 to plead guilty to a felony charge of conspiring to fix rates in the Puerto Rico trade and pay a $45 million fine to settle the criminal case with the U.S. Department of Justice. That penalty was later reduced to $15 million.

The U.S. Department of Justice expanded the investigation last November with a $14.2 million fine for Sea Star Line and a criminal charge against its former president.

Sea Star Line agreed to the fine and a guilty plea to one felony count of conspiring to fix prices on cargo moving in and out of the U.S. island territory. Sea Star admitted conspiring to set prices and rig bids between May 2002 and April 2008, according to court papers.