Expeditors fined $5.5 million in Europe for price-fixing effort
The European Commission said the Seattle-based logistics company violated antitrust rules by colluding with other major freight forwarders on surcharges.
Seattle Times business reporter
Price-fixing playersFourteen freight forwarders were fined a total of $225 million by the European Commission. Cartel participants included:
Kuehne & Nagel: $71.7 million
Panalpina World Transport, Switzerland: $62.1 million
UPS, U.S.: $13.1 million
Expeditors International, Seattle: $5.5 million
Deutsche Post subsidiaries DHL and Exel, Germany Not fined because they alerted antitrust agencies to the cartels.
Source: New York Times, Seattle Times
The European Commission has fined Expeditors International and its Hong Kong subsidiary more than $5.5 million for colluding with other companies to fix prices, part of a larger five-year investigation into anti-competitive practices in the global freight-forwarding and logistics business.
The commission, the European Union's executive body, says Seattle-based Expeditors joined with seven other companies to set a "peak season surcharge" on freight shipped from south China to Europe in the months leading up to the Christmas shopping season.
The companies, the commission said Wednesday, would use so-called "Breakfast Meetings" in Hong Kong to discuss when to introduce such surcharges and how big they should be.
Such actions, the commission said, violated EU antitrust rules.
All told, 14 global freight forwarders, organized in four separate cartels, were fined a total of 169.4 million euros, or about $225.7 million at Wednesday's exchange rate. The companies may appeal.
One of the four cartels, called the Gardening Club, used nicknames like Head Planter, Cat Weasel and Horticulturalist for participants and code words like "marrows" and "baby courgettes" for surcharges on important trade routes between Europe and the United States, the European Commission said.
Expeditors was cited only for its role in the Breakfast Meetings cartel. The company indicated in an earlier regulatory filing that the investigation covered its actions between August 2005 and June 2006; the European Commission announcement didn't specify when the violations occurred.
"In times of crisis, it is all the more important to stamp out the hidden tax that cartels impose on our economy," Joaquin Almunia, the EU's competition commissioner, said in a written statement.
"These cartels affected individuals and companies shipping goods on important trade lanes," Almunia said. "Many European exporters and consumers of imported goods may have been harmed as a result."
R. Jordan Gates, president and chief operating officer of Expeditors, did not respond to a request for comment on the commission's ruling.
Freight forwarding is the business of organizing the transport of goods, including related services such as clearing customs and warehousing. Expeditors, which has 185 full-service offices and 64 satellite offices on every continent except Antarctica, is one of the industry's major players.
The company reported a 2011 profit of $385.7 million on net revenues of nearly $1.9 billion. It had nearly $1.3 billion in cash and equivalents at the end of 2011.
Expeditors' shares fell 23 cents Wednesday after a 32-cent fall on Tuesday when reports of the fines began to leak out. The shares closed Wednesday at $46.35, though they were down an additional 17 cents in after-hours trading.
The wide-ranging probe began in October 2007, when European Commission officials and their national antitrust counterparts carried out surprise inspections at the offices of several freight forwarders.
Expeditors also is a subject of a parallel investigation by the U.S. Justice Department and a similar probe by Brazilian authorities. The company says it is "cooperating fully" with the U.S. inquiry.
Last month, Expeditors reached a tentative settlement in a putative class-action case in New York, also alleging antitrust violations.
According to regulatory filings, Expeditors has spent more than $16 million in responding to the various antitrust proceedings since 2007 — apparently a touchy subject for longtime CEO Peter Rose.
In June 2009, answering an investor's question about how much more the antitrust matters might cost Expeditors in legal fees, Rose responded in his typically pungent style:
"To us, this is somewhat akin to being asked to predict how many minutes after being force-fed a dead frog we would throw up," Rose wrote. "It should go without saying," Rose continued, "that given our druthers, we'd rather not spend the legal fees or eat the dead frog in the first place. Sometimes you don't get the luxury of deciding what you have to eat."
Drew DeSilver: 206-464-3145 or firstname.lastname@example.org
Information from The New York Times
is included in this report.