Matson and Horizon monopolize Hawaii's shipping market because of the Jones Act Photo: Emily Metcalf
Photo: Emily Metcalf

BY MALIA ZIMMERMAN – Horizon Lines, Inc. (NYSE: HRZ), the nation’s leading domestic ocean shipping company, with a fleet of 20 U.S.-flag containerships that transport goods between the continental United States and Alaska, Hawaii, Guam, Micronesia, and Puerto Rico, finalized its settlement with the U.S. Justice Department after an extensive probe into alleged price fixing and antitrust charges.

The U.S. Department of Justice department in April 2011 agreed the company should pay $15 million over 5 years for the violations, down from the original $45 million fine, for federal antitrust violations in the Puerto Rico tradelane.

“We are greatly appreciative of this action by the Department of Justice, which also allows the company to proceed with settlement of the class action litigation in Puerto Rico,” said Michael T. Avara, Executive Vice President and Chief Financial Officer, in a company statement.

Horizons Lines was just one of at least five major American shipping companies under federal probe over the last few years, allegedly for antitrust and price fixing violations.

Hawaii-based Alexander & Baldwin (NASDAQ:ALEX) Inc. acknowledged in an April 28, 2008 statement that its documents related to its subsidiary Matson Navigation were subpoenaed by the U.S. Justice Department’s anti trust division — the agency investigating pricing practices of ocean carriers – even though Matson Navigation does not operate vessels in the Puerto Rico trade.

Analysts in American Shipper speculated at the time that the fact that Matson Navigation also was subpoenaed — even though it does not participate in the Puerto Rico trade — could either mean investigators are comparing their books or probing the industry more widely. A Justice Department official based in Hawaii told Hawaii Reporter that the case is not being handled here and had no further comment.

According to the U.S. Department of Justice, the entire domestic noncontiguous ocean shipping industry has been in violation of U.S. antitrust laws for the last few years.  Five shipping executives, three of them from Defendant Horizon, have already pled guilty to antitrust violations.  Those guilty pleas involved, among other things, “agreeing to fix the prices of rates, surcharges, and other fees charged to customers.”

Based on revelations from the plea discussions with these shipping executives, John Terzaken, the U.S. Department of Justice prosecutor stated in court (Transcript of hearing, United States of America v. Gill,  case no. 3:08-cr-351-J-32TEM, United States District Court, Middle District of Florida, Jacksonville Division): “I think it’s also important to note for the court, because it may not be apparent in any of the papers that have been filed thus far, that the ongoing investigation that these charges are a part of is far broader than simply the United States and Puerto Rico trade language these charges arise from.  The ongoing investigation is far broader than simply the US and Puerto Rico trade.  This is a nationwide  investigation that involves other trade lines.”

“There will be charges in these other aspects of the case as well. And those are — those are to come down the road,” Terzaken added.

With no resolution announced in this case, but Horizons Lines’ case settled, is Matson Navigation still under investigation for alleged anti trust violations?

Jeff Hull, Director of Public Relations for Matson Navigation Company, told Hawaii Reporter during a recent inquiry: “On April 21, 2008, Matson was served with a grand jury subpoena from the U.S. District Court for the Middle District of Florida for documents and information relating to water carriage in connection with the Department of Justice’s investigation into the pricing and other competitive practices of carriers operating in the domestic trades.

“Matson understood that while the investigation was focused primarily on the Puerto Rico trade, it also included pricing and other competitive practices in connection with all domestic trades, including the Alaska, Hawaii and Guam trades. Matson does not operate vessels in the Puerto Rico and Alaska trades.  It does operate vessels in the Hawaii and Guam trades.

“Matson has cooperated, and will continue to cooperate, fully with the Department of Justice.”

When asked to clarify if it is Matson’s understanding that the DOJ investigation includes Hawaii and that as far as Matson knows, that investigation has not concluded and is ongoing? Hull answered: “We don’t have any comment on the DOJ investigation beyond what was provided in my previous response.”

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Malia Zimmerman is the editor and co-founder of Hawaii Reporter. She has worked as a consultant and contributor to several dozen media outlets including ABC 20/20, FOX News, MSNBC, the Wall Street Journal, UPI and the Washington Times. Malia has been listed as one of the nation’s top "Web Proficients, Virtuosi, and Masters" and "Hawaii's new media thought leader" by http://www.thewebstersdictionary.com Reach her at Malia@hawaiireporter.com