Horizon Pleads Guilty to Violating Antitrust Laws

Horizon Lines Inc., a U.S.-based ocean shipping and integrated logistics company, has entered into a plea agreement with the Antitrust Division of the U.S. Department of Justice (DOJ). Under the agreement, which is subject to court approval, Horizon Lines will plead guilty to a charge of violating federal antitrust laws solely with respect to the Puerto Rico tradelane and pay a fine of $45 million over five years without interest.

With the resolution of the DOJ investigation, Horizon Lines is in discussions with certain of its lenders to waive a judgment default that will arise from the plea agreement and to provide financial covenant relief as the company seeks new long-term financing.

Horizon Lines will plead guilty to a charge of violating section 1 of the Sherman Act with respect to the Puerto Rico tradelane between May 2002 and April 2008. The $45 million fine is payable over a five-year period as follows: $1 million within 30 days after imposition of the sentence by the court, $1 million on the first anniversary thereafter, $3 million on the second anniversary, $5 million on the third anniversary, $15 million on the fourth anniversary, and $20 million on the fifth anniversary.

The plea agreement provides that Horizon Lines will not face additional charges relating to the Puerto Rico tradelane. The DOJ also agreed that the company will not face any charges in connection with the DOJ’s investigation into the Alaska trade, and indicated that the company is not a subject or target of any investigation by the DOJ into the Hawaii and Guam trades.

Additionally, the DOJ has agreed that it will not bring criminal charges against any current director or officer, although this agreement does not extend to the company’s current CEO or to the company’s current chief operating officer. Meanwhile, Chuck Raymond, chairman, president and CEO, has announced his retirement.

Horizon Lines also entered into a Memorandum of Understanding (MOU) with the Commonwealth of Puerto Rico and attorneys representing indirect purchasers. The indirect purchasers allege they paid inflated prices for goods imported to Puerto Rico as a result of the alleged price fixing conspiracy. Under the MOU, the company has agreed to pay $1.8 million in exchange for a full release. The settlement agreement, when negotiated and entered into by the parties, will be subject to court approval.

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