It all started on Valentine’s Day 2006. But the Department of Justice (DOJ) was not delivering flowers, candy or greeting cards. Instead they served grand jury subpoenas on a number of air carriers. In some cases, with the aid of the FBI, they executed search and seizure warrants and raided certain airline offices. They seized documents, computers and electronically stored information. Over the next several months additional grand jury subpoenas were served on more airlines. This initial round of subpoenas was directed at air cargo movements.
While DOJ had not previously ignored transportation service providers, these documents, demands and raids acted like a spark that precipitated an array of antitrust activity directed at transportation service providers of practically every type. Within a short time, DOJ also initiated grand jury investigations directed at airline passenger operations and freight forwarders who utilize various modes. Private class action antitrust cases soon began to appear until there were well over a hundred pending. In addition to airlines and forwarders, motor carriers and rail carrier class actions were also initiated.
Antitrust legal proceedings can appear in a number of ways. The government, following an investigation, enforces the antitrust laws through both criminal and civil court actions. Private parties can also institute actions under the antitrust laws. If a private party is successful, it is entitled to three times its damages plus attorney’s fees. Class actions under the antitrust laws are common.
Government antitrust actions against transportation companies usually are instituted by the Department of Justice. While the Federal Trade Commission (FTC) may also enforce the antitrust laws, the FTC usually defers to DOJ in transportation matters. In addition, only DOJ is authorized to bring criminal actions.
Grand juries are used in criminal antitrust investigations directed at such things as price fixing and dividing customers or territories among those who are expected to compete against one another. Grand jury proceedings are secret; no grand jury activity takes place in open court. In practice the 23 members of a grand jury function at the direction of DOJ attorneys. Grand jury investigations often involve subpoenas for thousands of pages of documents and computer maintained files. DOJ lawyers can also call witnesses to testify in secret proceedings before a grand jury. A witness may not have his or her attorney present during the grand jury testimony. Witnesses may invoke their rights under the Constitution (“the Fifth Amendment”) not to testify. Those who do refuse to testify may be granted immunity from prosecution and forced to give testimony.
Criminal antitrust actions are often brought against individuals as well as corporations. An individual can be sentenced for up to three years in prison and fined millions of dollars. Corporations can also be fined in the millions of dollars.
The DOJ grand jury investigation of the airline and freight forwarder industries appears to be continuing. So far Korean Air Lines and British Airways have entered guilty pleas to charges of price fixing with respect to air cargo and passenger services. Qantas Airways has pleaded guilty to charges of fixing air cargo prices. Together the three airlines have been fined $661 million.
Justice also has been investigating certain ocean freight forwarders for rigging bids (a form of price fixing) on international traffic for the Department of Defense. To date eight forwarders have entered guilty pleas.
Private suits under the antitrust laws in the form of class actions are pending against air carriers for both cargo and passenger movements. Class actions are civil lawsuits brought on behalf of a “class” of plaintiffs, basically all those who allegedly were harmed by activity that may have been in violation of the antitrust laws. The most common accusation in antitrust law class actions is price fixing in some form.
The class actions pending against motor carriers and rail carriers center around fuel surcharges. These actions allege that the carriers in some manner agreed on fuel surcharge prices imposed on shippers. Nothing has been proved yet and the actions are pending.
The same is true in the antitrust class actions against a variety of freight forwarders. The allegations relate to forwarder activity involving ocean and air traffic, as well as domestic US surface movements.
In most of these actions the transportation service providers have filed motions to dismiss the suits maintaining, among other things, that the class plaintiffs have failed to allege an antitrust conspiracy. In essence they argue that under a recent antitrust decision by the US Supreme Court, plaintiffs cannot merely allege similar conduct such as that each defendant charged the same price and say that proves they fixed prices. The Supreme Court held that competitors may be charging the same prices for a variety of sound economic reasons, but to have engaged in unlawful price fixing they must have colluded. Simply alleging similar prices were charged is not enough; the plaintiffs must also present allegations relating to some form of actual agreement.
The antitrust situation for motor carriers became more serious when the Surface Transportation Board withdrew their immunity from the antitrust laws for collective pricing discussions effective January 1, 2008. This immunity had existed since 1935 and enabled such carriers to meet together and agree on uniform rates.
Actions under the antitrust laws of other countries are also pending. The European Union reportedly is looking at passenger and cargo airlines under EU competition, and it recently withdrew some of the antitrust immunity it had bestowed on ocean carriers to collectively consider rates.
All of these actions have brought antitrust law into the forefront of legal issues in the logistics industry.