Illinois-based shipping company MSRF is suing Taiwanese operator Yang Ming and South Korean carrier HMM, claiming that they benefited from failing to meet contractual obligations and that they colluded to benefit from their contract breaches.
The claim alleges that HMM and Yang Ming gained around $2.2m through their actions, with the amount still increasing as the lines continue to gain from what MSRF Inc claimed were illegal practices.
The legal action comes only weeks after the US Federal Maritime Commission’s two-year investigation, Fact Finding 29 found “no evidence of collusion” between shipping lines. (IMN June 8th).
The FMC found that the pricing of ocean transportation was a product of the market forces of supply and demand, pointing to the combination of unusually strong demand from US consumers, Covid-19, and congestion in the supply chain as the causes of rapidly increasing freight rates.
MSRF filed a complaint with the FMC on 8 June, alleging it had agreed contracts for the 2021 shipping year with the alliance partners that gave them 100 feu space on Yang Ming services and 25 feu on HMM vessels. MSRF said that Yang Ming offered just 4% of the allotted space and HMM carried only nine of the company’s boxes.
MSRF claims in its suit that it was forced to resort to the spot market to find a carrier for its cargo, or not to send its freight at all. It further alleges that both Yang Ming and HMM capitalized on their breaches of contract by “re-selling the capacity allotted to MSRF under the HMM [and Yang Ming] service contract(s) to other shippers on the same spot market at substantially higher rates than those to which it agreed in the HMM [and YM] service contract(s).”
MSRF alleges that, following the signing of contracts, the carriers changed their practices in a “parallel and seemingly co-ordinated fashion”, which as a result deprived MSRF of the space contractually agreed.
In its evidence to the FMC, MSRF claimed that several shipping lines disrupted a previously stable and well-established market structure that delivered reliable service contracts in advance of the booking process.
MSRF said that it was now compelled to “agree in advance to exorbitant rates for whatever portion of its needed capacity global ocean carriers are willing to cover with service contracts, make up the difference on the spot market and then rush to the spot market again each time respondents refuse to honour their limited service commitments in pursuit of even more profiteering”.
MSRF claims that the carriers had been permitted to organize themselves into collusive alliances and that this gave them the opportunity to “exploit their alliance status at the expense of shippers”.
“These collusive ocean alliances give respondents the incentive and opportunity to co-ordinate discriminatory practices, such as those alleged herein, so as to violate contracts with shippers like MSRF in favour of exploiting profit opportunities on the spot market”, the suit claims, adding a claim that the carriers within alliances were continuing to exploit shippers, including MSRF, and that these actions had brought the shipping lines historically high profits.