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The Honolulu Advertiser
Posted on: Friday, June 27, 2008

MATSON SUED
Hawaii shippers conspired to raise prices, lawsuits claim

By Greg Wiles
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Matson Navigation Co. says it intends to fully cooperate with federal investigators looking into possible violations of antitrust law.

ADVERTISER LIBRARY PHOTO | September 2006

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A spate of antitrust lawsuits have been filed on the Mainland against Matson Navigation Co. and Horizon Lines, with the latest claim alleging the two companies conspired to raise prices being filed in Honolulu this week by a Maui company.

In all, eight lawsuits have been filed against Matson, contending it and Horizon violated antitrust law by acting to raise prices and taking other steps to control the market for container shipments between the Mainland and Hawai'i. Among the plaintiffs in the lawsuits seeking class-action status are four Hawai'i-based companies and one local resident.

The lawsuits appear to key on a U.S. Department of Justice shipping price probe that came to light on April 17, when Horizon disclosed federal agents had served search warrants on it as part of a U.S. antitrust investigation of pricing practices among carriers serving Puerto Rico. Matson was later pulled into the investigation when it received a grand jury subpoena on April 21 for documents related to pricing in domestic markets.

Yesterday, Matson's parent company, Alexander & Baldwin Inc., said it was aware of the filing of the lawsuits that "allege violations of the antitrust laws and seek monetary damages and injunctive relief."

"Matson understands that these lawsuits were triggered by the Department of Justice's investigation into the pricing practices of water carriers operating in the domestic trades," said a statement e-mailed by spokeswoman Meredith Ching.

"Such lawsuits commonly follow the announcement of a governmental investigation and Matson will vigorously defend itself."

The lawsuits generally are similar in calling attention to Matson and Horizon's dominance of container shipping between here and the Mainland and focusing at least some of their claims on both shipping lines having identical fuel surcharges. A lawsuit filed by Aloha Agricultural Consultants Inc., a company that does business as Nui Nursery, noted that the surcharges were an identical 1.75 percent when they were introduced in October 1999.

"Since then, each liner has adjusted fuel surcharges 27 times — each adjustment occurred within days of the competitor's adjustment and was for the same amount," alleged the lawsuit filed in Seattle.

"Fuel costs among ocean liners vary significantly due to a number of unique factors, such as differences in vessels and fuel efficiency, differences in routes, the use of hedging and individual fuel conservation efforts. It is highly unlikely, if not impossible, that Matson and Horizon incurred identical fuel expense increases."

The lawsuit also claimed that Matson had adjusted the surcharges on a quarterly basis up until the spring of 2006, when it said it would file the increase as it deemed necessary. The lawsuit said Horizon adopted the same practice days later.

Matson acknowledged receiving the Justice Department subpoena in a regulatory filing last month and noted the investigation was starting with the Puerto Rico shipping business in which it doesn't participate.

"Matson understands that while the investigation currently is focused on the Puerto Rico trade, it also includes pricing practices in connection with all domestic trades, including the Alaska, Hawai'i and Guam trades," Matson said.

Matson said it intended to fully cooperate with investigators.

The lawsuit filed this week by Rhythm of Life Cosmetics Inc., a company that does business as Maui Tropical Soaps, also alleged the surcharge increases exceeded the actual price increases of fuel: "Conspiring parties intentionally used the incense in fuel prices, which was well known to the public including Plaintiff and the Class, as a subterfuge to artificially fix their fuel surcharges."

Other local companies that have filed actions include 50th State Distributors and Acutron Inc.

Hawai'i resident Curtis Brunk also filed a lawsuit, as did a Florida resident, Robert H. Steinberg and a North Carolina company with operations in Honolulu, Bluewater Marine & Dock Specialties Inc.

Los Angeles candy maker Taste of Nature Inc. filed its lawsuit earlier this month in Southern California, charging Matson and Horizon also had conspired to limit shipping capacity in the Mainland-Hawai'i market and charged each other about $1,000 to carry the other's containers when the other company needed to get something transported quickly.

It claimed all other shippers have to pay about $4,000 per container.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.