Friday, June 12, 2009

Fall out from illegal price fixing U.S./Puerto Rico

In general, I have a problem with this whole idea that only U.S. Flag carriers can offer service between the mainland and Puerto Rico. That also applies to Hawaii and Alaska.

To add insult to injury, the carriers operating between the mainland and Puerto Rico got together to illegally fix their rates. Some people went to jail for this action.

This is the outcome for Horizon Lines, one of the carriers.

Horizon Lines was facing multiple class action lawsuits from customers who claimed financial damage because of the company’s allegedly unlawful conduct, after the US Department of Justice antitrust division’s investigation into price fixing between Horizon Lines and its trade rivals became known.

HORIZON Lines has agreed to pay $20m and freeze freight rates in its Puerto Rico trade lane for two years to settle a class action lawsuit brought by disgruntled customers.

Customers with Puerto Rico contracts with the Jones Act container line would have the option, in lieu of receiving cash, of a freeze on their base rates for two years beyond the expiration the contracts.

If I were a customer of Horizon, I would do 2 things.

1) Take the money, not the freeze on rates

2) Start looking for services from Europe and South America to Puerto Rico. Start shopping the rates from those origins, and use these to negotiate new rates with your carrier.

Who knows, maybe in the end it will be cheaper to source products from someplace other than the mainland U.S.

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