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Shipping Executive Pleads Guilty to Ocean-Shipping Price Fixing Conspiracy

On Tuesday, March 10, 2015, an employee of the Japan-based Nippon Yusen Kabushiki Kaisha (NYK) pleaded guilty to a violation of the Sherman Act for conspiring to fix prices and rig bids for international ocean shipping from approximately 2004 through 2012. Susumu Tanaka, formerly a manager, deputy general manager and general manager in NYK’s car carrier division, received a 15-month prison sentence and will pay a $20,000 criminal fine. The charges and sentencing occurred in the U.S. District Court for the District of Maryland in Baltimore. This is the latest in a series of guilty pleas stemming from a Justice Department investigation into a long-running conspiracy among ocean carriers to fix prices and rig bids for shipments in and out of U.S. ports, in particular Baltimore, Maryland.

Three companies – NYK, Chile-based Compania Sud Americana de Vapores (CSAV), and Tokyo-based Kawasaki Kisen Kaisha Ltd. (K-Line) – also pleaded guilty to conspiring to fix prices and agreed to fines in late 2014. NYK will pay a $59.4 million fine, CSAV will pay $8.9 million, and K-Line will pay $67.7 million. Tanaka is the first NYK employee to be charged. Two former executives of K-Line pleaded guilty and received prison sentences in February 2015.

The conspiracy involved international ocean shipping services for “roll-on, roll-off” cargo in deep-sea/trans-ocean (as opposed to shorter, coastal water) shipping. Roll-on/roll-off cargo is cargo that can be rolled or driven on and off of a shipping vessel, rather than stored in shipping containers and loaded or off-loaded using cranes. Common examples of roll-on/roll-off cargo are cars, trucks, and construction and agricultural equipment. This is a popular method of international shipping for such items, because it is frequently less expensive and more efficient than container shipping.

The shipping companies and individuals under investigation agreed to allocate customers and shipping routes, and to rig bids and fix prices for the sale of international ocean shipments, according to the government. According to a one-count felony charge against NYK, for example, between 1997 and 2012 the company “conspired to suppress and eliminate competition by allocating customers and routes, rigging bids and fixing prices.”

In addition to his prison sentence and fine, Tanaka has agreed to assist the Justice Department in its ongoing investigation into the ocean shipping industry and this conspiracy. According to a Justice Department press release, the investigation is “far from over,” and additional companies and executives may also be held accountable for conspiring to reduce competition in the ocean shipping industry.