UPS, Fedex Face Antitrust Court Date Over Price Fixing, Collusion Charges


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UPS, Fedex Face Antitrust Court Date Over Price Fixing, Collusion Charges

By Mike Mitchell

January 19, 2012 - In a positive move forward for parcel shippers and their consultants, defendants United Parcel Service Co. (UPS) and FedEx Corporation (FedEx) have answered a complaint alleging antitrust violations filed by AFMS LLC. In addition, the parties have agreed to a trial date, pending court approval, of June 18, 2013. AFMS is an independent transportation consultant specializing in small package contract negotiations. 

"We are obviously pleased that our case will be proceeding forward,? said Mike Erickson, founder and president of AFMS. ?By severely restricting dealings with third-party consultants, UPS and FedEx are unfairly preventing shippers from accessing valuable knowledge and information that can make a significant impact on their contract negotiations and, ultimately, on their bottom lines".

"We strongly believe in the claims made in our complaint and are encouraged by the defendants? decision not to challenge our pleadings.? The complaint (case no. 10-CV-05830) was originally filed by AFMS on August 5, 2010. It contends that UPS and FedEx colluded to exclude third-party shipping consultants from business dealings, despite a history of engaging in amicable and mutually profitable negotiations for nearly 20 years for companies like Sony, GE, Quiksilver, Domino?s Pizza, Johnson & Johnson, Toyota, St. John Knits, Precision Castparts, REI, Blue Cross Blue Shield, Fred Hutchinson Cancer Research Center, Reader?s Digest, Hunter Douglas, Mentor Graphics, Fred Meyer and many more. 

The complaint claims that at an industry event in October 2009, executives from UPS and FedEx announced policies of no longer dealing with third-party consultants. This news was followed by internal memos from UPS and FedEx, which were circulated within hours of each other on April 23, 2010. Both memos defined new and highly restrictive policies regarding third-party shipping consultants. 

?We believe that the no third-party shipping consultant policies implemented by UPS and FedEx violate the Sherman Antitrust Act, and we have alleged in our complaint that both defendants have unreasonably restrained trade, increased prices and wrongfully driven competing consultants from the market,? stated Maxwell M. Blecher, founding partner of Blecher & Collins P.C. , the law firm representing AFMS. ?As a result of the defendants? conduct, our client AFMS, other third-party consultants and shippers in general have all been injured.? 


In addition to the complaint filed by AFMS, the controversial no third-party consultant policies have also attracted the attention of the Antitrust Division of the U.S. Department of Justice. It has been reported that several months ago the department notified UPS and FedEx of a preliminary investigation regarding their dealings with third-party consultants, and UPS has stated publicly that it is cooperating with the department?s inquiries. 

According to a 2006 Morgan Stanley Transportation Industry Report cited by AFMS in its complaint, 11 percent of shippers used a third-party consultant, and shippers who used third-party consultants enjoyed discounts that were 49 percent better than those that were obtained by negotiating directly with UPS and FedEx. The third-party shipping consultant industry, prior to the defendants? institution of the no third-party shipping consultant policy, comprised approximately 50 firms, with services ranging from contract negotiations to warehousing and inventory control. 

Consultants, like AFMS, have vast experience in the shipping industry and can provide customers with valuable knowledge about shipping methods, pricing and fee structures. For many shippers, third-party consultants provide experience and oversight that translates into significant value. AFMS estimates that from 2007 to 2009 it saved its clients more than $100 million in shipping dealings with UPS and FedEx. 

According to AFMS founder and president Erickson, ?Our diverse group of U.S. clients relies on us to help deliver bottom-line savings. With transportation costs often representing five to 10 percent of total operating costs, our clients depend on us to help make American goods and services more competitive in the global marketplace.?

The combined effect of third-party consultants on revenues of UPS and FedEx is significant enough to warrant interest by the carriers, which dominate the industry, and estimates are in the low billions annually. According to the complaint filed by AFMS, UPS and FedEx share a market valued at more than $60 billion in air, international and ground shipments, and without ?middleman? consultants, the carriers would have an opportunity to recoup shippers? savings and further increase revenues and profits.

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