SANTA ANA, Calif. — South Korean automakers Hyundai and Kia are suing the four largest U.S. Class I railroads, saying the railroads are violating U.S. antitrust law with coordinated fuel surcharges that drive up shipping costs.
Reuters reports that the companies filed the suits Tuesday in federal court in Santa Ana, near their U.S. headquarters in Fountain Valley, Calif., and Irvine, Calif., respectively. They are suing BNSF Railway, Norfolk Southern, CSX Transportation, and Union Pacific for imposing the surcharges between July 2003 and December 2008. The suits cite meetings, phone calls and emails to claim that the railroads conspired to impose the surcharges that generated billions of dollars in profit at customers’ expense.
The suits seek triple damages.
Fuel surcharges along with other surcharges in the trucking industry are determined by regulatory agencies, there was at one time a tire and oil surcharge also. In other cases industry agencies determine surcharges. The basic service may be competitive bid but surcharges are flat industry wide.
@Charles Landey: The shipper in this case is HK USA, the US subsidiary of Hyundai Kia that is responsible for importation and distribution of the vehicles they order from the parent back in SK.
Fuel surcharges are permitted if it is spelled out in the contract of carriage between the shipper and the carrier.
UPS had updated their terms of service to permit surcharges long before they actually implemented them. Several airlines did the same thing, they just didn’t wait until just after it surpassed the legal hurdle. Other airlines simply purchased the fuel hedges themselves to offset the variance in fuel supply costs.
I haven’t read the class action request or any of the lawsuits raised by the plaintiffs, but I would surmise that the surcharge was placed without any changes to the carriage contract with the shipper, hence the lawsuit.
JOHN RICE – There’s another analogy (in addition to your analogy) between this issue and pro football. In pro football, players each have a personal contract along with the union contract. They have their cake and eat it too, screwing the people paying their salaries twice over.
Now look at this issue in railroading. A big shipper, that being Hyundai/ Kia, has the big shipper benefits of individually negotiated contracts but also wants protection from the provisions of the contract, that being the fuel adjustment. The big shipper wants its cake and wants also to eat its cake. While the little shippers get squeezed out.
Oh and by the way. I may be wrong but isn’t Hyundai one of those mega Asian cartels with its fingers in different industries and well protected by the R.O.K. government it’s in bed with? Excellent cars – Hyundai, Genesis, Kia, but I think there’s more to the story. How many “little guys” make it in the R.O.K. industrial economy?
This will go as far as Colin Kaepernick’s anti-trust suit with the NFL did. A group settlement, no claim of wrongdoing and everyone walks away without it going to trial.
If Hyundai and Kia were smart, they would make the Big 4 purchase fuel hedges as part of their carriage contracts.. Delta and Southwest does. Better yet, Hyundai/Kia could lease their own engine power and use it as a service offset as part of the carriage agreement. Instead of surcharges, we will provide so many hours of motive power instead. Then for Hyundai/Kia its a predictable, forecasted expense vs the “surprise” they plop on you.
Then again, I seriously doubt any Class 1 is that creative in their carriage agreements.
There was a similar lawsuit filed about a decade or more ago that never really went anywhere. Wonder what’s in this one that wasn’t mentioned previously?