Has the book been finally closed on a parcel consultant's nearly five-year fight with FedEx Corp. and UPS Inc. over charges that the two giants violated antitrust laws by boycotting the consultant's business?
The consultant, Portland, Ore.-based AFMS LLC, considered by many to be the patriarch of the field, has vowed to appeal a federal district court ruling last week throwing out its motion against FedEx and UPS. It may not be easy, though. That's because Judge Jesus G. Bernal dismissed the case "with prejudice," meaning AFMS can never again bring a cause of action based on the same claim.
"We are in complete disagreement with the judge's decision and opinion," Charles T. Collett, an attorney representing AFMS, said in an e-mail. Collett didn't respond to a request for comment on specific areas of Judge Bernal's ruling that AFMS had major concerns with.
The legal battle dates back to August 2010, when AFMS sued the carriers on grounds they colluded to boycott third-party consultants who negotiated rate discounts on behalf of their shipper clients. AFMS also alleged that FedEx and UPS threatened shippers who continued to use intermediaries with the loss of their rate discounts. AFMS said the carriers' actions destroyed the ability of consultants to compete in the marketplace, and that many suffered severe drops in revenue and income stemming from the carriers' strategies.
The carriers have argued that it is legal to work directly with shippers, adding that they were not deliberately excluding consultants but that they would work—or not work—with them at each company's discretion.
AFMS had a mostly-amicable 17-year relationship with FedEx and UPS until early 2010, when the carriers terminated their agreement and began dealing directly with its shipper clients. In October 2009, the carriers announced changes in their relationships with all consultants. The changes effectively led to a boycott of intermediaries whose primary job was to conduct rate negotiations. Since then, many consultants have continued to advise shippers on pricing tactics. However, they work behind the scenes rather than appearing at the negotiating table.
ADVERSE RULINGSCourts have ruled against AFMS in the past, finding that FedEx and UPS' actions didn't do harm to the industry beyond the alleged damage to AFMS, and that its claim had no standing on antitrust grounds. Courts have also ruled that because AFMS was not a shipper but a consultant that didn't ship parcels, it could not have suffered antitrust damages due to the carriers' alleged anticompetitive behavior.
In last week's ruling, Judge Bernal reaffirmed those opinions, saying AFMS failed to "delineate a relevant market" for services that could have been discriminated against and was unable to show the carriers played enough of a role to significantly impair competition.
The judge noted that consultants can and do perform other services outside of rate bargaining. (AFMS said in legal documents that rate negotiations accounted for 95 percent of its business.) Judge Bernal found that more than 80 percent of parcel shippers negotiate directly with the carriers, and said there is validity to the carriers' claim that working directly with shippers increases efficiency and could be procompetitive for the shipper because there is no intermediary fee to be paid.
Rob Martinez, president and CEO of consultancy Shipware LLC, said AFMS faced an uphill climb to prove antitrust violations because it would have to show it was excluded from the same marketplace by monopolistic behavior. "Consultants dispense advice. Carriers move packages. Case over, right from the get-go," Martinez said in a recent e-mail. Martinez said that the carrier boycott "is wrong on many levels." However, he notes that it targets consultants that only conduct rate negotiations and doesn't apply to other services that consultants can bring to a shipper relationship. These include distribution analysis; request for proposal templates; negotiation strategies; distribution center site studies; modal/carrier optimization; and invoice auditing, among other things, he said.
