March 1, 2011, 4:30 PM

Parcel problems

The Justice Department is investigating if delivery firms have engaged in anti-competitive behavior.

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The U.S. Department of Justice confirmed this week it is looking into possible anti-competitive practices by parcel delivery companies, services that are commonly used by online and catalog retailers to deliver customers’ orders. A Justice Department spokeswoman declines to mention the names of companies under investigation.

The two major parcel carriers in the United States, UPS and FedEx Corp. have said in recent months that they were being scrutinized as part of a Justice Department investigation prompted by a federal court case brought against the two companies by AFMS Logistics Management Group. AFMS, a shipping consultant to online retailers and other shippers, contends in a federal lawsuit that UPS and FedEx keep their shipping rates high by refusing to negotiate clients’ shipping contracts through third-party services such as AFMS. The suit charges UPS and FedEx with collusion in refusing to work with AFMS.

Asked about the current Justice Department probe, a spokesman says UPS has “voluntarily provided everything the D.O.J. has asked us for and expects the D.O.J. to conclude UPS did nothing wrong.” Adds a spokesman for FedEx, “We are aware of the D.O.J. investigation and are cooperating fully.” Both UPS and FedEx have denied engaging in anticompetitive practices.

Maxwell Blecher, an attorney for AFMS in the Los Angeles law firm of Blecher and Collins PC, says it appears that the Justice Department has launched a more formal investigation of the parcel industry. “It appears that with the issuance of subpoenas, the government’s investigation is now more formal,” he says, adding that he can only confirm that subpoenas were issued to his client, AFMS.  The subpoenas were issued by the Justice Department’s Antitrust Division under a procedure known as Civil Investigative Demand and have the “same force as though issued by a court,” he adds.

The spokesmen for UPS and FedEx did not comment on whether their companies had also received subpoenas.

Regarding the AFMS lawsuit, Blecher says that U.S. District Court Judge Margaret Morrow of the Central District of California has issued a tentative opinion finding that AFMS has adequately alleged a claim of collusion against UPS and FedEx. Meantime, AFMS is awaiting a decision by the court on a motion by UPS and FedEx to dismiss the AFMS complaint, Blecher says.

UPS contends there “is no support for the allegation that FedEx and UPS have conspired to monopolize a market for shipping services,” the spokesman says. He says there is more competition than ever in the parcel shipping industry among UPS, FedEx, the U.S. Postal Service and regional and local carriers. 

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