The Office of Enforcement of the Federal Maritime Commission is calling for a whopping $63.3 million civil penalty against MSC Mediterranean Shipping Company due to its “unreasonable and unjust actions and inactions in violation of the Shipping Act of 1984.” The recommendation comes after a more than six-month investigation into the shipping giant and its agents’ billing practices. 

The investigation was ordered in August 2023 after years of complaints from shippers about abuses by the large carriers. During the pandemic and the resulting surge in cargo volumes, shippers loudly complained about the business practices of the carriers. The concentration of the shipping industry into the hands of a small number of carriers and the potential abuses were at the core of the 2022 reforms to the Shipping Act. 

The FMC’s investigators concluded their discovery exploring the billing practices of MSC at the beginning of February and yesterday filed their 87-page report to an administrative law judge at the FMC. Discussing what it believes are the violations of the Shipping Act, the Office of Enforcement writes, “At the core of this proceeding is MSC’s billing practices that resulted in MSC unjustly profiting at the expense of its customers.”

The order for the investigation mapped out a range of issues including third-party billing for companies that might not have been directly a part of the bill of lading, tariffs and fees for nonoperating refrigerated containers (reefers), how rates were published, and if they were following the published rates as well, as exploring how penalties should be assessed if they found violations.

The report concludes that MSC knowingly and willfully employed unreasonable and unfair practices that did not promote economic ocean commerce. They cite an ongoing practice of a broad definition for “merchant” used to invoice charges to third parties, as well as incorrectly billing for non-operating reefers and a failure to publish rates for those containers.

“For years, MSC used its market power and wielded heavy-handed tactics to define standard bill of lading terms such as “merchant” to justify billing non-consistent and non-contracting third parties detention and demurrage,” the report concludes. They detail 18 specific violations and using the schedules established in the Act, set the penalty per violation adjusted for inflation at over $73,000 or a total of $1.3 million.

The largest number of violations is identified for overcharging for non-operating reefers, where they cite over 2,600 examples with a penalty of over $17,600 per or a proposed total of over $46 million. They also cite nearly 800 examples of failure to publish rates for those containers with a fine of $19,600 per or a total of over $15.6 million.

The investigation justifies the penalties, which total $63.3 million, reporting that the practices were followed “in the pursuit of higher profits.” They report that MSC when confronted by customers did issue refunds but never proactively undertook any action to “return millions of dollars in overcharges.” They report that MSC participating in the discovery indicated it was not possible to review each invoice. 

The Office of Enforcement highlights that the Shipping Act calls for civil penalties that are significant to deter and mitigate behaviors. The Act also provides for issuing an appropriate cease and desist order which they recommend is warranted in this case.

MSC has not yet filed a response. Undoubtedly, there will be appeals, but it highlights the claims of shippers regarding the actions of carriers as they have grown larger and consolidated the market.