Leading freight forwarding company, FedEx Corporation (FDX – Analyst Report) has reportedly been charged $16.5 million under a lawsuit for overcharging business customers. According to a lawsuit filed in 2011 by two law firms, the company FedEx has been overcharging by approximately $3 dollars per package for thousands of shipments. The lawsuit involves FedEx customers who did not get their claim refunded for overcharges on residential deliveries between Aug 28, 2008, and Jul 13, 2011.
Regulatory issues are not new to the parcel industry. Carriers like FedEx and United Parcel Service, Inc. (UPS – Analyst Report) have previously been under the federal grand jury’s scrutiny for dealing in shipments of illegally operated online pharmacies. According to reports, the case dates back to 2005, when an investigation by the U.S. Drug Enforcement Administration exposed approximately 4,600 online pharmacies that were operated illegally.
In Jul 2006, both UPS and FedEx served subpoena from the grand jury as part of the investigation by the Antitrust Division of the U.S. Department of Justice. The subpoena required the companies to furnish records that could provide an insight into possible antitrust violations in transportation of packages for online pharmacies.
Further, UPS and Expeditors International of Washington Inc. (EXPD – Analyst Report) faced legal charges for price fixation in 2012. In Mar 2012, the European Union commission’s antitrust regulators charged $225 million as fine to 14 international freight forwarding companies for perusing price fixing activities for freight transactions in Europe.
Overall, we assume that the legal proceeding may not have a material adverse impact given the mammoth financial strength of these companies. However, the rising number of litigations does call for a closer look into the existing regulations that continue to govern the freight forwarding companies.