$67,000 profit per box? MSC faces huge claims of $347 million!

The complaint alleges that MSC, the world's largest shipping company, took advantage of higher prices during the pandemic, resulting in higher freight costs that ultimately forced the company, formerly known as Bed Bath & Beyond(BBBY), now DK Butterfly-1 Inc., to file for bankruptcy. The complaint alleges that MSC systematically failed to meet agreed minimum cargo volume (MQC) service commitments, cut capacity when space was already scarce, and unfairly allocated space to higher-priced cargo in order to maximise its own profits. That forced BBBY to seek shipping space on the spot market at high cost, leading it to file for bankruptcy in April.

The complaint also alleges that MSC's conduct is not limited to failing to meet its service promises. The shipping company has encouraged customers, including BBBY, to accept peak season surcharges, imposing unfair demurrage and demurrage charges on shippers, despite uncontrollable conditions such as port congestion and equipment shortages. BBBY insists MSC's approach is deliberate and not subject to any external restrictions.

According to BBBY, MSC's average profit per container shipped in BBBY is $66,924.07, a far cry from the current situation. Just two containers (which BBBY said could not be returned to MSC) resulted in $37,780 and $40,360 in detention charges.

The complaint alleges that MSC's practices caused financial losses to Bed Bath & Beyond and other shippers. The lawsuit reportedly seeks damages of up to $347 million.

In an affidavit submitted to the FMC, BBBY claimed that MSC should pay damages for its alleged illegal conduct, which should include the company's legal fees and interest. The company said in its complaint that "as a result of MSC's retaliatory actions," FMC should consider an "additional award of doubling the amount of damages." The complaint includes claims for nearly $113 million in lost profits, in addition to the fact that shippers were forced to pay a total of more than $5.5 million in PSS fees and more than $9 million in additional rate costs when they entered the spot market compared to contract rates. Claims could total more than $347 million. An additional $23 million was paid for demurrage and demurrage for the rental and redelivery of container equipment beyond the shipper's control. Of course, MSC has yet to respond to the claims, but these issues will be familiar to many shippers.

According to the shipper, MSC was also found to have similarly breached its contractual obligations in cases where the presiding judge described MSC's failure to fulfil its contractual obligations as having "national significance". The judge added that "one of the world's largest container shipping lines sought to take advantage of unprecedentedly high rates to force shippers with service contracts, such as the plaintiffs, to resort to the spot market for booking space through a practice of systematically failing to meet their minimum booking quantity commitments."

In addition, according to the MCS case, the vast majority of demurrage and demurrage charges are levied illegally because they do not meet the requirements of speeding up the flow of goods in the supply chain, but instead penalize shippers who are unable to pick up goods or redeliver container equipment because of port congestion or lack of chassis equipment.