In a legal showdown of unprecedented proportions, the bankruptcy estate of Bed Bath & Beyond has lodged the largest lawsuit in the history of the Federal Maritime Commission (FMC), demanding approximately $300 million from the Geneva-based Mediterranean Shipping Co. (MSC). The lawsuit accuses the world’s largest container shipping operator of overcharging for cargo transportation during the challenging times of the pandemic.
Bed Bath & Beyond, now operating under the name DK Butterfly after filing for bankruptcy protection in April, has set forth a claim for around $150 million in damages. Additionally, an equal amount is being sought for what the retailer describes as exploitative and coercive behavior on the part of MSC. The FMC, the U.S. maritime regulator, will be responsible for adjudicating complaints raised by American companies against shipping operators.
The 36-page lawsuit paints a grim picture of MSC’s performance in 2021, labeling it as “abysmal.” Bed Bath & Beyond alleges that the retailer was compelled to pay exorbitant freight rates in the spot market to ensure the timely shipment of its goods. The legal document further contends that MSC failed to meet its contractual obligations regarding pricing, burdening the retailer with unjust surcharges.
According to the complaint, MSC’s conduct has resulted in significant harm to Bed Bath & Beyond, causing lost profits due to the non-importation of cargo and the imposition of shipping surcharges. The retailer is now seeking the FMC’s intervention to determine the extent of damages caused by MSC’s actions.
Responding to the allegations, MSC has stated that it is carefully reviewing the complaint and believes the claims to be without merit. A spokesperson for the company asserted that MSC is proud of its efforts to provide continued service to its customers during the extraordinary market conditions posed by the pandemic.
The surge in ocean freight rates during the pandemic, fueled by supply-chain disruptions and heightened consumer demand, affected various American retailers, including Bed Bath & Beyond, Target, and Walmart. Cargo transport costs skyrocketed, with retailers often paying around $20,000 per container, more than triple the pre-pandemic rates, to move goods across the Pacific and from Asia to Europe. Although freight rates have since plummeted by more than 95%, the repercussions of the unprecedented peak continue to reverberate in the industry.
In response to the challenging market conditions, some major retailers, including Bed Bath & Beyond, resorted to chartering their own ships to ensure the movement of their goods during the crisis.
This high-stakes legal battle follows Bed Bath & Beyond’s previous claims against other shipping companies, including Taiwanese carrier Yang Ming Marine Transport and Hong Kong-based carrier OOCL. However, the damages sought in those cases were comparatively smaller.
In a related development, the FMC recently dismissed a case against Korean carrier HMM by Illinois food importer MSRF, citing alleged damages stemming from capacity constraints during the pandemic. The outcome of these legal battles is poised to shape the maritime industry’s approach to addressing grievances arising from the unprecedented challenges posed by the global health crisis.
(Source: Costas Paris | WSJ)
