UPS, FedEx, DHL Probed on Potential Price Collusion
India’s regulatory watchdog launched an antitrust investigation into DHL, UPS and FedEx, according to Reuters, which said the agency is looking into alleged price collusion on discounts and tariffs.
The Competition Commission of India (CCI) has recently started reviewing thousands of emails as part of its investigation into the fees these logistics companies charged for courier and storage services at airports, according to government documents viewed by Reuters.
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Investigators want until March to study all the evidence before preparing an internal report, Reuters said.
FedEx denies the allegations in the complaint.
The FedEx, UPS and DHL spokespersons said the companies are cooperating fully with Indian authorities, but wouldn’t comment further on the ongoing investigation.
The inquiry began in October of 2022 after the Federation of Indian Publishers complained that DHL, FedEx, UPS and Dubai’s Aramex, along with some domestic players, were collectively conspiring on fees and controlling customer discounts.
The companies “appear to be sharing commercially sensitive information amongst themselves…for taking joint or collective decision to arrive at tariffs,” the CCI said in an early assessment that ignited the broader investigation.
FedEx, UPS and DHL could be fined up to three times their annual profit in each year these fee was fixed, or 10 percent of annual revenue for each year of violation, whichever is greater.
The logistics giants have been forced to pay fines to international bodies in the past. In 2015, France’s competition regulator levied $739 million in fines across 20 companies, including FedEx and DHL, for secretly colluding on price increases for parcel deliveries from 2004-2010.
According to research firm Mordor Intelligence, courier, express and parcel delivery services are expected to grow 17 percent annually in India to $18.3 billion by 2029.
FedEx, UPS and DHL have made substantial investments in India recently, with the latter investing $500 million to expand its warehousing, workforce and sustainability initiatives there in September 2022. In August, UPS opened its first Indian technology center in Chennai at a cost of up to $20 million; it’s set to create 1,000 jobs by 2025. On Monday, UPS said it would accelerate the hiring to bring in the employees by 2024 and triple the facility’s current footprint to nearly 190,000 square feet.
Last month, FedEx invested $100 million to support digital innovation and transformation at its Hyderabad technology hub.
FedEx may lose half of USPS business
For FedEx, a potential antitrust lawsuit is just one of its problems. The company already cut its 2024 revenue forecast and is reorganizing the FedEx Express air unit to better adapt to consumer demand and cut costs.
FedEx reportedly expects its Express unit will lose as much half of the business it does with the U.S. Postal Service (USPS) when their contract expires in September. FedEx Express facilitates airport-to-airport transportation of USPS Priority Mail Express and Priority Mail in the U.S.
“If I were to bet, I think we lose 50 percent of our daytime flying,” said Pat DiMento, FedEx’s vice president of flight operations and training, according to a recording reviewed by supply chain publication FreightWaves.
According to DiMento, who made the comments in an internal conversation November, this would mean FedEx would have as many as 300 more pilots than it needs by October—putting their jobs at risk. FreightWaves previously reported that FedEx Express expects to reduce pilots’ guaranteed minimum number of flight hours by 13 percent, and push 400 senior crew members to early retirement “as quickly as possible” to address overstaffing.
FedEx Express, the largest of the company’s units by revenue, felt the pressures of soft demand in 2023, with second quarter sales dipping 6 percent to $10.3 billion, and operating income down 49 percent to $178 million. Global freight by weight declined 18 percent year over year to 21.2 million pounds, driven by lower USPS volume as the agency shifts volume from air to ground.
The package delivery giant is still negotiating a renewal of its air cargo network contract with USPS, but the company said in a December earnings call that it would take a “significant” change in contractual terms to renew the deal. Their arrangement is set to expire Sept. 29, 2024.
“We appreciate the relationship we have enjoyed with the United States Postal Service (USPS) for the past 22 years,” a company spokesperson said. “Like any other customer relationship, we are focused on ensuring it continues to make good business sense for both parties as we each realign our networks for the future.”
The Postal Service has cut the volume of first-class mail and packages moved through air carriers by 90 percent in the past 2.5 years, Postmaster General Louis DeJoy told the USPS board of governors last August. USPS air transportation expenses fell $600 million, or 16.3 percent, primarily due to lower package volumes and the shift to ground transportation.
