Bed Bath & Beyond Accuses Container Line of Not Meeting Commitments, Unfair Fees

BBBY, which filed the complaint against OOCL's Hong Kong headquarters and its branch in the U.K., said it entered into multiple service contracts in which the shipper agreed to provide a minimum amount of 40-foot-equivalent container units (FEUs) over a given time period. OOCL agreed to provide 2,100 FEUs as part of a 2020 service contract, but instead the shipping company "undertook a systematic practice of failing to make space available under the 2020 Service Contract, resulting in mounting shortages."

Under a 2021 service contract, OOCL agreed to provide a total of 3,796 FEUs from May 2021 through April 2022, BBBY said. But the U.S. retailer said OOCL only made available 52.9% of the space it had agreed to provide from October 2021 through March 2022, and only 2,432.74 FEUs during the 2021 service contract year.

OOCL "engaged in a practice of systematically failing to meet its service commitments" and allocating BBBY's cargo pacts to other shippers to "maximize [their] own profits," the complaint said. "As a result, Complainant was forced to obtain space on the spot market at enormous expense during a period of unprecedented high spot prices," the complaint said.

OOCL's "failure to provide contracted space was part of a practice by the shipper of preferring higher-priced freight and demanding extracontractual financial concessions before performing under its service contracts," BBBY said. The complaint said OOCL imposed "Peak Season Surcharges" and other fees, "effectively conditioning its performance under the Service Contracts upon Complainant’s agreement to pay rates well above the rate reflected in those Service Contracts."

BBBY said OOCL demanded it pay the surcharges "in order to have any reasonable chance of getting its freight carried." In a 2020 email, an OOCL employee wrote to BBBY that while paying will not "guarantee extra space," it will "help differentiate" BBBY for "procurement of equipment for the space allocated," according to the complaint. OOCL's "practice of holding [BBBY's] space hostage was clearly designed to, and did, coerce" BBBY to pay the surcharges demanded. The complaint said that OOCL is not the only line to be participating in the alleged behavior, citing an August 2021 complaint that accuses Mediterranean Shipping Company and COSCO Shipping Lines Co. of similar behavior.

BBBY also accused OOCL of unfair detention and demurrage charges. From August 2021 to June 2022, BBBY was charged over $6 million in detention and demurrage charges, according to the complaint. BBBY said the charges were unfair and assessed "because circumstances outside the control" of BBBY. such as congestion at ports, bad weather delays and labor disputes, "interfered with the normal handling of freight and containers."

OOCL also tried to coerce BBBY into "premium rate contracts" as a "precondition to carry just a fraction of the quantity commitment" that was agreed upon by both parties, the complaint said. That practice began in January 2021, with OOCL announcing a pilot program that would charge higher rates, the complaint said. The pilot program was expanded and OOCL "pressed [BBBY] to extend premium rate contracts several times, covering the time periods of both Service Contracts," the complaint said. OOCL was "overtly threatening" that BBBY would be "shut out of its contracted space" if it failed to pay new premium rates, the complaint said.

"[OOCL's] program of failing to honor its service commitments, and instead demanding that [BBBY] agree to premium pricing arrangements to move even a fraction of its contracted cargo, was unfair and unreasonable, and is the very definition of price gouging -- the term that even [OOCL]'s own employees could not avoid when discussing [OOCL]'s policies," the complaint said.

OOCL did not respond to our request for comment. OOCL previously has been investigated by the FMC for surcharge practices (see 2108050011).