Hostilities escalate in parcel wars
In early 2010, Werner Co., a Greenville, Pa.-based manufacturer and distributor of ladders, accessories, and climbing
equipment, informed its main parcel carrier, UPS Inc., that
it had engaged a third-party consultant, AFMS Inc., to renegotiate a transportation contract between Werner and UPS.
Big Brown struck back. Hard.
In a March 2010 letter to Werner’s transportation group,
Atlanta-based UPS told its customer that its decision to work
with a third party like AFMS would trigger a provision allowing UPS to cancel its contract with Werner after a 30-day
notice period. The termination of the current contract, in
effect since 2006, would result in the loss of discounts to
Werner and require it to pay more for UPS’s shipping services.
The letter also put Werner on notice that other benefits it
enjoyed through the UPS relationship would go by the
boards as well. UPS wrote that it has provided Werner with
“many special operating plans” for a number of the shipper’s locations across the United States. “If the goal of
breaking your current agreement is to realize additional
economic benefits, some of the unique value-added services that you have come to rely upon over the years may now
be subject to renegotiation as well,” the letter stated.
In the letter, UPS expressed surprise that a 25-year customer like Werner had sought out AFMS, particularly since
the current agreement with UPS had saved Werner $92,000
in 2009. The UPS letter added that Werner’s savings went
directly to its bottom line and that the company didn’t have
to share the gains with any outside sources.
In the end, Werner decided not to pursue a relationship
with AFMS. A Werner spokesperson did not return a
request for comment.
ONGOING LEGAL CHALLENGE
That wasn’t the end of the matter, however. A copy of the
UPS letter was included in an amended complaint filed
June 24 by attorneys for AFMS, which has sued UPS and
FedEx under federal antitrust laws on grounds they leveraged their position as the market’s two dominant players to
deliberately and illegally freeze out third-party consultants
in an effort to keep more of the profits foregone when consultants negotiate discounts for their clients.
Attorneys for the carriers argue that their policy of working directly with customers instead of third parties is nothing more than a competitive and legal business practice. The
