Local attorney and former state lawmaker John Carroll is taking another whack at the Jones Act, the federal law that supports America’s commercial shipping fleet but is also criticized as inflating Hawaii’s cost of living.
Carroll filed a lawsuit Thursday in federal court against the U.S. government on behalf of seven local business owners and consumers seeking monetary damages and termination of the 92-year-old law.
The suit claims that the Jones Act has hurt Hawaii companies and consumers because it adds to the cost of shipping by requiring that all cargo moved between two U.S. seaports be shipped on vessels built in the United States, owned by a U.S. citizen or company and manned by a U.S. crew.
State officials estimate that 80 percent to 90 percent of goods consumed in the state are imported from the mainland and foreign countries, and nearly all of that arrives by ship. Two companies — Matson Inc. and Horizon Lines — dominate the trade, which is also served by Pasha Hawaii Transport Lines mostly with automobile shipments.
The lawsuit seeks to represent all Hawaii companies hurt by the law, and to recover damages for them and consumers.
“Defendant’s unlawful conduct has resulted in high prices, a de facto duopoly operated by Matson Navigation and Horizon Inc.,” the suit said.
The suit is broadly similar to one Carroll brought three years ago that a judge rejected, which suggests the new case faces tough prospects.
Carroll said he believes he has addressed the deficiencies in the prior suit, which included the plaintiffs not demonstrating, in the judge’s view, that the Jones Act put them out of business or was threatening to put them out of business.
Senior U.S. District Judge David Ezra, who ruled on the prior suit, also concluded that the plaintiffs had no standing to sue the government over impacts of a law that are shared by the general public.
“We’re not going to lose on this (standing) issue on this (new lawsuit),” Carroll said. “This suit should be considered as Hawaii’s revolution to obtain economic freedom from monopolistic domination of shippers who face no competitors.”
The prior case was filed on behalf of five different businesses and former business operators, and was dismissed with prejudice, meaning the same plaintiffs are barred from making the same claim in the future. Though the claim is more or less the same, the plaintiffs are different in the new suit.
The Jones Act was created as part of the Merchant Marine Act of 1920 and is intended to protect domestic shipping and ensure a capable merchant marine in times of war.
In part because the law has stood for so long and survived concerted past efforts to dismantle it, many observers believe it is here to stay.
Prior attacks on the act include antitrust examinations and a major push in Congress to dismantle or modify the law in the mid-1990s.
Some observers also point out that the shipping trade is open to competition and is not restricted to any number of cargo transportation companies.
Still, the Jones Act is not popular with many consumers and companies that pay to ship goods.
The Hawaii Shippers Council, an organization formed in 1997 to represent interests of businesses that ship goods, advocates for allowing foreign-built ships to operate in Hawaii with U.S. crews, U.S. owners and U.S. flags as a means to reduce shipping costs.
The council recently cited Matson’s plan to buy two new ships for $200 million each in the next three to five years as a major factor driving up shipping costs and limiting competition. The council estimated that comparable ships built overseas would cost $40 million apiece.
“It creates a very high barrier to entry into the trades curtailing any potential competition, rendering the market essentially uncontestable and resulting in monopoly-like conditions,” Michael Hansen, the council’s president, said in an email. “It leads directly to high freight rates as the Jones Act shipowner must recover the high cost of the ships, which they can do because of the lack of contestability in the trade.”
But not everyone believes the Jones Act hurts Hawaii’s economy.
Local economist Paul Brewbaker has questioned whether local consumers and businesses would be better off without the Jones Act because it’s uncertain what kind of cargo service would emerge to serve a remote market that is relatively small, produces minimal goods for export and has ports that can’t accommodate the most efficient supertankers.
Carroll’s suit alleges that the federal government, through the Jones Act, has created the monopolistic shipping trade in Hawaii that has caused financial losses for local businesses and consumers who are captive to the law because no highways or railways provide interstate commerce alternatives.
The complaint was filed on behalf of four business operators and three consumers. The business operators are Patrick Novak of frozen-dough producer The French Gourmet, distributor Larry Kenner and ranchers Philip Wilkerson and Daniel Rocha. Consumers participating in the suit are Bjorn Arntzen, Ken Schoolland and William Akina.
Carroll, who at 82 is 10 years younger than the Jones Act, is an attorney, former Hawaiian Airlines pilot and military veteran. He also is a veteran political candidate. Carroll served in the state House in 1972-78 and state Senate in 1978-80 before becoming Hawaii Republican Party chairman in the early 1980s. He also has lost several campaigns for governor and U.S. Senate over the past decade, including the gubernatorial contest in 2010 and Senate contest this year.
