A Texas motor carrier scored a legal victory against Amazon.com, Inc. (NASDAQ: AMZN) in a lawsuit highlighting the e-commerce giant's sometimes testy relationship with trucking industry.
Waco-based Central Freight Lines, which has 1,651 power units according to the Federal Motor Carrier Safety Administration, won a $2.4 million jury verdict against Amazon at the end of October.
Central Freight Lines first began hauling less-than-truckload (LTL) freight for Amazon in 2011. But Central Freight said the relationship with Amazon started going south by 2016 as it "attempted to wield its economic power to force through billing and procedure changes that Central Freight never agreed to" the carrier's complaint said.
Amazon's economic power over trucking has been on full display this year. The "onerous" contract terms it puts on carriers were said to be one factor in the demise of New England Motor Freight. FedEx similarly ended its ground-delivery relationship with Amazon due to low yields on the business. XPO Logistics lowered its 2019 revenue outlook as its largest customer – believed to be Amazon – took its business away.
In its lawsuit, Central Freight Lines said Amazon began tendering eight-pallet shipments, which did not qualify for the agreed-upon LTL rates due to their size.
Instead, Central Freight Lines quoted Amazon a spot rate that was 30% higher than the LTL rate, plus a fuel surcharge for the
After an oral agreement, Central Freight amended its written contract with Amazon to reflect the new spot rate. While Amazon paid the agreed-upon rate, it "neglected to sign by the addendum," Central Freight said.
By June 2016, Amazon was disputing any contract was in place to bill eight-pallet shipments at the new rate. It subsequently audited Central Freight's Invoices and demanded that the carrier reimburse Amazon for shipments that did not receive the volume discount over the 2012 through 2016 period.
In addition to disputing the agreed-upon rate, Amazon made other demands on Central Freight that were not agreed to in the original contract.
Amazon wanted Central Freight to reimburse for issuing separate bills of lading for each shipment, even though "custom and practice in the LTL shipping industry is that each bill of lading is a separate shipment and is invoiced separately, even if the shipment is for the same day and the same destination."
Amazon also began requiring that carriers match shipments against Amazon's internal tender identification numbers, even though Central Freight said it had previously picked up shipments without tender identification.
Any shipment without the tender identification was to be refused or sent back to the vendor. But Central Freight said its original agreement with Amazon never included this term.
"This would lead to situations where Central Freight would incur – through no fault of its own – the costs of going to pick-up shipments that would not leave the dock. It would also lead to situations where Central Freight's drivers would get into disputes with irate vendors incensed at Central Freight's refusal to pick up the Amazon shipment."
Central Freight said Amazon tried to direct its other carrier partners including Estes Express Lines, XPO Logistics, New England Motor Freight, Dayton Freight Lines and AAA Cooper Transportation, to agree to the same terms.
An August 2016 letter from Amazon demanded that Central Freight reimburse $2.8 million that Amazon said it was owed for overages on the eight-pallet shipment invoices and for Central Freight not following Amazon's procedures.
Amazon subsequently reduced the demand amount to $1.3 million. But it added that Central Freight would have to reimburse the amount if it was to be awarded any business during its 2017 bid season.
After Amazon Fulfillment Services ended its LTL business, a separate division, Amazon Truckload Services, approached Central Freight for trucking services.
Central Freight agreed to work for Amazon Truckload Services. But Central Freight said this was a "ruse" as Amazon Truckload withheld payment as an offset for the amounts claimed by Amazon Fulfillment.
"Amazon first breached its contract with Central Freight, and then used its economic power and dominance to fraudulently induce Central Freight to perform additional services for Amazon for payment, when all the while Amazon had no intention of paying Central Freight for such services," the lawsuit said.
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