A lawsuit against Matson Navigation Co. accuses it and rival Horizon Lines of conspiring to overcharge their customers by assessing fuel surcharges in excess of actual fuel costs. The suit portrays Horizon as the civil equivalent of an unindicted co-conspirator. Horizon already faces some similar suits.
Matson said Thursday it had not yet been served, but understood that suits like this are not unheard of when the Justice Department is known to be investigating pricing practices. It said it would defend itself vigorously.
The most striking thing in the initial reports of the suit was a comparison of percentage increases in fuel prices and fuel surcharges. The percentage increase in the fuel surcharges was way, way bigger.
Let's string 'em up!
Actually, percentages are not so much numbers as comparisons of numbers, and comparisons which can be much misunderstood. If fuel prices rise a zillion percent and Matson surcharges rise a jillion percent, whether that's wrong or not depends on what the starting fuel price was and what the starting fuel surcharge was. Which initial reports on the suit didn't specify.
Here's another example, from another issue Hawaii cares about, where percentages can be misleading. Suppose health care premiums were to rise 10% this year and 10% next year.
If you're paying a premium of $100, a 10% increase makes it $110. But another 10% increase the following year makes it $121. The percentage increase is flat. But the actual dollar increase goes up, from $10 to $11.
It's hard to resist the instinct to treat these numbers as if they had dollar signs in front instead of percentage signs in back. But it makes a difference.
To make an informed judgment about whether Matson and Horizon fuel surcharges are proper, here are some questions to ask:
- Was there ever any point at which the surcharge was actually covering 100% of fuel costs, or has it always defrayed a tiny bit of those costs? If the latter, large percentage increases might have increased the share of costs covered by surcharges, without necessarily ever approaching 100% of actual costs.
- Can market prices be used to make a judgment? Presumably Matson and Horizon made their own deals for fuel, and it is highly unlikely that these contracts always conformed precisely with whatever financial news media said the cost was for diesel or bunker fuel.
- Matson saved millions in fuel bills just by slowing its ships. Did it try to collect surcharge payment for fuel not used? If so, a person can be forgiven for considering that improper, even fraudulent. If not, then it could be that, far from ripping off customers, Matson has been taking decisive action on behalf of those customers.
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