Expeditors takes on the lawyers (again)…

May 22, 2012

For the most part, being a footnoted frequent flyer is a lot like winning our annual Footnote of the Year contest: Not something sane investors should want for companies in their portfolios. And yet there’s one exception: Expeditors International of Washington (EXPD).

The company’s filings are quirky, opinionated, irascible, often funny — and, most importantly, in pretty plain English, as far as corporate-speak goes. They’re written more or less how you’d want an up-front CEO to explain things to you over a beer on the back deck — with the occasional reference to dead frogs or Freud, and a good dose of backtalk.

The 8-K filed yesterday by the $8-billion transportation-logistics company is no exception. The filing is one of the company’s periodic Q&As for investors, and Question 6 is the one that caught our eye, about a European antitrust ruling (for background, see the Seattle Times):

“Do you plan to appeal the European Commission’s È4.4M fine for alleged price fixing? The DOJ investigation into the same price fixing case remains ongoing – are there any new developments with the DOJ’s case and when do you expect a resolution?”

In characteristic style, Expeditors answers, with a few digressions:

“Appealing a decision one has publicly disagreed with seems a logical next step—when there are a logical set of rules that one can follow and where one would feel confident that the appeals process would result in some reasonable probability of exoneration based on the facts.”

The filing goes on to criticize the European Commission’s definition of anti-competitive practices, calling it “very unique in both breadth and scope” and continuing:

“Under their definitions, even if you believe that you have clearly demonstrated that whatever the EC alleged did not constitute an illegal agreement that affects customer pricing, they can still assert a violation of anti-competitive behaviour and impose a fine. The EC also has higher potential fines as compared with other jurisdictions. In our opinion, the standard the EC used to lodge an infringement fine against us is so low that it has to look up to look down.”

That’s all just a wind-up for the finale:

“We are resolute in our belief that the evidence we presented to the EC supports our independent conduct with regard to our customer pricing and that the EC is wrong in concluding we entered into an illegal agreement that affected our customer pricing. However, spending more money to prove something the laws of the European Union are set up to keep you from considering in attempting to prove your point seems to us to be the definition of “pointless,” and yes it is inconsistent with the other laws and standards, and yes it is vexing…but at the end of the day, the EC doesn’t really care about the fact we didn’t actually join in any agreement that impacted the pricing we offered to our customers…obviously! Given all that, in the absence of a real possibility to completely overturn the decision, we’re thinking it’s probably not the best use of the shareholders money.”

Investors get the point, and some pretty plain-spoken insight into why the company is unhappy with the process; the company gets to vent its spleen; and no one has to connect the dots after slogging through pages of legalese. (For what it’s worth, the EC obviously has a different take on Expeditors’ activity, which you can read about here.)

Further down in the 8-K, Expeditors has a nicely concise description of its bonus-pool structure — something other companies could take note of for their proxy filings — some reasonably substantive answers about various operational issues, and a polite brush-off of questions about the company’s capacity procurement strategy.

This isn’t to say that Expeditors tells shareholders everything. Consider this Q&A pair from the most recent 8-K (the link is ours):

5. Can you talk about the recent 8-K citing a DOJ/BIS subpoena regarding exports and/or re-exports from the US to an embargoed country? What time period is the DOJ/BIS investigating? Is this investigation specific to Expeditors or more broad based into the forwarding industry?

The 8-K to which you refer was intended to be a stand-alone statement. Out of respect for the process, for many reasons, we cannot elaborate beyond what we have said in our 8-K. We’re sure you’ll all understand and accept the wisdom in that.

Yes, we’d like more detail. But given the company’s bluntness and relative clarity in so many other areas, it’s a lot easier to accept a polite “no” here.

If only more companies followed Expeditors’ lead, we might be left with nothing to do.

Image source: Businessman giving an order via Shutterstock.com

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