Hawaii-based Alexander & Baldwin (NASDAQ:ALEX) Inc. recently issued a statement saying documents related to its subsidiary Matson Navigation are being subpoenaed by the U.S. Justice Department as part of a larger federal probe.

The company is one of at least five major American shipping companies operating in Hawaii and Puerto Rico ordered to hand over documents to the Justice Department’s anti trust division -- the agency that is reportedly investigating pricing practices of ocean carriers.

American Shipper reports that “All four major container carriers between the U.S. mainland and Puerto Rico -- Horizon Lines, Crowley Maritime, Sea Star Line and Trailer Bridge -- requests for information, and federal agents visited the offices of several on Thursday, seizing files.”

In its statement, Alexander & Baldwin says: "Matson Navigation, A&B's ocean transportation subsidiary, does not operate vessels in the Puerto Rico trade," but will "cooperate fully" with the Department of Justice.”

Horizon Lines, the other major ocean carrier in Hawaii, which operates between Hawaii, Guam, Alaska and Puerto Rico, has also been served with warrants and a grand jury subpoena. The company issued a statement last Thursday:

Horizon Lines, Inc (NYSE:HRZ) has confirmed federal agents today served search warrants and a grand jury subpoena relating to an investigation of pricing practices of ocean carriers operating in the Puerto Rico trade. Horizon Lines is cooperating fully with the government officials. The company has not been informed of the specific subject matter of the inquiry, being conducted by the U.S. Department of Justice’s Antitrust Division.

The fact that Matson was also subpoenaed -- even though it does not participate in the Puerto Rico trade -- could either mean investigators are comparing their books or probing the industry more widely, American Shipper speculates.

A Justice Department official based in Hawaii told Hawaii Reporter that the case is not being handled here and had no further comment. Gina Talamona, a Justice Department spokeswoman, told the American Shipper that the "antitrust division is investigating the possibility of anticompetitive practices in the coastal freight shipping industry."

Hawaii Carriers Long Accused of Monopoly Pricing

Honolulu transportation expert Cliff Slater, who has written extensively about Hawaii’s monopoly shipping industry, says many Hawaii consumers are unaware of the negative impact the monopoly shippers have on every product shipped to and from Hawaii.

The impact is tremendous, because Hawaii is 2,500 miles off the West Coast, and produces few products here, so the state imports more than 90 percent of its supplies, mostly by ship.

"Were Hawaii to have an exemption from the Jones Act, freight costs would be half of what they are today," Slater says, noting that would instantly reduce prices on everything from food to non-perishables to construction supplies.

John Carroll, a former Hawaii state Representative who is an opponent of Cabotage laws including the Jones Act, has done his own informal study of the cost of the legislation on the 50th state. In comparisons between grocery products such as eggs, bread and milk on the mainland, Hawaii prices are 50 percent higher. “The reason that a gallon of milk costs $9 in Hawaii and half that on the mainland is in large part because of the Jones Act, which prevents competition and raises the cost of all goods imported by ship here,” Carroll says. However, getting an exemption isn’t so easy. America’s Cabotage laws, including the more than 80-year-old Jones Act, mandate that all cargo moved between U.S. ports be transported in U.S.-built cargo ships, reducing competition to just two major carriers here, Matson and to a lesser degree, Horizon.

For decades, groups like Hawaii’s Cattlemans’ Association, have fought for a Jones Act exemption for Hawaii or the abolishment of the more than 8-decade-old law altogether, but the Jones Act is backed by some of the largest political powers in the nation including Hawaii’s entire congressional delegation now in office.

Congressman Ed Case, D-Hawaii (2002-2006) was the only member of Hawaii’s 4-person congressional delegation during his 2, 2-year terms to fight for relief for Hawaii residents.

In 2003, Case introduced three related pieces of legislation, hoping through specific exemptions to “end a century of closed market cargo shipping to, from and within his isolated home state of Hawaii, as well as the other noncontiguous locations of our country.” He aimed to “break the stranglehold on the economies and peoples of these exposed communities, which results from just a few shipping companies controlling the lifeline of commerce upon which our communities absolutely depend.”

The Jones Act, Case explains, was enacted in a “protectionist era under the guise of preserving a strong national merchant marine. But today it is just an anachronism: most of the world's shipping is by way of an international merchant marine functioning in an open, competitive market.”

He notes that those few U.S. flag cargo lines that remain have maneuvered the Jones Act to develop virtual monopolies over domestic cargo shipping to, from and within our most isolated and exposed locales, including Hawaii.

While Case believes “the broadest, deepest effects” of the Jones Act on Hawaii are on prices of westbound imports, the federal law also hurts Hawaii’s exports, such as agriculture and livestock.

The Cattlemen rallied behind Case’s legislation because they need to export their young cattle in a way that is cost efficient, but they can’t do so with Hawaii’s monopoly shipping companies.

“There are foreign cargo carriers that specialize, through custom cattle ships and overall sensitivity and adjustment to rancher timetables and needs, in such transport, but the Jones Act outright excludes them from the Hawaii-Mainland market. As a result, Hawaii's ranchers are reduced to two crippling, cost-magnifying options. The first is to ship their cargo by foreign carriers to Canada, where they have to go through a myriad of bureaucratic, cost-magnifying gyrations to get their product eventually to their U.S. markets. The second is to beg for the goodwill of the domestic carriers, to whom this is simply a hindrance rather than a major commitment, to ship directly to the West Coast,” Case says.

He notes the problem gets worse when the cows sit for days in Honolulu Harbor, waiting for one of cargo ships to return from the mainland -- something that causes its own set of problems including “in-harbor cattle waste disposal challenges and higher in-transit cattle mortality; lower-weight cattle delivery to market.”

Supporters of Jones Act See Green

Jones Act supporters say the legislation protects the nation’s labor unions and environment.

In a 2006 debate with Case, U.S. Sen. Daniel Akaka said: “The Jones Act is a critical component to protecting local jobs and national security. There has been bipartisan support of that bill by all of the presidents. These leaders recognize as I do, the strategic importance of our ports and our high quality labor force working in the maritime industry. And the Jones Act protects all of these. The Navy League of the U.S. says that the Jones Act is critical to U.S. national security, and it also helps our economy. The domestic shippers and ship builders that come under the Jones Act do contribute in terms of federal taxes. Hawaii receives $232 million in taxes every year on this.”

In a 2006 speech to the AFL-CIO Maritime Trades Department in San Diego, U.S. Rep. Neil Abercrombie, D-Hawaii, suggested the Jones Act could be a potential foundation for an expanded national maritime policy, noting “maritime has to be the number one security interest of this nation. Not just port security, but shipbuilding and a merchant marine owned and operated under the Jones Act must become a fundamental premise of American policy.”

In 2003, Hawaii’s Senior Senator Daniel Inouye spoke at the christening of a Matson ship, saying “No state in the nation is more acutely aware of the vital role our U.S. Jones Act fleet has in serving domestic waterways. For those of us who call Hawaii our home, the steady flow of cargo vessels coming to and from the state is essential."

Inouye, Akaka and Abercrombie have been rewarded financially for their loyalty to the hundreds of organizations and dozens of industries profiting from Cabotage laws including the Jones Act, some of who list themselves here: http://www.mctf.com/members.shtml

Opensecrets.org, a non-partisan, non-profit political watchdog group, tracks contributions to the nation’s top political officials.

Surprisingly, it isn’t Hawaii’s senior Senator who takes in the highest number of political contributions from Jones Act beneficiaries.

Congressman Neil Abercrombie received substantially more than his fellow Hawaii congressional members with, $362,000 from Jones Act related political action committees and another $959,000 from top industries benefiting from the Jones Act.

Sen. Daniel Inouye was second, with an estimated $144,000 from Jones Act related PACs and another $452,000 from the top industries related to the Jones Act (and this doesn't count indirect beneficiaries like other unions or defense contractors that build Jones Act ships).

Sen. Daniel Akaka brought in $141,000 and $402,000.

And Congresswoman Mazie Hirono, who replaced Case when he ran for Senate in 2006, has received $30,000 and $96,000 from related Jones Act entities.

One political analyst says it is likely that Hawaii’s congressional delegation has received an estimated $700,000 from Alexander & Baldwin, including Matson, and the main ocean-based transportation unions, and another $2 million from sea transport industries and transportation unions.

These groups also appear to be stepping up contributions to Hirono, possibly in light of rumors that Case is considering a run against her in 2008 to recapture his old seat.

Malia Zimmerman is editor and president of Hawaii Reporter, and serves on the GRIH Board of Directors.