) - one of the world's largest freight transportation companies -
is once again under the radar for dealing in shipments of illegally
operated online pharmacies. The company is facing indictment for
shipping dangerous prescription drugs ordered via illegal Internet
If found guilty, FedEx can be fined up to $1.6 billion, double
the amount of $820 million which the regulators estimate FedEx has
gained from such illegal transactions. According to reports, the
company has been summoned to court in San Francisco on July 29.
Going by the share price movement, investors seemed unfazed by
the news as FedEx's stock traded upward closing at $152.87 on
This legal battle has been on for many years. Back in 2012, the
federal grand jury had initiated a criminal investigation on
illegal drug shipments by FedEx.
United Parcel Service, Inc.
) had also come under the scrutiny of the Department Of Justice for
the same reason.
According to reports, the case dates back further to 2005, when
an investigation done by the U.S. Drug Enforcement Administration
(DEA) exposed approximately 4600 online pharmacies that were
The disclosure was followed by an immediate shutdown of these
online stores. Several arrests and further investigations threw
light on the involvement of shipping companies. While these illegal
online pharmacies have gradually seen the end, according to the
indictment, FedEx continues to be involved in the delivery of
In July 2006, UPS and FedEx both served subpoena from grand jury
as a part of the investigation by the Antitrust Division of the
U.S. Department of Justice. The subpoena required them to furnish
records that could provide an insight into possible antitrust
violations in transportation of packages for online pharmacies.
Regulatory issues are not new to the parcel industry. In 2012,
the European Union (EU) commission's antitrust regulators had
slapped charges worth $225 million against 14 international freight
forwarding companies for pursuing price fixing activities for
freight transactions in Europe. Companies like UPS and
Expeditors International of Washington Inc.
) have also been in the news for price fixation.
In respect to this case, UPS has already paid a fine of $40
million to conclude federal probe against shipping of illegal
online drugs and has also agreed to adhere to online pharmacy
compliance programs. However, FedEx stands to take a different
approach and expects to plead not guilty, defending against the
FedEx currently holds a Zacks Rank #3 (Hold).
A better ranked stock in this sector is
Atlas Air Worldwide Holdings Inc.
), with a Zacks Rank #1 (Strong Buy).
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FEDEX CORP (FDX): Free Stock Analysis Report
UTD PARCEL SRVC (UPS): Free Stock Analysis
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