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Why is the hometown carrier trying to drown us?

By Eric Rosario

"As a result of the MSP subsidies, APL is able to offer significantly lower prices than Matson for shipping cargo on the same routes," Matson's latest complaint to a federal court that the company isn't able to stick it to us even more

At probably the worst possible time, when prices from everything from corned beef to electricity are more expensive than ever, the region's 'hometown carrier' is complaining to the Feds that its competitor is keeping it from raising prices on all of us.

"Our local Matson team understands these are very trying times for everyone," Matson general manager Bernie Valencia said in a March 2020 commercial at the start of the public health emergency. "Matson's top priority, like yours, is to keep your family safe and healthy and make sure you have everything you need."

But according to statements the company made in Washington, D.C. about Guam, the CNMI, and the region, Matson's priority is to stop its competitor, APL, from lowering its prices further. What Ms. Valencia didn't say in her carefully-crafted commercial spot is that having "everything you need" would come at a much higher price if Matson prevails in the U.S. District Court of Washington, D.C. to kick APL out of the market.

What Guam's supposed 'hometown carrier' hasn't been able to do through good old fashioned competition, it is trying to do through government interference: get rid of its only competitor, APL.

Matson reigned as the monopoly carrier throughout the region, when competitor Horizon pulled out in 2012. A series of unregulated price increases followed, making nearly everything sold at the stores, including gas and electricity nearly unaffordable until APL entered the market in 2015.

Since arriving on Guam and operating throughout Micronesia, APL has undercut Matson's prices significantly, and increased shipping capacity to some of the world's most remote seaports, helping to keep prices from skyrocketing.

Matson has sued the U.S. Maritime Administration for the third time to take away the licenses the federal agency gave to APL to operate in this area. Each of the civil lawsuits, all filed in Washington, D.C. and away from the local news agencies in this region, alleged violations based on technicalities related to the Maritime Security Program, or MSP. The MSP allows shippers enrolled in its program to bypass certain maritime regulations under the Jones Act and service seaports commercially that otherwise would be prohibited. The catch is that the member shipper's fleet can be called into the service of the U.S. Navy at any time when war or conflict is declared. U.S. MarAd pays a stipend to its members. APL joined the program. Matson decided not to.

"As a result of the MSP subsidies, APL is able to offer significantly lower prices than Matson for shipping cargo on the same routes," Matson stated in its June 14, 2021 filing in federal court.

Those 'same routes' include seaports throughout Micronesia, home-based in Guam. And those 'MSP subsidies' amount to $5 million per ship. Matson's argument is a Telo Taitaguean effort at mathematical theory: Matson, which controls the vast market share of hundreds of millions in shipping revenue is telling a federal court that it cannot raise its prices because APL gets a $5 million subsidy. The subsidy is peanuts by comparison to Matson's grip on our pocketbooks.

In fact, consumer data shows the cost of shipping, at least on Guam, forms a larger portion of a store-purchased product's cost than local taxes. And in a linear comparison of prices from 2012 through today, it is clear that APL's arrival on the market stopped Matson from pricing us all under their ships.

Despite the competition, Matson has refused to lower its prices to APL's rates. Its 2017 annual report's comparison among fiscal years 2015 through 2017 shows that, despite the competition, Matson's revenues grew from around $1.8 billion in 2015 to $2.0 billion in 2017. Its CEO (Ms. Valencia's boss), Matthew Coxx, reportedly took home a healthy bonus. All this, while prices in Guam, the CNMI, and the rest of Micronesia continued to climb.

"When we work together to take care of our family and our neighbors, we will emerge together as a stronger island and community," Ms. Valencia says in that March 2020 commercial to the people of Guam.

The other part of Matson's forked tongue, however, is saying something else in Washington, D.C. And it isn't good for us or our neighbors.

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