Air Cargo Cartel Allegations Continue As Freight Forwarders Go To Court

NEW ZEALAND – AUSTRALIA – US – EU – Reading like a Jeffrey Archer novel or a script from any long running TV Police drama, the anti trust suits against the world’s air cargo carriers and freight forwarders for cartel collusion keep rolling out and tales of household industry names ‘grassing’ on their mates continues unabated.

The latest allegations come as New Zealand’s Commerce Commission lodged proceedings In the High Court against divisions of DB Schenker (part of the giant Deutsche Bahn Group), Kuehne and Nagel, Panalpina, Geologistics International (Bermuda), CEVA Logistics subsidiary EGL plus former BAX companies Brinks and BAX Global (now part of Deutsche Bahn).

As with the cases which have been lodged previously in the US, EU and Australia some of the accused will probably walk away without serious penalty, unless you count loss of credibility, after it appeared that EGL and Geologistics will have charges dropped as a result of their cooperation with the authorities, one of them having started the original investigation when they approached the Commission confidentially in 2007 offering evidence and applying for leniency.

The latest allegations are not linked to previous allegations against a number of airlines for alleged contraventions of Part 2 of the Commerce Act in relation to security and fuel surcharges applied to the international carriage of air cargo. The accusations in the current case concern freight forwarding activities and seem to accuse the defendants of colluding to keep freight charges artificially high and in line with each other thus removing the competitive element and passing on excessive charges to the consumer.

Kate Morrison, general manager of enforcement at the Commerce Commission was delighted with progress in the case and the employment of industry informers saying:

“This investigation is evidence of the continued success of the Commission’s cartel leniency policy in bringing to light potentially collusive conduct. It also shows that the Commission is willing to avoid drawn-out litigation if parties engage with the Commission and agree to suitable settlement terms, as this can provide a quicker resolution than a full court trial.”

Air freight generates NZ$ 450million annually and it will be interesting to see how the case resolves itself. In the US air carriers themselves have rushed to try and mitigate damage caused by scandals there. In July Air France-KLM agreed to stump up a reported $87 million to US direct shippers leaving freight forwarders to explain themselves to their customers whilst American Airlines have also now put their hands up and agreed to cooperate with ongoing allegations, not only in the US but also in Europe. Like Air France-KLM their $5 million rebates will only go to direct shippers.

American Airlines, and their parent group AMR, were themselves dragged into the investigation after British Airways (BA) named them, along with thirty two other air carriers, as co-conspirators in the price fixing of freight rates between 2000 and 2006. BA made the move as it stared into the abyss when threatened in British and EU Courts with fines and compensation possibly exceeding the £350 million it set aside when it first realised the game was up.

A full list of the airlines named by BA can be found HERE together with further details of class actions conducted by US law firm Hausfield LLC who are acting in many of the ongoing matter for clients in cases around the world.

Meanwhile the seafreight sector looks on happily as container carriers set Trans Pacific and Trans Atlantic box rates, quite legally through the respective trade associations, whilst they continue their own fight for revenue.