Thursday, October 2, 2014

Air Freight Carrier Hit with Multi-Million Dollar Cartel Costs Both Sides of the Pacific

Another Cargo Airline Accepts Defeat in Antitrust Cases
Shipping News Feature

US – SOUTH KOREA – JAPAN – Yet another air freight carrier, Nippon Cargo Airlines (NCA), will soon end its involvement in the large multidistrict class action raised against cargo carriers currently underway in New York. The company is now entering the early stages of a settlement agreement with the plaintiffs, just as it also accepts a fine imposed by the Korean Fair Trade Commission (KFTC) in a separate case. The Korean fine should then settle this long running lawsuit, the company having appealed the court’s decision on a number of occasions. Both the US and South Korea were among many Antitrust Commissions around the world to prosecute a large group of airlines over inflated surcharges and NCA, a subsidiary of Japanese container shipping and logistics group, NYK, is no exception, setting aside more than $37 million to settle the charges in both countries.

It is alleged that from April 2000 to at least February 2006, NCA participated in a conspiracy with other cargo carriers, to levy inflated surcharges, such as unwarranted fuel surcharges, to eliminate or prevent discounting of air cargo shipping services, to agree on yields, and to allocate customers or routes. In the US, NCA has reached an agreement to pay $36.35 million in reparation to the freight purchasers, subject to the New York Court’s approval. The company also had a $46 million fine levied against it in 2009 by the US Justice Department.

Over twenty of the defendants named in the litigation have also pled guilty to federal criminal antitrust violations collectively paying over $1.5 billion in criminal fines to the US alone. One defendant, Lufthansa, disclosed the conspiracy to the US Justice Department, and as a result, was accepted into the Department's leniency programme.

The list of those accused in the US reads like a who’s who of the world’s airlines with some of the other defendants involved in the action being:

ABSA Cargo Airlines, Air Canada, Air China, Air France, Air India, Air Mauritius, Air New Zealand, Alitalia, All Nippon Airways, American Airlines, Asiana Airlines, British Airways, Cargolux, Cathay Pacific, China Airlines, DAS Air Cargo, El Al, Emirates, Ethiopian Airlines, EVA Airways, Japan Airlines, Kenya Airways, KLM, Korean Air, Lan Cargo, Lufthansa, Malaysia Airlines, Martinair, Polar Air, Qantas, SAS, Saudi Arabian Airways, Singapore Airlines, South African Airways, Swiss International Air Lines, Thai Airways, and VARIG. Several executives of the airlines also named as defendants, have also been the subject of individual proceedings by other competition authorities, including from the EU, Australia, and New Zealand, to name but a few.

Over in South Korea, NCA's long running battle with the country's competition commission ended last month with the airline seemingly negotiating a $50,000 reduction on the original $1 million penalty imposed against the company when the KFTC first announced the fines in November 2010.

The KFTC found that the cartel conspiracies for shipments of four routes, outbound shipments from Korea, and inbound shipments to Korea from Hong Kong, Europe, and Japan, seriously affected the Korean market. Of the four routes, NCA had allegedly been involved in two; outbound shipments from Korea, and shipments from Japan to Korea. The airline filed an appeal in December 2010, requesting the court to nullify the decision but the Seoul High Court instead affirmed the decision of the KFTC. Taking it one step further, NCA appealed to the Supreme Court requesting a re-examination of both trades but earlier this year, the appeal was once again rejected, and referred it back to the High Court with the request to re-examine the calculation of the fine for the case related to the charges on all the outbound Korea routes which seemingly produced the 5% reduction on the original penalty.