Air Freight Carriers Win Victory in Cargo Cartel Conspiracy

AUSTRALIA – WORLDWIDE – One can only imagine the celebrations in certain air freight offices in the Southern Hemisphere at the news that the Australian Federal Court has dismissed antitrust proceedings bought by the Australian Competition and Consumer Commission (ACCC) against Air New Zealand and PT Garuda Indonesia over allegations that the two companies colluded with other international air cargo carriers to fix fuel and security surcharges on air cargo services around the world.

As we have well documented in the past (type cartel into the News Search box for examples), the air cargo industry has been the subject of a globally co-ordinated investigation by competition regulators and civil actions by class action lawyers around the world, for over eight years. Air New Zealand was cleared of involvement by the European Commission in 2010 and by the US Department of Justice in 2011. The company continues to defend a related class action claim in the United States which is the only remaining litigation arising from this matter. This Court decision follows the release of Air New Zealand in June from the civil class action without liability or payment and brings an end to the protracted investigation and legal claims in Australia.

Air New Zealand and Garuda were the only airlines to defend the allegations through to the trial in May 2013. The airlines argued that to the extent there were any agreements, they were appropriately authorised by the relevant regulators outside the Australian market. In presiding over the case, Justice Nye Perram concluded that a number of collusive arrangements were made out, but the conduct did not take place in a ‘market in Australia’ as required by the Trade Practices Act 1974 (now the Competition and Consumer Act 2010) at that time. Air New Zealand’s General Counsel, John Blair said:

“This decision is important in aviation because international operators need clarity of the legal boundaries of the ‘markets’ in which they operate. The distinction between where competitive markets exist and where jurisdiction lies determines which regulators’ requirements must be met. Respect for national sovereignty and legal jurisdiction has been a foundation of the aviation industry since 1919.”

In September 2009, PT Garuda became the tenth airline to be the subject of the Australian proceedings, with the ACCC alleging that between 2001 and 2006, the company entered into arrangements or understandings with other international air cargo carriers to levy inflated surcharges, which were reached in Indonesia and Hong Kong.

In May 2010, Air New Zealand became the fifteenth airline to be the subject of the proceedings with the ACCC claiming that the airline entered into the arrangements a year later, between 2002 and 2006. The ACCC alleges that arrangements were reached in Singapore, Hong Kong, and Japan for fuel surcharges applied to cargo originating in those countries, and in Singapore and Hong Kong, a security surcharge was applied to cargo originating from those countries.

The penalties for freight carriers worldwide, even before taking into account the multiple international class actions in which customers of the freight carriers seek to retrieve illegally collected fees, have seen billions of pounds in fines raised by the various anti-trust bodies around the globe over the past few years. The result of these two latest cases are very much the exception to the rule.