Antitrust Fines on Air Freight Forwarding Cartels Confirmed by European Court
Some of the biggest names in freight and logistics initiated these appeal proceedings in the General Court seeking an annulment of the Commission’s decision or for a reduction in their respective fines, similar to a recent surprise ruling the Court made in a separate case to reverse a judgement by the EC of fines worth €790 million on several airlines regarding their alleged antitrust activities.
In the current case the Commission held that the anti-competitive conduct of the companies, which agreed on the fixing of various pricing mechanisms and surcharges, gave rise to four distinct cartels. The ‘new export system’ (NES) cartel, otherwise known as ‘the Gardening Club’, concerned a pre-clearance system for exports from the UK to countries outside the European Economic Area which was introduced by the UK authorities in 2002. A group of freight forwarders agreed to introduce a surcharge for NES declarations.
The ‘advanced manifest system’ (AMS), introduced after the terrorist attacks of 11 September 2001, describes legislative provisions of the United States customs authorities that require companies to submit in advance data on goods that they intend to ship to the United States. A number of freight forwarders coordinated the introduction of a surcharge applicable to the AMS service, for the electronic communication of the data concerned to the United States authorities.
The ‘currency adjustment factor’ (CAF) cartel was designed to achieve agreement on a common tariff strategy in order to deal with the risk of a fall in profits owing to the decision of the People’s Bank of China in 2005 that it would no longer peg the Chinese currency to the United States dollar. A number of international freight forwarders decided to convert all contracts with their customers into renminbi and to introduce a CAF surcharge at a set amount.
Finally the ‘peak season surcharge’ (PSS) cartel concerned an agreement between a number of international freight forwarders relating to the application of a temporary rate adjustment factor. That factor was imposed as a reaction to increased demand in the air freight forwarding sector at certain times, which led to a shortage of transportation capacity and a corresponding increase in transport rates. The agreement was designed to protect the freight forwarders’ margins.
As regards UTi Worldwide, the parent company of UTi Nederland and UTI Worldwide (UK), the General Court stated that ‘where the liability of a parent company is purely derivative of that of its subsidiary and where no other factor individually distinguishes the conduct for which the parent company is held liable, the liability of the parent company cannot exceed that of its subsidiary’.
In this case, the Commission chose, for the purposes of setting the fine, to round down the infringement periods imputed to the subsidiaries, while no such rounding down was carried out for the benefit of the parent company. The General Court holds that the parent company whose liability is entirely derived from that of its subsidiaries must benefit from the same reduction in liability as that enjoyed by its subsidiaries. Consequently, the General Court recalculated the overall fine of €3.07 million imposed initially on UTi Worldwide and decided to reduce it to €2.97 million.
With regard to the other companies concerned, the General Court rejected all their arguments and decided to uphold the fines imposed on them. The Court held in particular that it is appropriate to base the calculation of the fines on the value of sales linked to freight forwarding services as a package of services on the trade lanes concerned.
The General Court is an arm of the European Court of Justice to which further appeals can be made, only however on points of law.
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