Thursday, July 8, 2010

Shipping Companies Take Legal Route After Freight Rate Fraud Result

Class Action Being Prepared Against 19 Airlines
Shipping News Feature

SOUTH KOREA – After the country’s anti trust watchdog, the Fair Trade Commission levied their first ever fine, close to $100 million, on a group of nineteen international airlines in May there are reports that shipping groups in the country are drumming up support for a class action to launch a claim for compensation from those involved. The case may be difficult to prove in the light of Korean law which experts tell us only allows such action for stock market fraud but as only two companies, one now dissolved, are currently taking action no doubt advice on how to proceed collectively will be taken should more freight forwarders sign up.

Lawyers have already been briefed to start proceedings using the evidence supplied from actions already under way in the US and Europe and they have stated that the penalties imposed on the airlines was insufficient for the amounts which cartel agreements to fix the price of fuel surcharges and other charges netted the companies involved, an estimated $820 million.

The heaviest fines were against native carriers Korean Air and Asiana airlines although Korean Air had their fine reduced from an initial $40 million to just over $18 million for cooperating with authorities. Other airlines fined were reportedly British Airways, Lufthansa, Malaysia Airlines, Japan Airlines, Nippon Cargo Airlines, All Nippon Airways, Swiss International Air Lines, Singapore Airlines, Air France, Air France-KLM, KLM Airlines, Qantas Airways, Cathay Pacific, Thai Airlines, Polar Airlines, Air Hong Kong and Cargolux Airlines.

This is the latest development in a series of anti trust prosecutions throughout the world. The difficulty arises when shipping and forwarding agents claim to have been punished financially when in fact they have passed any excess charges onto their shippers. Quantifying loss is extremely difficult after the event, especially as the delays in discovery not to say prosecution and conviction make claims extremely hard to prove.

Whilst a Court may decide an agent has been overcharged will he then automatically reimburse his clients for passing on the excess at the time? In addition EU Competition Commissioner Almunia declared in February that any fines he recovers for cartel activity was to be retained by the EU and not disbursed among member countries. The first question for Korean agents is are they each prepared to pursue a case against the group of carriers on whom they still rely?

Photo:- Seoul Incheon International Airport