Two More Air Freight Carriers Face Cartel Consequences from Antitrust Authority

AUSTRALIA – The Australian Competition and Consumer Commission (ACCC) has won an appeal against a decision made by the Australian Federal Court to dismiss the case against Air New Zealand and PT Garuda Indonesia, over allegations that the two cargo carriers colluded with other airlines to fix fuel and security surcharges on air shipments around the world. The two carriers remain the only two companies not to settle with the antitrust regulator in a case that has seen the ACCC collect around A$98.5 million in fines from several air freight carriers involved in a cartel conspiracy.

In its proceedings, the ACCC alleged that Air NZ and Garuda violated what is now the Competition and Consumer Act 2010 by colluding with other airlines to fix the price on various surcharges between 2001 and 2006. In October 2014, Justice Perram dismissed the ACCC’s proceedings against the two airlines on the basis that the conduct which he found otherwise would have contravened the then Trade Practices Act 1974 (now called the Competition and Consumer Act 2010) did not do so as it did not occur in a ‘market in Australia’ as was required by the Act at the time of the conduct.

The ACCC appealed the decision to the Full Court of the Federal Court with a fairly simple objective. Did the collusion which clearly occurred happen in this ‘market in Australia. Garuda and Air New Zealand raised a defence which the Appeal Court called ‘a scorched earth policy’ i.e. lodging a very complicated set of Notices of Contention against the decision in relation to whether the conduct occurred in a ‘market in Australia’, how and where the agreements were found to have been reached, as well as a broad range of other issues.

The defence motions turned the Appeal Court’s motion into a highly complex trial, with Garuda’s lodgements alone raising 94 issues which concerned the original 57 day trial. Whereas the original judge decided that as all the movements were for cargo imported into Australia, and therefore the decision on which route and service to use would likely have been made outside the county, the market in question being that in which air cargo services were supplied and acquired, the ACCC pressed home the point that a customer in the importing country is relevant to the market, a point which the Appeal Court accepted.

The Federal Court has now ruled that the price fixing conduct therefore took place in a ‘market in Australia’, and consequently breached the country’s price fixing laws. The majority of the Federal Court held that ‘all aspects of the market are relevant in determining whether it is in Australia’, and that ‘the presence of importers (customers) in Australia is not irrelevant to the determination of whether the market is in Australia’. The full judgement can be seen here.Commenting on the decision to overturn the dismissal, ACCC Chairman Rod Sims, said:

“The air cargo case is a very significant one for the ACCC, as it involved a substantial number of airlines engaging in price fixing conduct around the world. To date, 13 airlines have paid penalties totalling approximately $98 million for making and giving effect to price fixing agreements relating to the imposition of air cargo surcharges on cargo sent to Australia.

“Although it is no longer a requirement of our cartel laws that it be established that price fixing occurred in a market in Australia, this decision is significant because it confirms the ACCC’s view that the conduct by the airlines in fixing air cargo surcharges to be paid by Australian importers and ultimately passed on to Australian consumers, were caught by Australian competition laws.”

The matters against both Air NZ and Garuda have been remitted to the Federal Court to determine the relief to be granted, including declarations, injunctions and penalties.

*(Apologies to The Godfather, Sopranos etc.)