Thursday, May 30, 2019

Air Cargo Carrier Finally Fined for Improper Charges on Freight Traffic Whilst Cartel Member

Penalties Relate to Offences Stretching Back Sixteen Years
Shipping News Feature
AUSTRALIA – INDONESIA – The Federal Court of Australia has ordered PT Garuda Indonesia to pay A$19 million in penalties after legal action by the Australian Competition and Consumer Commission (ACCC), accusing the airline of taking part in a global air cargo cartel. The Court found that between 2003 and 2006, Garuda made and gave effect to agreements that fixed the price of security and fuel surcharges on freight traffic, as well as a customs fee from Indonesia.

The penalties follow the ACCC’s court action against a global air cargo cartel, which has so far resulted in penalties of A$132.5 million against 14 airlines, including Air New Zealand, Qantas, Singapore Airlines and Cathay Pacific. A further A$4 million was ordered for the imposition and level of insurance and fuel surcharges from Hong Kong, with Garuda also ordered to pay the ACCC’s legal costs. ACCC Chair Rod Sims commented:

“Price fixing is a serious matter because it unfairly reduces competition in the market for Australian businesses and consumers, and this international cartel is one of the worst examples we have seen. We are committed to pursuing cartel conduct from both domestic and overseas operators, and think the total penalty ordered against all the airlines involved sends a strong deterrent message, particularly when it comes to international anti-competitive conduct.

“The ACCC has recently entered more formal agreements with the FBI on cooperation and information sharing, and has strong links to other competition regulators worldwide, which mean our scope is much broader than Australian businesses.

“Any business anywhere that enters an agreement that affects Australian businesses and consumers should clearly take note. We are pleased to finally have resolution of this matter, which confirms our view that it was an important matter for us to appeal.”

The ACCC commenced legal action against the 14 international airlines between 2008 and 2010 under the Trade Practices Act (1974) for conduct that occurred between 2002 and 2006. All goods imported to Australia during the period by the airlines subject to ACCC litigation were impacted by the illegal price agreement including car parts, electronics, vegetables, seafood, flowers, and in one specific circumstance, meat to Australian troops in the Middle East.

Competition regulators around the world have taken action in relation to the air cargo cartel, with fines or penalties ordered against various airlines in Europe, the United States, Korea, New Zealand, Canada, and India.

This case is a long running one for the ACCC. In October 2014, the Federal Court initially dismissed the ACCC’s case against Air New Zealand and Garuda. The ACCC appealed the decision and the Full Court of the Federal Court upheld the ACCC’s appeal in March 2016. Garuda and Air NZ appealed the decision to the High Court, which unanimously dismissed the appeal in June 2017.

The Federal Court has imposed penalties totalling A$132.5 million in relation to airlines involved in the air cargo cartel, as follows:

Carrier Date of Court Order Penalty (A$)
Qantas Dec 2008 $20 million
British Airways Dec 2008 $5 million
Air France & KLM Feb 2009 $6 million
Cargolux Feb 2009 $5 million
Martinair Feb 2009 $5 million
Japan Airlines April 2011 $5.5 million
Korean Air Lines Nov 2011 $5.5 million
Malaysian May 2012 $6 million
Emirates Oct 2012 $10 million
Cathay Pacific  Dec 2012 $11.25 million
Singapore  Dec 2012 $11.75 million
Thai Airways Dec 2012 $7.5 million
Air NZ June 2018 $15 million
PT Garuda May 2019 $19 million
  Total $132.5 million