Air Freight Forwarders Caned in Court as European Court of Justice Denies Appeal

EUROPE – The European Court of Justice has upheld a decision by the European Commission to impose fines totalling €169 million on several international air freight forwarders for their participation in various agreements and concerted practices in the air cargo sector, between 2002 and 2007. The EC originally made a decision to penalise the long list of forwarders for their respective roles in several cartels in March 2012, but a number of the companies concerned brought actions before the General Court for the annulment of the Commission’s decision or for a reduction in their respective fines. The appeal was dismissed and the fines also upheld for the most part.

In its judgments of 29 February 2016, the General Court upheld the amount of the fines imposed on Kuehne + Nagel International, Schenker, Deutsche Bahn and Others, Panalpina World Transport (Holding), Ceva Freight (UK) and EGL. Those companies, with the exception of Ceva Freight (UK) and EGL, brought an appeal before the Court of Justice asking that the General Court’s judgments be set aside.

The Court of Justice has now rejected all the arguments put forward by the companies and upheld the amount of the fines imposed. It declared in particular that the General Court was correct in holding that it is appropriate to base the calculation of the amount of the fines on the value of sales associated with freight forwarding services as a package of services on the trade routes concerned.

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, also known as the ‘Gardening Club’ for their use of vegetables as code names, 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.

New Export System Cartel	EC Fine (€)	Leniency	Decision of the General Court/Court of Justice
Ceva Freight (UK) and EGL	2,094,000	35%	Fine upheld by the General Court No Appeal before Court of Justice
Kuehne + Nagel International, Kuehne + Nagel (UK )	5,320,000	-	Appeal Dismissed Fine Upheald
Schenker (UK) as an Economic successor of Bax Global	3,673,000	-	Appeal Dismissed Fine Upheld
DHL GLobal Forwarding (UK) and Deutsche Post	0	100%	-
Exel Freight Management (UK) Exel Limited	0	100%	-

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.

 

Advanced Manifest System Cartel	EC Fine (€)	Leniency	Decision of the General Court/Court of Justice
Kuehne + Nagel Management and Kuehne + Nagel International	36,686,000	-	Appeal Dismissed Fine Upheld
Schenker and Deutsche Bahn	23,091,000	25%	Appeal Dismissed Fine Upheld
Panalpina Management and Panalpina World Transport (Holding)	23,649,000	-	Appeal Dismissed Fine Upheld
UTi Worldwide Inc, UTi Worldwide (UK), and UTi Nederland	Total fine: 3,068,000 1,273,000 imposed jointly and severally on the companies UTi Worldwide : 1,795,000 jointly and severally liable with UTI Worldwide (UK) - 738,000 UTi Nederland - 954,000	-	Action partially upheld by the General Court Reduction of the fine Total fine: €2,965,000 €1,273,000 imposed jointly and severally on the companies UTi Worldwide: €1,692,000 jointly and severally liable with UTI Worldwide (UK)- €738,000 UTi Nederland - €954,000 No appeal before the Court of Justice
Agility Logistics	2,296,000	30%	-
DHL Management (Schweiz) and Deutsche Post	0	100%	-
Exel Limited, Exel Freight Management (UK), and Exel Group Holdings (Nederland)	0	100%	-

The ‘currency adjustment factor’ (CAF) cartel was designed to achieve agreement on a common tariff strategy in order to deal with a 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 (renminbi or RMB) 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, setting the amount.

 

Currency Adjustment Factor Cartel	EC Fine (€)	Leniency	Decision of the General Court/Court of Justice
UPS SCS (China) and United Parcel Service	3,916,000	-	-
Panalpina China and Panalpina World Transport	3,251,000	-	Appeal Dismissed Fine Upheld
Schenker China and Deutsche Bahn	3,071,000	20%	Appeal Dismissed Fine Upheld
Schenker China (as an economic successot of BAX Global (China))	2,444,000	20%	Appeal Dismissed Fine Upheld
Ceva Freight Shanghai and EGL	935,000	50%	-
Nippon Express (China)	812,000	-	-
Beijing Kintetsu World Express	623,000	-	-
Kuehne + Nagel (Shanghai), and Kuehne + Nagel International	451,000	-	Appeal Dismissed Fine Uphead
Yusen Shenda Air and Sea Service (Shanghai)	319,000	5%	-
DHL Global Forwarding (China)	0	100%	-
DHL Logistics (China)	0	100%	-

Last, 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 an increase in transport rates. The agreement was designed to protect the freight forwarders’ margins.

 

Peak Season Surcharge Cartel	EC Fine (€)	Leniency	Decision of the General Court/Court of Justice
Panalpina China and Panalpina World Transport (Holding)	19,584,000	-	Appeal Dismissed Fine Upheld
Kuehne + Nagel (Hong Kong) and Kuehne + Nagel Internaitonal	11,217,000	-	Appeal Dismissed Fine Upheld
Hellmann Worldwide Logistics (Hong Kong) and Hellmann Worldwide Logistics GmBH	4,281,000	-	-
Expeditors (Hong Kong) and Expeditors International of Washington	4,140,000	-	-
Toll Global Forwarding (Hong Kong) and Toll Global Forwarding	2,918,000	-	-
Agility Logistics (Hong Kong)	2,662,000	25%	-
Schenker International (Hong Kong) and Deutsche Bahn	2,656,000	50%	Appeal Dismissed Fine Upheld
DHL Global Forwarding (Hong Kong) and Deutsche Post	0	100%	-
DHL Suppply Chain (Hong Kong) and Exel Limited	0	100%	-