Air Freight Cartel Conspirators Get a Pre-Christmas Bonus

BRAZIL – Over a year after handing down fines against four air freight carriers and seven individuals involved in a price fixing conspiracy, Brazil’s antitrust authority, the Administrative Council for Economic Defence (Cade) has lowered the penalty it imposed against ABSA Cargo Airlines, American Airlines, Alitalia and four individuals involved in the international air cargo cartel case, after an investigation found inconsistencies and contradictions when the fines were initially levied. Commissioner Ana Frazão, explained:

“The re-examination was done to compensate omissions and contradictions of the decision appealed. As it was, the decision compromised the internal coherence of the case. Therefore, the review assures the proportionality and fairness of the fixed fines under the law.”

Originally, the four airlines and the seven individuals were ordered to pay a total of more than R$293 million after having been found guilty of conspiring to levy additional fuel surcharges in international air freight shipments between 2003 and 2005. In addition to ABSA, American Airlines and Alitalia, Varig Logística was also found guilty but the company suspended operations and later declared bankruptcy. Varig was ordered to pay the heaviest fine at R$147 million.

With regard to American Airlines, the Tribunal considered the percentage of the turnover used to calculate the fine to be much higher than the one imposed to the other charged parties, and to the fines traditionally applied by Cade in cartel cases. For this reason, the amount applied to the company was lowered from R$26 million to R$16.1 million. Dener José de Souza, a former employee of the company, had his fine maintained at R$74,000.

ABSA, a subsidiary of LATAM airlines, had a quite astonishing reduction in its fine, from R$114 million to a comparatively mere R$32.7 million. The Tribunal understood that the method to calculate the company’s turnover may have led to a distortion in the fine amount which would harm the principle of equal treatment. In addition to the new corporate amount, the sanctions applied to the individuals that were members of ABSA’s board at the time of the offences were also reduced. Thus, the fine applied to Norberto Maria Jochmann (R$2 million) was reduced to R$654,000, and Hernan Arturo Merino and Javier Felipe Meyer de Pablo who were both originally charged R$1.1 million now will pay R$327,000 each.

As for Alitalia, the Tribunal verified that the company had a reduced participation in the cartel when compared to the other condemned companies. For this reason, the fine amount imposed to the company was reduced to R$1.7 million from R$3.9 million. Following the same understanding, the former employee, Margareth Faria, had her fine reduced to R$31,900 from R$74,000.

The air cargo cartel investigation began in 2006 from a leniency agreement between Cade and Deutsche Lufthansa airlines; two of its subsidiaries, Lufthansa Cargo and Swiss International Airlines; and five employees/former employees: Cleverton Holtz Vighy, Vítor de Siqueira Manhães, Eduardo Nascimento Faria, Aluísio Damião da Silva Corrêa and Fernando Amaral. Not the first time Lufthansa has got itself off the hook and left others to take the penalties. United Airlines and employee Luiz Fernando Costa were also initially embroiled in the investigation but were later acquitted due to lack of evidence.

In February 2013, the airlines Société Air France and KLM and two employees, Paulo Jofily de Monteiro Lima and Renata de Souza Branco, respectively, confessed to participating in the collusion and agreed to cease the practice and pay about R$14 million in financial assistance.