Thursday, April 29, 2021

Final Penalty Decision Rounds Off Long Running Air Freight Cartel Case

No Escape for Price Fixing Cargo Carriers
Shipping News Feature

AUSTRALIA – The Australian Federal Court has approved a payment plan for airline PT Garuda Indonesia Ltd (Garuda) to pay a A$19 million penalty the Court previously ordered relating to a long-running Australian Competition and Consumer Commission (ACCC) action against a global price fixing cartel in the air cargo industry.

In May 2019, the Federal Court ordered Garuda to pay the penalty for colluding with other global airlines on fees and surcharges for air freight services for a wide range of consumer goods between 2003 and 2006. Garuda appealed against the penalty judgment in June 2019, and has now withdrawn its appeal.

The Court last week ordered, by consent, that Garuda pay the A$19 million penalty, and a contribution to the ACCC’s costs, in monthly instalments between December 2021 and December 2026. ACCC Chair Rod Sims said:

“The airline industry has suffered significantly because of the pandemic and these orders take account of that. What is important is that Garuda has been ordered to pay the full penalty for its role in this serious price fixing cartel without a further appeal.

“We are pleased this concludes this long-running case against 15 global airlines, including Garuda, Air New Zealand, Qantas, Singapore Airlines and Cathay Pacific, which has resulted in total penalties of $132.5 million being ordered by the Court.”

Under the Court orders, if Garuda misses a monthly payment, the entire remaining outstanding amount becomes due for payment within 30 working days. Sims added:

“Businesses of all sizes should note the ACCC’s determination to fight this large international cartel. Significant penalties, like the $19 million penalty ordered against Garuda, send a strong warning that anti-competitive conduct has serious consequences.

“We will also continue to closely watch for any signs of anti-competitive conduct in the airline industry specifically following the disruption to travel due to COVID-19, given our monitoring role in the domestic airline industry.”

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.

In Australia, the ACCC commenced legal action against 15 airlines between 2008 and 2010 under the Trade Practices Act 1974 (now the Competition and Consumer Act 2010) alleging cartel conduct between 2002 and 2006 concerning price fixing of surcharges on air cargo services. Thirteen of the airlines settled with the ACCC. Air New Zealand and Garuda proceeded to a trial which concluded in May 2013.

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.

Garuda and Air NZ appealed the decision to the High Court, which unanimously dismissed the appeal. In May 2019, the Federal Court ordered the penalty against Garuda.

All goods imported to Australia by the 15 airlines at the relevant time were impacted by the illegal price agreement. The goods included car parts, electronics, vegetables, seafood and flowers.

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