Wednesday, July 22, 2015

Major Freight and Logistics Groups in Cartel Hit with Multi Million Euro Antitrust Fines (Again)

Leading Players Seen as Transgressors Once More
Shipping News Feature

EUROPE – The European Commission (EC) has imposed fines totalling €49.1 million on two rail freight operators, Express Interfracht and Schenker, for their part in a cartel to fix prices and allocate customers for their cargo ‘blocktrain’ services throughout the continent for nearly eight years, in breach of the EU antitrust rules. A third company, Swiss transport and logistics firm Kuehne + Nagel, also took part in the cartel arrangement but was not fined and was granted immunity having initiated the proceedings.

The 'blocktrain' services, which refers to a rail shipping system to transport cargo from one hub to another without wagons being split up or stored on the way, were jointly operated by Kuehne + Nagel, Express Interfracht, part of Rail Cargo Logistics, a subsidiary of Austrian railway group Österreichische Bundesbahnen (ÖBB), and Schenker, a subsidiary of the German rail giant Deutsche Bahn (DB).

Express Interfracht and Schenker received reductions of their fines under the Commission's 2006 Leniency Notice for cooperating with the investigation, whilst Kuehne + Nagel received full immunity for revealing the existence of the cartel, thereby avoiding a fine of more than €62 million. This game has been played before of course, with Schenker previously getting reduced penalties for acting as a whistle-blower against former friends, including coincidentally, Kuehne + Nagel.

Express Interfracht received a reduction of 45% and Schenker a reduction of 30% for cooperating with the investigation. Since all three companies agreed to settle the case with the Commission, the overall fines imposed were further reduced by 10%. Interfracht were fined €17.4 million and Schenker were penalised €31.8 million.

In setting the level of fines, the Commission took into particular account the companies' sales generated from rail cargo transport services related to the jointly operated blocktrains, Balkantrain and Soptrain, including ancillary transport services, the serious nature of the infringement, its geographic scope and its duration. The ‘Balkantrain’ service connects Western and Central Europe with Southeast Europe whilst the ‘Soptrain’ service links Central Europe with Romania. The EC hopes that the fines will act as an appropriate deterrent while remaining proportionate to the infringement. Commissioner Margrethe Vestager, in charge of competition policy, said:

"I find it very disappointing that a project to enhance transport efficiency and promote environmentally friendly cargo transport was derailed into a cartel. The European Union needs rail cargo markets to function efficiently on the basis of effective competition and not to be hijacked by vested interests to the detriment of customers."

In order to limit competition between them, the companies apparently agreed on several restrictive practices by allocating existing and new customers as well as setting up a customer allocation scheme including a 'notification system' for new customers; exchanging confidential information on specific customer requests; sharing transport volumes contracted by customers; and coordinating prices directly by providing each other with cover bids in respect of customers protected under their customer allocation scheme plus coordinated sales prices offered to 'downstream' customers. The infringement lasted from July 2004 to June 2012 for all companies.

The coordination of the operators to enter into the joint purchasing of transport services, such as locomotion/traction, trailers and other equipment from national rail carriers, is not covered by the EC’s decision because such coordination to create a 'blocktrain' service is not anticompetitive. The decision solely concerns the collusion between the operators of the blocktrains in the marketing of the service.