Wednesday, August 28, 2013

Yet Another Air Freight Cartel Conspirator Hit in the Pocket

A New Revenue Stream Continues as Anti-Trust Authorities Just Keep on Cashing In
Shipping News Feature

CANADA – The Competition Bureau announced last week that LATAM Airlines Group, the parent company of LAN Cargo, pleaded guilty to criminal conspiracy under the Competition Act. LATAM was fined CA$975,000 by the Ontario Superior Court of Justice for its participation in an air cargo price-fixing cartel, relating to fuel surcharges that it imposed on international air cargo shipments from Canada to South America and elsewhere between March 17, 2003 and February 14, 2006. This is just the latest in a seemingly endless stream of anti-trust cases lodged against logistics groups and providing billions of dollars for authorities world-wide.

The Bureau’s investigation into the fixing of fuel and other surcharges has successfully secured over $25 million dollars in fines to date. LATAM is the ninth party to be convicted in this investigation. In 2009 - Air France (CA$4 million), KLM (CA$5 million), Martinair (CA$1 million), Qantas (CA$155,000), and British Airways (CA$4.5 million). In 2010, Cargolux (CA$2.5 million), in 2012, Korean Air (CA$5.5 million), and earlier this year, Cathay Pacific (CA$1.5 million). The Bureau’s investigation into the alleged conduct of other air cargo carriers continues.

As with other prosecutions world-wide, the Bureau’s investigation benefitted from the cooperation of certain parties, on this occasion under the Bureau's Immunity and Leniency Programmes. These programmes create incentives for parties to address their criminal liability by cooperating with the Bureau in its ongoing investigation and prosecution of other alleged cartel participants.

Under the current conspiracy provision in the Competition Act, it is a criminal offence for two or more competitors or potential competitors to conspire, agree or arrange to fix prices, allocate customers or markets, or restrict the output of a product. An offence under this provision is punishable by a fine of up to CA$25 million and/or imprisonment for a term of up to 14 years. In this case, the conduct occurred under the former conspiracy provision, which provides for a fine of up to CA$10 million and/or imprisonment for a term of up to 5 years.

To secure a conviction under the former conspiracy provision of the Act, the Bureau is required not only to prove an agreement between competitors to fix prices, but also that the agreement was likely to have an undue economic effect on competition in the market. This has the effect of significantly increasing the complexity of proving a violation of the Act.

Editors Note: To see the litany of anti-trust actions pursued against freight groups globally simply type a suitable keyword (cartel) into the News Search box and access previous stories.