Air cargo carriers fined £690m for price fixing

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The European Commission has fined 11 air cargo carriers a total of £690million (799m euros) for operating a worldwide cartel which affected cargo services within the European Economic area.

Lufthansa (and its subsidiary Swiss) received immunity from fines under the Commission’s leniency programme, as it was the first to provide information about the cartel.

The following airlines were fined:

Air Canada: £18.2m
Air France: £157.9m
KLM: £109.7m
Martinair: £25.5m
British Airways: £89.8m
Cargolux: £69m
Cathay Pacific Airways: £49.3m
Japan Airlines: £30.8m
LAN Chile: £7.1m
Qantas: £7.7m
SAS: £60.6m
Singapore Airlines: £64.6m

The commission said the carriers coordinated their action on surcharges for fuel and security without discounts over a six year period from December 1999 to 14 February 2006.

“The contacts on prices between the airlines concerned initially started with a view to discuss fuel surcharges. The carriers contacted each other so as to ensure that worldwide airfreight carriers imposed a flat rate surcharge per kilo for all shipments. The cartel members extended their cooperation by introducing a security surcharge and refusing to pay a commission on surcharges to their clients (freight forwarders).

“The aim of these contacts was to ensure that these surcharges were introduced by all the carriers involved and that increases (or decreases) of the surcharge levels were applied in full without exception. By refusing to pay a commission, the airlines ensured that surcharges did not become subject to competition through the granting of discounts to customers. Such practices are in breach of the EU competition rules.”

The commission dropped allegations of collusion on two other surcharges and regarding freight rates in the Statement of Objections for insufficient evidence. It also dropped charges against another 11 carriers and one consultancy firm which had previously received the Statement of Objections for the same reason.

The Air France-KLM Group intends to file an appeal against decision with the European Union Tribunal.

The total level of fines imposed on it was £294m (339.6m euros). The group said the level of the fines was disproportionate “given the fact that the economic analysis produced within the context of the procedure demonstrated that the actions in question had no detrimental effect on the freight shippers nor the freight forwarders.

“Moreover, the level of the fines disregards the economic hardship that the air cargo industry has suffered, and will have a distortive effect on the level playing field.”

British Airways said its fine fell within the provision made by the company in its 2006/7 report and accounts.

Cargolux is also considering launching an appeal against the fine. David Arendt, executive vice president finance & administration, said:  “The fine does not seem to reflect a discount to take into account the financial turbulences that recently affected cargo carriers generally and Cargolux in particular. When added to fines already due to other anti-trust authorities this seems a very harsh punishment indeed.”

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