EU fines freight forwarders 169m euros

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The European Commission has fined 14 international freight forwarders a total of  169m euros for price fixing in the air cargo market between 2002 and 2007.

But one company, Kuehne + Nagel, has already said it is considering an appeal.

The commission said that the companies had participated in four distinct cartels aimed at fixing prices and other trading conditions for international air freight forwarding services, in breach of EU antitrust rules. It said the companies involved include:
Agility Logistics
Beijing Kintetsu World Express
Ceva and EGL
DHL Global Forwarding
DSV Air & Sea
Expeditors Hong Kong
Hellmann Worldwide Logistics
Kuehne + Nagel
Nippon Express
UTi Worldwide
Toll Global Forwarding
UPS Supply Chain Solutions (as successor of Menlo Worldwide Forwarding)
Yusen Shenda Air & Sea Service (Shanghai)

The freight forwarders colluded on surcharges and charging mechanisms concerning important trade lanes, in particular the Europe-USA and the China/Hong Kong-Europe lanes. Participants and duration varied in each of the four cartels.

Deutsche Post (including its subsidiaries DHL and Exel) received full immunity from fines under the Commission’s 2006 leniency notice for all four cartels, as it was the first to reveal their existence the Commission.

Commission vice president in charge of competition policy, Joaquín Almunia, said: “In times of crisis, it is all the more important to stamp out the hidden tax that cartels impose on our economy. These cartels affected individuals and companies shipping goods on important trade lanes. Many European exporters and consumers of imported goods may have been harmed as a result. Companies should be aware that crossing the line and colluding on prices comes at a high price, as today’s decision illustrates.”

However, Kuehne + Nagel, which has been fined a total of 53.7m euros, has challenged the commission’s conclusion.

“We will carefully consider the decision of the EU Commission and its rationale,” said Karl Gernandt, chairman of Kuehne + Nagel International AG.

“However, already now we are of the opinion that the Commission has not correctly investigated the facts and the participation of Kuehne + Nagel and has drawn significantly incorrect factual and legal conclusions. In addition, Kuehne + Nagel’s comprehensive cooperation throughout the investigation was not adequately acknowledged. That is why we take into consideration to appeal against the decision before the European courts.”

The commission said that in most cases, the freight forwarders took specific measures to conceal the cartel behaviour. In one of the cartels, the participants organised their contacts in a so-called “Gardening Club” and code names based on names of vegetables – such as asparagus and baby courgettes – were used when talking about fixing prices. In another, a specific yahoo email account was set up to facilitate exchanges between the cartel participants (“currency adjustment factor” cartel, see below).

Deutsche Post (including its subsidiaries DHL and Exel) received full immunity from fines. Deutsche Bahn (including Schenker and BAX), Ceva, Agility and Yusen received reductions of fines ranging from 5 to 50 per cent. The reductions reflected the timing of their cooperation and the extent to which the evidence they provided helped the Commission to prove the respective cartels.

The cartels

“When the UK decided to introduce an electronic declaration for exports in 2003, freight forwarders agreed on establishing a surcharge on this reporting service and to fix its amount according to the size of the customer (the “new export system” or NES cartel),” the commission said.

“The “advanced manifest system” (AMS cartel) refers to a regulatory requirement by the US customs to provide advance information on goods to be shipped to the US. In 2003-2004, a group of forwarders agreed to introduce a surcharge for the AMS service, i.e. for processing the electronic transmission of such information to the US customs authorities. They also agreed not to use the surcharge as a tool for competition.

“The NES and AMS cartels related to exports respectively from Europe to the rest of the world and from Europe to the US.

“In the “currency adjustment factor” (CAF) cartel, following the appreciation of the Chinese currency (RMB) against the USD in 2005, international freight forwarders agreed on a shift of contracts from USD to RMB or, if this was not possible, on the introduction of a CAF surcharge and on its level. The collusion was driven by the fact that in general, the local services at Chinese airports were paid for by forwarders in RMB, while the customers of forwarders were billed in USD which consequently might have led to losses.

“In the “peak season surcharge” (PSS) cartel the freight forwarders agreed in so called “Breakfast Meetings” held in Hong Kong on the introduction and timing of a PSS, to be charged during the peak season transport period in the run up to Christmas (lasting generally from September to December) and on occasions also discussed the level of the surcharge.

“The CAF and PSS cartels concerned imports of goods from China/Hong Kong to Europe,” the commission said.

* In October 2010, the US Department of Justice fined six international freight forwarders a total of $50.27 million for their roles in conspiracies to fix a variety of fees and charges in connection with the provision of freight forwarding services for international air cargo shipments.

* And in November 2010, the European Commission 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.


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