EC fines 11 carriers €799 million for air cargo price fixing

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EC fines 11 carriers €799 million for air cargo price fixing

Unread post by bimjim » Wed Nov 10, 2010 ... =nl_atw_dn

EC fines 11 carriers €799 million for air cargo price fixing
By Kurt Hofmann and Linda Blachly
November 10, 2010

Air France, who received the largest EC fine of €182.9 million for air cargo price fixing, said it intends to appeal the decision to EU courts. Photo: Air France Boeing 777 Freighter. Courtesy, Air France.

The European Commission on Tuesday fined 11 airlines a total of €799 million ($1.1 billion) for "operating a worldwide cartel which affected cargo services within the European Economic Area."

In a statement, EC said the carriers "coordinated their action on surcharges for fuel and security without discounts over a six-year period." Air France received the largest fine at €182.9 million, followed by its affiliate KLM at €127.2 million. Other fines include British Airways (€104 million), Cargolux (€79.9 million), Singapore Airlines (€74.8 million), SAS (€70.2 million), Cathay Pacific Airways (€57.1 million) Japan Airlines (€35.7 million), Martinair (€29.5 million), Air Canada (€21 million), Qantas (€8.9 million) and LAN Airlines (€8.2 million).

Lufthansa and its subsidiary Swiss International Air Lines "received full immunity from fines under the EC’s leniency program, as it was the first to provide information about the cartel," the EC stated.

"It is deplorable that so many major airlines coordinated their pricing to the detriment of European businesses and European consumers," said EC VP-Competition Joaquin Almunia. "With today’s decision, the Commission is sending a clear message that it will not tolerate cartel behavior." EC charged that the "cartel members" coordinated pricing from December 1999 to February 2006.

The EC in late 2007 sent out official statements of objections to as many as 25 carriers regarding cargo price fixing (ATW Daily News, Jan. 3, 2008). It said Tuesday that 11 carriers originally charged were not fined.

The EU, US Dept. of Justice, Australian Competition and Consumer Commission and other authorities worldwide have been investigating anticompetitive practices in air cargo since 2005. Cargolux President and CEO Ulrich Ogiermann and Senior VP-Sales and Marketing Robert Van de Weg were recently indicted in US court on charges of conspiring to fix and coordinate certain surcharge rates on air cargo shipments to and from the US (ATW Daily News, Nov. 1).

In a statement, Air France KLM said it considered the level of the fine to be "disproportionate given the fact that the economic analysis…demonstrated that the actions in question had no detrimental effect on the freight shippers or 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."

It added that it intends to appeal the decision to EU courts. Because the level of the fine exceeds the level of provisions already taken by the company for potential cargo antitrust payments, AF KLM will book a charge of €127 million for the first half of its current fiscal year.

SAS said in a statement it has not been involved in a global cartel and the fines are disproportionate. It also plans to appeal the decision, a process that could take several years. The fines will be accounted for in SAS's third-quarter earnings.

Air Canada said in a statement it may appeal the decision and said the penalty is “more than adequately” covered by a C$125 million provision it made in 2008.

"We are highly disappointed and strongly contest the considerable level of the fines, which we believe to be disproportionate to SAS Cargo's actions," said SAS Chief Legal Officer Mats Loennkvist. "We have cooperated fully with the European Commission during the entire investigation and, for slightly more than four years, we have disputed the European Commission's view that SAS Cargo has been involved in a global cartel."

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