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Eleven airlines stagger under billion dollar fine

March 21, 2017 Headline News No Comments Email Email

The European Commission has re-imposed an enormous fine on 11 airlines for taking part in an air cargo cartel more than a decade ago.

Qantas was involved originally but did not contest the initial fine so is no longer involved. All carriers except Qantas appealed to the EU’s General Court against the Commission’s 2010 decision. Since Qantas did not appeal, the 2010 decision became final for it – something Qantas will no doubt consider a wise decision.

The European Commission announced on Friday that it had re-adopted a cartel decision against 11 air cargo carriers and imposed a fine totalling EUR 776,465,000 (slightly more than AUD 1 billion) for operating a price–fixing cartel. The Commission’s original decision was annulled by the General Court on procedural grounds.http://www.bbtf.or.id/

Air France was fined EUR 182.9 million, followed by KLM EUR 127.1 million, British Airways EUR 104.4 million, Cargolux EUR 79.9 million and Singapore Airlines EUR 74.8 million.

Other carriers penalised were Air Canada, Cathay Pacific Airways, Japan Airlines, LAN Chile and SAS. Lufthansa, along with its subsidiary Swiss International Airlines, alerted the EU competition authority to the cartel’s existence so escaped a fine.

European Commissioner Margrethe Vestager, in charge of competition policy, said: “Millions of businesses depend on air cargo services, which carry more than 20% of all EU imports and nearly 30% of EU exports. Working together in a cartel rather than competing to offer better services to customers does not fly with the Commission. Today’s decision ensures that companies that were part of the air cargo cartel are sanctioned for their behaviour.”

In November 2010, the Commission imposed fines of nearly EUR 800 million on 11 air cargo carriers who participated in a price-fixing cartel, from December 1999 to February 2006, in the airfreight services market covering flights from, to and within the European Economic Area. The cartel arrangements consisted of numerous contacts between airlines, at both bilateral and multilateral level to fix the level of fuel and security surcharges.

The companies fined in 2010 were Air Canada, Air France-KLM, British Airways, Cargolux, Cathay Pacific Airways, Japan Airlines, LAN Chile, Martinair, Qantas, SAS and Singapore Airlines. A 12th cartel member, Lufthansa, and its subsidiary, Swiss International Air Lines, received full immunity from fines.

All but one of the companies (Qantas) subject to the 2010 decision challenged the decision before the EU’s General Court. In December 2015, the General Court annulled the Commission’s decision against the 11 cartel participants that appealed, concluding that there had been a procedural error. However, it did not rule on the existence of the cartel.

The Commission maintains that these air cargo carriers participated in a price-fixing cartel and is adopting a new decision and re-establishing the fines. This new decision addresses the procedural error identified by the General Court while remaining identical in terms of the anticompetitive behaviours targeted by the Commission. The decision confirms that the Commission will not let cartels go unpunished. Cartels are illegal and cause consumers and business to suffer.

Reuters has reported that SAS and Air Canada have said they will appeal the new decision.

Edited by Peter Needham

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