The Commission alleges that, over a period of more than seven years, airlines throughout the world colluded to inflate the price of airfreight by imposing fuel surcharges. This affected the price of cargo both into and out of New Zealand.
The Commission alleges that airlines first entered into an illegal global agreement in 1999/2000 under the auspices of the trade organisation International Air Transport Association (IATA). The airlines imposed the fuel surcharges between 2000 and 2006. The allegations also involve a series of regional price fixing agreements.
Furthermore, the Commission alleges that a number of airlines conspired to fix prices through the imposition of a security surcharge immediately following the 9/11 terrorist attacks.
The Commerce Commission is filing proceedings against Air New Zealand, British Airways, Cargolux International Airlines, Cathay Pacific, Emirates, PT Garuda Indonesia, Japan Airlines, Korean Airlines, Malaysian Airline, Qantas, Singapore Airlines & Singapore Airlines Cargo, Thai Airways and United Airlines.
Although the case potentially involves sixty airlines and a number of individuals throughout the world, the Commission has focused on those airlines that had the greatest impact on New Zealand as well as the most culpable individuals.
All the individuals named in the proceedings were managers in positions of responsibility, and were allegedly actively involved in promoting the conspiracy and/or they were allegedly in a position to stop the conduct and deliberately refrained from doing so.
Some airlines are co-operating with the Commission, and an early resolution may be possible in some cases.
Commerce Commission chair Paula Rebstock points out that since New Zealand is a long way from its overseas markets, the harm to the country's economy and its ability to compete internationally will have been disproportionately greater than in other jurisdictions in which the alleged price-fixing activities took place.
"Anti-cartel enforcement activity is a priority for the Commission," said Ms Rebstock. "Participation in cartel activity is internationally regarded as one of the most egregious forms of anti-competitive behaviour."
Ms Rebstock added: "Cartels are insidious. They are difficult to detect and extremely difficult to investigate because of their secretive and international nature. The Commission's leniency policy, where the first member of a cartel to inform the Commission of the cartel's existence is given immunity from prosecution in return for providing evidence of the illegal conduct, has been successful in detecting both international and domestic cartel activity. The Commission will continue to strongly pursue cartels involved in price-fixing and other anti-competitive conduct."
The Commission began this investigation in December 2005, triggered by a leniency application. The Commission issued notices requiring a number of airlines to provide information. Three airlines did not comply with the terms of these notices, which resulted in the Commission filing summary proceedings for non-compliance against Cathay Pacific, Singapore Airlines Cargo and Aerolineas Argentinas earlier this year.
Aerolineas Argentinas has entered a guilty plea. The District Court in Auckland will next consider this case in January 2009. The penalties for a company not responding to a request for information fully can be summary conviction and fines of up to $30,000.
Overseas competition authorities are also investigating the air cargo market
In the US, British Airways, Korean Air, Qantas and Japan Airlines settled and agreed to pay record fines. Most recently, Air France-KLM also settled in the US courts and was fined US$350 million. In total, the US courts have already awarded penalties of US$1.2 billion against airlines for participation in a cartel that increased air cargo rates to and from the US. At least one US air cargo executive will pay a fine and serve time in prison as a result of his activity in a cartel.
In Europe, in December 2007 the European Commission accused 25 airlines, including Air Canada, Air France-KLM, Air New Zealand, All Nippon Airways, British Airways, Cargolux, Cathay Pacific, LAN Cargo (Chile), Japan Airlines, Lufthansa, Malaysian Airline System, SAS and United Airlines (US) of violating EU rules on restrictive business practices.
And in August 2007, the UK Office of Fair Trading nailed British Airways with a ₤121.5 million penalty for its price fixing activities.
In Australia, the Federal Court in Sydney ordered Qantas to pay Aus$20 million and British Airways to pay Aus$5 million in pecuniary penalties for breaching the price fixing provisions of the Trade Practices Act 1974.
