Freight Transport

Five major international airlines have agreed to plead guilty to fixing prices on air cargo rates and to pay criminal fines totalling more than $500 million

American anti-trust investigation

Air France, KLM, Cathay Pacific, Martinair Holland and SAS Cargo have each agreed to each plead guilty and pay criminal fines totalling $504 million for participating in a multi-year conspiracy to fix prices for air cargo rates

The US Department of Justice announced that Air France-KLM, which now operates under common ownership by a single holding company, has agreed to pay a $350 million criminal fine, the second highest fine ever levied in a criminal antitrust prosecution

Cathay has agreed to pay a criminal fine of $60 million, Martinair $42 million, and SAS $52 million

According to the charges filed today in the US District Court for the District of Columbia, each of the airlines engaged in a conspiracy to suppress and eliminate competition by fixing the cargo rates charged to customers for international air shipments This impacted the price of billions of dollars' worth of consumer and other goods - including produce, clothing, electronics and medicines - shipped by these airlines and their competitors in the air cargo industry

According to the US DOJ, Air France-KLM, Martinair and SAS conspired to fix rates on cargo shipments on certain routes to and from the US, and Cathay Pacific conspired to fix cargo rates on routes from the Hong Kong Special Administrative Region of the People's Republic of China (HKSAR) to the US (Cathay Pacific)

The five airlines have each agreed to co-operate with the US DOJ's ongoing investigation

The plea agreements are subject to court approval If the court accepts the plea agreements, it would bring the total fines imposed in the Antitrust Division's investigation in the air transportation industry to more than $127 billion, marking the highest total amount of fines ever imposed in a criminal antitrust investigation

In August last year, British Airways pleaded guilty and was ordered to pay a $300 million criminal fine for conspiring to fix cargo rates and passenger fuel surcharges on routes including those between the US and UK

The same day, Korean Air Lines pleaded guilty and was ordered to pay a $300 million criminal fine for conspiring to fix cargo rates and passenger fares, on routes including those in the US and between the US and Korea

In January 2008, Qantas Airways pleaded guilty and was sentenced to pay a $61 million criminal fine for conspiring to fix cargo rates in the US and elsewhere The airline's former highest-ranking executive in the US, Bruce McCaffrey (vice president of freight, Americas), also pleaded guilty and agreed to pay a criminal fine and to serve eight months in jail

In May 2008, Japan Airlines pleaded guilty and was sentenced to pay a $110 million criminal fine for conspiring to fix rates for international cargo shipments

Two other airlines - Lufthansa and Virgin Atlantic - also disclosed their involvement in the illegal activities, and agreed to co-operate with the authorities, thus earning themselves a spot in the Antitrust division's Corporate Leniency Program and avoiding criminal conviction and heavy fines However, both airlines are obliged to pay restitution to US victims of their conspiracies

European anti-trust investigation

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

Air France-KLM, Cargolux, British Airways, Lufthansa and SAS all said they were co-operating with the investigation, and Lufthansa said it had been granted conditional immunity from fines

Because the investigation is a global one, airlines could be in hot water with more than one authority

In August 2007, the UK Office of Fair Trading nailed British Airways with a ₤1215 million penalty for its price fixing activities The fine was the highest ever imposed by the OFT for infringement of competition law BA's partner in crime, Virgin Atlantic, qualified in principle for full immunity under the OFT's leniency policy