EC Fines 11 Air Cargo Carriers $1 Billion

The European Commission (EC) has fined 11 air cargo carriers a total of $1.09 billion (799 million Euros) for operating a worldwide cartel which affected cargo services within the European Economic area (EEA). The airlines involved are Air Canada, Air France-KLM, British Airways, Cathay Pacific, Cargolux, Japan Airlines, LAN Chile, Martinair, Qantas, SAS and Singapore Airlines.

The carriers coordinated their action on surcharges for fuel and security without discounts over a six year period. Lufthansa (and its subsidiary Swiss) received full immunity from fines under the Commission's leniency program, as it was the first to provide information about the cartel.

"It is deplorable that so many major airlines coordinated their pricing to the detriment of European businesses and European consumers,"says Joaquin Almunia, vice president for competition, adding, “With [this] decision the Commission is sending a clear message that it will not tolerate cartel behavior.”

The cartel members coordinated various elements of price for a period of over six years, from December 1999 to February 2006. The cartel arrangements consisted of numerous contacts between airlines, at both bilateral and multilateral level, covering flights from, to and within the EEA. Airlines providing airfreight services primarily offer the transport of cargo to freight forwarders, who arrange the carriage of these goods, including associated services and formalities on behalf of shippers.

The contacts on prices between the airlines concerned initially started with a view to discuss fuel surcharges. The carriers contacted each other so as to ensure that worldwide airfreight carriers imposed a flat rate surcharge per kilo for all shipments. The cartel members extended their cooperation by introducing a security surcharge and refusing to pay a commission on surcharges to their clients (freight forwarders).

The aim of these contacts was to ensure that these surcharges were introduced by all the carriers involved and that increases (or decreases) of the surcharge levels were applied in full without exception. By refusing to pay a commission, the airlines ensured that surcharges did not become subject to competition through the granting of discounts to customers. Such practices are in breach of the EU competition rules.

On the other hand, Commission allegations of collusion on two other surcharges and regarding freight rates in the Statement of Objections have been dropped from the case for insufficient evidence. The Commission also dropped charges against another 11 carriers and one consultancy firm which had previously received the Statement of Objections for the same reason.

In setting the level of the fines, the Commission took into account the sales of the companies involved in the market concerned, the very serious nature of the infringement, the EEA-wide scope of the cartel and its duration.

The individual fines are as follows:

(*) Legal entities within the undertaking may be held jointly and severally liable for the whole or part of the fine imposed.

Any person or firm affected by anti-competitive behavior as described in this case may bring the matter before the courts of the Member States and seek damages. More information is available here.