European Commission fines 11 air cargo carriers with over $1 billion for fixing prices

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European Commission fines 11 air cargo carriers with over $1 billion for fixing prices

2010-11-10 06:55:35 GMT+7 (ICT)

BRUSSELS (BNO NEWS) -- The European Commission on Tuesday announced that it fined 11 air cargo carriers with a total of $1.27 billion (€799,445 million) for participating in a worldwide cartel that fixed prices of cargo services within the European Economic area (EEA).

Among the eleven air cargo carriers fined, there are some well-known airlines such as Air Canada, Air France-KLM, British Airways, Japan Airlines, Singapore Airlines and LAN Chile. The airlines coordinated their surcharges for fuel and security without discounts over a six year period.

"It is deplorable that so many major airlines coordinated their pricing to the detriment of European businesses and European consumers" said Vice President for Competition Joaquín Almunia. "With today's decision the Commission is sending a clear message that it will not tolerate cartel behavior".

Lufthansa and its Swiss subsidiary, Swiss International Air Lines, received full immunity from fines under the Commission's leniency program as it was the first to provide information regarding the cartel.

From December 1999 to February 2006, the cartel members coordinated various elements of price consisting in several contacts between airlines (at both bilateral and multilateral level) covering flights from, to and within the EEA. Airlines offer the transport of cargo to freight forwarders, who arrange the transport of the goods and services on behalf of the shippers.

The carriers contacted each other to discuss fuel surcharges to ensure that worldwide airfreight carriers imposed a flat rate surcharge per kilogram for all shipments. Furthermore, the cartel members imposed a security surcharge and refused to pay a commission on surcharges to their clients (freight forwarders).

As a result, the surcharges were introduced by all carriers involved and the increase or decrease of the surcharges level were applied in full without exception. By refusing to pay commission, the airlines ensured that surcharges did not become subject to competition through customer's discount.

Such practices breach the European Union's competition rules. The Commission took into account the sales of the companies involved in the cartel, the serious nature of the crime, and the duration of it while setting up the fines.

The highest fine was imposed on Air France-KLM, which has to pay approximately $495 million. On the other hand, LAN Chile was fined with around $14 million for its participation in the illegal cartel. Five carriers applied for a reduction on its fines claiming inability to pay it, but none met the conditions for a reduction.

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