Thai take aways

Published On 19/12/2012 | By Peta Stevenson | Cartels

On 14 December 2012, the Federal Court of Australia imposed a $7.5M penalty on Thai Airways for its role in entering into and giving effect to a price-fixing understanding to fix in respect of cargo shipped from Indonesia to Australia, after Thai Airways reached a settlement agreement with the ACCC.

The judgment marks the thirteenth airline penalised for their involvement in the air cargo cartel, which we have previously posted about here, bringing total penalties obtained by the ACCC for this single investigation to $98.5M.  The ACCC was also awarded $500,000 towards its costs.

The conduct to which Thai Airways admitted was a small fraction of that originally alleged by the ACCC.  Significantly, the admissions were consistent with those made by Singapore Airlines, Malaysian, Korean Air Lines and Emirates in that they related to Indonesian understandings in respect of a fuel surcharge, a security surcharge and a customs fee.  As such, in assessing the appropriate penalty, Justice Katzmann noted that in circumstances such as this, where a number of corporations have been involved in the same contravention, it is important to have regard to the issue of parity.  In this case:

1.       Market share

Thai Airways had a relatively low market share – approximately 4% of all air cargo to and from Australia.  In contrast, Singapore Airlines (which received a penalty of $8M in respect of the Indonesian understandings) had 12-14% market share, while Emirates ($7M penalty) had comparable market share to Thai Airways at 5%.

2.       Degree of cooperation

Thai Airways did cooperate with the ACCC to reach agreement with the ACCC, saving the parties, the Court and the community substantial costs.  However, the cooperation was late in coming – with agreement only being reached on the first day of the hearing.  Earlier, Emirates received a 12.5% discount for cooperation in settling several weeks before the hearing was due to start, and Singapore Airlines which received a 5% discount for settling on the third day of the hearing.  In contrast Qantas, which settled in December 2008, received a 50% penalty for its early cooperation.

While the Court did not state what discount Thai Airways received for its cooperation with the ACCC, as Thai had a similar market share to Emirates, but received a higher penalty for the same conduct, it can be inferred that it received a lower discount for its delay in settling, likely in the same range as Singapore Airlines.

Justice Katzmann recognised however that there is no question of mathematical precision, stating that “fixing penalties is more of an art than a science”.  Her Honour concluded that the proposed agreed penalty of $7.5M was clearly within the range which a court would fix.

The series of decisions in the ACCC’s air cargo investigations make clear oncer more the benefit that may be obtained from cooperating with the ACCC in an investigation, where appropriate.

Photo credit: Roger Price / Foter / CC BY

 

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About The Author

is a partner in the Sydney office of King & Wood Mallesons where she specialises in competition litigation with experience in a wide range of jurisdictions. Peta also advises clients on the application of the anti-competitive conduct, consumer protection and access provisions of the Competition & Consumer Act 2010 (Cth) and related state legislation. In 2001/02 she undertook her LLM at the University of Cambridge, during which time she developed a passionate if fleeting interest in rowing.

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