And then there were two…

Published On 12/12/2012 | By Tamara Hunter | Cartels, Enforcement

Two more airlines, Cathay Pacific and Singapore Airlines Cargo, have settled with the ACCC in the air cargo litigation.  The airlines are the eleventh and twelfth airlines to settle, leaving only Air New Zealand and PT Garuda in the ACCC’s trial.

Last week, the Federal Court of Australia ordered Cathay Pacific to pay a penalty of $11.25 million and Singapore Airlines to pay a penalty of $11.75 million, taking the total penalties ordered in the ACCC’s proceedings to $91 million, the highest total penalties from a single ACCC investigation.

The ACCC commenced its actions against Cathay Pacific and Singapore Airlines Cargo in April 2009 and December 2008, respectively.  The Court’s judgment observes that when the ACCC commenced proceedings against Singapore Airlines Cargo, it alleged 143 contraventions of the Trade Practices Act (now the Competition and Consumer Act; the Act).  However, by the third day of the hearing, the parties reached an agreement in which Singapore Airlines Cargo admitted to six contraventions and one attempted contravention of section 45 of the Act.

Cathay Pacific’s penalty included:

  • a $7.25 million penalty for price fixing relating to a fuel surcharge and insurance and security surcharge for the carriage of air cargo from Singapore to Australia over a couple of years; and
  • a $4 million penalty for attempting to make an arrangement with Qantas containing a provision that the airlines would not undercut each other’s prices for the supply of airfreight services from Hong Kong to Australia.  This conduct took place over about 10 days.  The Court noted that, if successful, a 25% price increase would have resulted in Qantas increasing its prices by over $80,000 per week if the freighter was fully loaded with cargo.

Singapore Airlines Cargo’s penalty included:

  • an $8 million penalty for price fixing relating to a fuel surcharge, security surcharge, and customs fee, for airfreight services from Indonesia to Australia over several years; and
  • a $3.75 million penalty for attempting to make an arrangement with Malaysia Airlines, and attempting to induce Malaysia Airlines to make an arrangement, containing a provision that the airlines would increase their prices for the airfreight of meat from Australia to the Middle East.  This conduct took place over about three days in January 2003.  At the time, the US had announced that it would deploy about 25,000 troops to the Middle East.  The judgment states that Singapore Airlines Cargo’s most senior representative in Australia anticipated that this would lead to increased demand for Australian meat in the Middle East and spoke to a representative of Malaysian Airlines, suggesting that each airline should increase its price by about $0.20 per kilogram.

Singapore Airlines Cargo also admitted to arriving at an understanding, in October 2001, about prices for the supply of airfreight services from Jakarta to various destinations including Australia.  This understanding about prices was not relevant to determining the penalty because the ACCC may only commence proceedings for the recovery of a pecuniary penalty for a contravention of Part IV of the Act within six years after the contravention.

The Cathay Pacific judgment notes that Qantas was the first airline to settle with the ACCC, in December 2008 for a penalty of $20 million.  Qantas’ penalty related to price fixing the fuel surcharge but, unlike the recent decisions, Qantas’ conduct was not limited to agreements affecting specific countries.

Proceedings against Air New Zealand and PT Garuda are currently in hearing before the Federal Court, with the hearings scheduled to continue until May 2013.

Image courtesy of digitalart / FreeDigitalPhotos.net

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About The Author

is a Special Counsel in the competition litigation group at King & Wood Mallesons. Tamara has advised on the competition law aspects of commercial transactions and disputes and assisted clients to respond to investigations by the ACCC and other regulators in the Asia Pacific region. In her spare time, Tamara enjoys planning holidays almost more than she enjoys going on them.

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