EC reinstates cargo cartel fine

Eleanor Steed
By Eleanor Steed March 20, 2017 14:32

EC reinstates cargo cartel fine

The European Commission has re-adopted a cartel decision against 11 air cargo carriers and imposed a fine totaling €776,465,000 for operating a price–fixing cartel. The Commission’s original decision was annulled by the General Court on procedural grounds.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Millions of businesses depend on air cargo services, which carry more than 20% of all EU imports and nearly 30% of EU exports. Working together in a cartel rather than competing to offer better services to customers does not fly with the Commission. Today’s decision ensures that companies that were part of the air cargo cartel are sanctioned for their behaviour.”

In November 2010, the Commission imposed fines of nearly €800 million on 11 air cargo carriers who participated in a price-fixing cartel, from December 1999 to February 2006, in the airfreight services market covering flights from, to and within the European Economic Area. The cartel arrangements consisted of numerous contacts between airlines, at both bilateral and multilateral level to fix the level of fuel and security surcharges.

The companies fined in 2010 were Air Canada, Air France-KLM, British Airways, Cargolux, Cathay Pacific Airways, Japan Airlines, LAN Chile, Martinair, Qantas, SAS and Singapore Airlines. A 12th cartel member, Lufthansa, and its subsidiary, Swiss International Air Lines, received full immunity from fines.

All but one of the companies (Qantas) subject to the 2010 decision challenged the decision before the EU’s General Court. In December 2015, the General Court annulled the Commission’s decision against the 11 cartel participants that appealed, concluding that there had been a procedural error. However, it did not rule on the existence of the cartel.

The Commission maintains that these air cargo carriers participated in a price-fixing cartel and is adopting a new decision and re-establishing the fines. This new decision addresses the procedural error identified by the General Court while remaining identical in terms of the anticompetitive behaviours targeted by the Commission. The decision confirms that the Commission will not let cartels go unpunished. Cartels are illegal and cause consumers and business to suffer.

The fines were set on the basis of the Commission’s 2006 Guidelines on fines (see also MEMO). They were fixed at exactly the same level as in the 2010 Decision for all the companies, except for Martinair. In the 2010 decision, Martinair’s fine had been capped at 10% of the company’s total turnover in 2009. EU rules allow a maximum fine of 10% of the total turnover in the year preceding the adoption of the decision. Martinair’s turnover is significantly lower in 2016 than in 2009. As a result, Martinair’s fine has been lowered to reflect this.

In the 2010 decision, Lufthansa, and its subsidiary Swiss International Air Lines, received full immunity under the Commission’s 2006 Leniency Notice, as it brought the cartel to the Commission’s attention and provided valuable information. Furthermore, the fines for the majority of carriers were also reduced for their cooperation with the Commission under the Leniency Notice.

The individual fines are as follows:

  Fine (€)* Reduction under the Leniency Notice
 Air Canada 21,037,500 15%
 Air France 182,920,000 20%
 KLM 127,160,000 20%
 Martinair 15,400,000 50%
 British Airways 104,040,000 10%
 Cargolux 79,900,000 15%
 Cathay Pacific Airways 57,120,000 20%
 Japan Airlines 35,700,000 25%
 LAN Chile 8,220,000 20%
 SAS 70,167,500 15%
 Singapore Airlines 74,800,000  
 Lufthansa 0 100%
 Swiss International Air
0 100%

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

The investigation started as a result of an immunity application by Lufthansa filed in December 2005. In February 2006, the Commission carried out unannounced inspections at the premises of a number of providers of airfreight services. In November 2010, the Commission adopted a decision against 12 air cargo carriers imposing fines totalling €799 445 000.

All carriers except Qantas appealed to the EU’s General Court against the Commission’s 2010 decision. Since Qantas did not appeal, the 2010 Decision became final for it.

In December 2015, the Court annulled the Commission’s 2010 decision after finding a discrepancy between the reasoning and operative part of the decision. The reasoning part of the decision described the infringement as a single and continuous infringement covering all addressees. However, some articles of the operative part suggested that there were four separate infringements with only some addressees participating in all four.

The Commission’s March 2017 Decision addresses the Court’s conclusions by bringing the operative part in line with the reasoning part.

Eleanor Steed
By Eleanor Steed March 20, 2017 14:32