$7.6m penalties for two airlines in air cargo cartel case

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The High Court in Auckland has imposed penalties against two of the international airlines charged in a major cartel proceeding brought by the Commerce Commission.

Two international airlines have been ordered to pay a total of $7.6 million in penalties and costs.

The alleged air cargo cartel has been fined in several other countries, including Australia where seven airlines were ordered to pay a total of $A41m in penalties and another eight await a hearing.

In the High Court at Auckland, Cargolux International Airlines was ordered to pay $6 million in penalties and $25,000 in costs, and British Airways ordered to pay $1.6m in penalties and $100,000 in costs.

The commission settled with the two airlines and Qantas last month, with the airlines admitting their involvement in price-fixing arrangements and agreeing to penalties. A penalty has not yet been imposed on Qantas.

The case dates to December 2008, when the commission alleged that 13 international airlines colluded to raise the price of freighting cargo by imposing fuel surcharges on cargo shipments into and out of New Zealand.

The arrangements "were at the serious end of the spectrum" and the conduct would have hurt both price competition and the competitive dynamics in the air cargo services industry, Justice Judith Potter said in her Cargolux judgment.

The penalties reflected discounts for both airlines for their early admissions and their co-operation with the commission, said Mary-Anne Borrowdale, the commission's general counsel of enforcement.

"BA has received a greater discount, because of its commitment to further co-operation as the case progresses, but in each case the court has acknowledged the value to this agency of receiving assistance from the parties involved."

Justice Potter made no findings in respect of the airlines that were defending the proceedings -- Air New Zealand, Cathay Pacific, Emirates, Japan Airlines, Korean Air Lines, Malaysian Airlines, Garuda, Singapore Airlines and Thai Airways.

A case against United Airlines was dropped earlier.

The commission said it was preparing for the first stage of the price-fixing case due to start in May, which will determine the meaning of a market in New Zealand and whether inbound air cargo services were part of such a market.

The rest of the case, due to start in July 2012, will deal with the commission's price-fixing allegations.In the United States, 19 airlines were fined a total $US1.6 billion. Four executives were fined and imprisoned for between six and eight months, and six others were charged and awaiting trial.


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