Air NZ fined $A15m for price-fixing

Australia’s Federal Court has ordered Air New Zealand to pay $A15 million in penalties, after regulators took legal action against a global air cargo cartel.

The court found Air NZ agreed with other airlines to fix the price of fuel and insurance surcharges on air freight services from Hong Kong, and insurance and security charges from Singapore, to various locations between 2002 and 2007.

Air NZ was ordered to pay an $A11.5 million penalty for price-fixing of fuel surcharges imposed for cargo from Hong Kong to Australia.

It got a further $A3.5 million penalty for price fixing the insurance and security surcharge from Singapore to Australia.

Air NZ has also agreed to pay $A2 million toward the Australian Competition and Consumer Commission’s legal costs, from the long-running battle.

“These illegal price-fixing agreements unfairly reduced competition for the transport cost for goods flown into Australia,” ACCC commissioner Sarah Court says.

 “This decision sends a strong warning to overseas and domestic operators that the ACCC can and will continue to defend competition and the rights of Australian customers and businesses by taking action against anti-competitive conduct.”

Air NZ says the penalty will not affect previous guidance given for 2018. The board expects full-year pre-tax earnings to exceed last year’s $527 million.

Cracking down
Competition regulators around the world have cracked down on the air cargo cartel, with fines or penalties ordered against airlines in Europe, the US, Korea, New Zealand, Australia Canada and India.

The ACCC started legal action against 15 international airlines between 2008 and 2010 under the Trade Practices Act for conduct that occurred between 2002 and 2006.

In October 2014, the Federal Court initially dismissed the ACCC’s case against Air NZ and Indonesian airline PT Garuda Indonesia. The ACCC appealed the decision, and this was upheld in March 2016.

While Air NZ and Garuda appealed the decision to the High Court, this was dismissed.

The penalty hearing against Garuda, the 15th airline, was heard in the court this week, with the judgment reserved.

Since the ACCC first launched its investigation into the air cargo cartel in 2006, penalties of $A113.5m have been imposed against 14 airlines.

Qantas has received the largest penalty, of $A20m, with Air NZ’s the second largest.

In New Zealand, Air NZ was penalised $7.5m by the High Court in 2013 for its role in the ring. The Commerce Commission reached settlements with 11 carriers, securing penalties totalling $45 million, or about 10% of the revenue generated from air freight forwarding services in and out of New Zealand in 2006.