Air New Zealand in airline cartel case for price fixing

Air New Zealand is among 13 airlines being prosecuted by the Commerce Commission in the High Court at Auckland this morning, for “extensive and long-term cartel activity in the air cargo market.”

The defendants named in the suit include seven airline staff, of which some are senior executives.

The airlines the Commerce Commission is filing proceedings against are:

• Air New Zealand

• British Airways plc

• Cargolux International Airlines S.A

• Cathay Pacific Airways

• Emirates

• PT Garuda Indonesia

• Japan Airlines International Co

• Korean Airlines Co

• Malaysian Airline System Berhad

• Qantas Airways

• Singapore Airlines Cargo Pte Limited and Singapore Airlines

• Thai Airways International Public Company

• United Airlines Incorporated

The commission alleges airlines throughout the world hijacked the price of cargo both into and out of New Zealand by colluding to raise the price of freighting cargo via fuel surcharges for more than nine years.

It alleges airlines first entered into an illegal global agreement in 1999/2000 under the auspices of the trade organisation International Air Transport Association (IATA).

The airlines imposed fuel surcharges between 2000 and 2006.

The charges also involve a series of regional price fixing agreements, and the commission alleges that a ‘security surcharge’ imposed immediately after the 9/11 terrorist attacks was a price fix.

The commission focused on the 13 airlines cited out of 60 potential airlines and a “great number of individuals throughout the world” because they were the most culpable, and had the greatest effect on New Zealand.

All the individuals named in the proceedings were managers holding positions of responsibility and were allegedly actively involved in promoting the conspiracy and/or they were allegedly in a position to stop the conduct and deliberately refrained from doing so.

The few airlines co-operating with the commission can expect earlier resolution in some cases.

Airlines earn more than an estimated $400 million each year transporting air cargo to and from New Zealand, and over the nine years  the total revenue was approximately $2.9 billion.

Commerce Commission chairwoman Paula Rebstock said, “New Zealand is a long way from its overseas markets and so the harm to our economy and our ability to compete internationally will have been disproportionately greater than in other jurisdictions in which the conduct took place.”

“Participation in cartel activity is internationally regarded as one of the most egregious forms of anti-competitive behaviour. It results in consumers and businesses paying higher prices and having less choice than if competitors were competing honestly.”

The US Department of Justice, the Australian Competition and Consumer Commission and the European Commission are also investigating the airlines.

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