Two more airlines caught price fixing have their wings clipped

Emirates and Korean Air have been stung with millions of dollars in fines for their part in a long-running international fuel and security pricing cartel.

Korean Air and Emirates have been fined for admitting their parts in a global aircargo price fixing case.

Auckland High Court has ordered Korean Air to pay a penalty of $3.5 million and Emirates $1.5 million for breaches of the commerce act.

They were among the 13 airlines the commission allege were colluding to fix fuel and security surcharges for air cargo shipments into and out of New Zealand during the early 2000s.

Korean Air’s conduct occurred over a period of six years, while Emirates’ conduct occurred over three years.

Korean Air has admitted liability for agreeing fuel and security surcharges in Hong Kong, Japan and Malaysia for cargo flown to New Zealand. Emirates admitted agreeing fuel and security surcharges in Indonesia for cargo flown to New Zealand.

The commission has now successfully settled with six airlines, for a total sum of $21.37 million.

Judge Chris Allan awarded Korean Air with a 33% discount, recognising the airline’s guilty plea and "commitment to co-operate with the commission’s case" and a 25% discount to Emirates.

In sentencing, Justice Allan said in cartel cases, punishments must be adequate and fitting.

“That is because it is necessary both to ensure that the participant is stripped of any profits derived from the illegal behaviour, and to serve as an appropriate deterrent in a class of case where, because illegal behaviour is often covert, detection will sometimes be avoided."

Commission chairman Dr Mark Berry agreed. “Penalties should be a deterrent to others who might breach the commerce act.”

Both airlines were also ordered to pay $259,079 in costs.

Commission lawyer John Dixon argued there had been commercial gain in both cases, although "it is not readily ascertainable".

Korean Air’s lawyer, Ann Callinan, said there was no commercial gain and that the fuel surcharges were imposed to meet the rising costs of fuel. The security surcharges were brought in to recover cost increases after tighter security as a result of the September 2001 terrorist attacks on the World Trade Centre.

Korean Air’s total revenue from the fuel surcharges during six years was $266,681 and total revenue from security surcharges over a period of about four years was $30,328.

In June, Japan Airlines National was fined $2.275 million for its part in the six-year long cartel from 2000.

The commerce commission is yet to argue its case in court against the airlines defending the allegations.

Those airlines include Air New Zealand, Cathay Pacific Airways, Malaysian Airlines, Singapore Airlines Cargo, Singapore Airlinesand Thai Airways International.

That case is due to be heard in the High Court in March next year.

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