NEW ZEALAND: Qantas settles Kiwi cartel, Air NZ complains

Qantas has said it has reached a settlement with the New Zealand Commerce Commission in relation to price fixing conduct within its freight division between 2000 and 2006. The terms of the settlement are confidential, but include agreement to recommend to the New Zealand High Court that Qantas pays a fine of NZ$6.5 million (US$4.8 […]


Qantas has said it has reached a settlement with the New Zealand Commerce Commission in relation to price fixing conduct within its freight division between 2000 and 2006. The terms of the settlement are confidential, but include agreement to recommend to the New Zealand High Court that Qantas pays a fine of NZ$6.5 million (US$4.8 million). This recommended penalty reflects a 50 per cent discount for Qantas’ cooperation with the Commission in its investigation of the cartel. The penalty hearing is set for 11 April 2011, at which time Qantas will plead guilty to participating in the cartel with other international airlines, including Air New Zealand. Qantas said it will continue to cooperate fully with the Commission in its prosecution of other airlines and has already resolved its liability (and that of its current employees) to regulators in the US, Australia, Canada, Korea and Europe for its freight division’s conduct. In each case the fine imposed on Qantas reflected a considerable cooperation discount. The New Zealand Commerce Commission also released a statement saying it has reached settlements with three international airlines charged in a major cartel proceeding, ahead of the first hearing in the case scheduled for May this year. Qantas Airways Limited, British Airways plc and Cargolux International Airlines S.A. have agreed settlements with the Commission, which involve admitting liability and paying significant penalties. In December 2008 the Commission commenced proceedings against 13 international airlines, alleging the airlines colluded to raise the price of freighting cargo by imposing fuel surcharges on cargo shipments into and out of New Zealand. The conduct is alleged to have occurred over a period of more than seven years. “The Commission is preparing to test whether it can pursue price-fixing conduct that occurs overseas. We need to know whether deliberate collusion overseas, to affect New Zealand markets, is something that we can take enforcement action against. Our efforts to streamline and focus the case have that central issue in mind,” it said. But in reaction to the statements issued by both Qantas and the NZ Commerce Commission, Air New Zealand said it consider them to be “misleading and defamatory.” “In announcing penalties agreed between the Commission and Qantas, British Airways and Cargolux, the Commission’s ‘Background’ fails to note that none of the investigations referred to by the Commission has resulted in a finding of illegal conduct by Air New Zealand,” the carrier said in its own statement. “The Commission’s media release leaves an impression that all airlines involved in all jurisdictions are guilty and simply ‘awaiting hearing’ or ‘awaiting trial’. That is simply not true and the Commission knows it,” said John Blair, Air New Zealand’s general counsel. “Qantas has previously attempted to deflect attention from its own illegal conduct by making similar claims of Air New Zealand involvement to another investigator but this was given no weight. Qantas appears to be pursuing a strategy of trying to implicate other airlines in cartel investigations in the hope of securing more lenient treatment of its own conduct,” he added. The alleged global air cargo cartel is also being pursued by authorities in other jurisdictions including: Australia, where fifteen airlines were implicated in the cartel. Seven of these airlines have been ordered to pay penalties totalling AU$ 41 million (US$41.4 million). The other eight airlines are awaiting hearing. In the US nineteen airlines have been fined a total US$ 1.6 billion. Four executives have been fined and imprisoned (6-8 month terms) and six others have been charged and are awaiting trial. The European Commission has likewise imposed penalties against 11 airlines totalling €800 million (US$1.1 billion. Canada has seen six airlines entering guilty pleas and have been fined a total of CDN$17 million (US$17.3 million), while South Korea has fined nineteen airlines a total of KRW 120 billion (US$107 million).