Qantas coughs up $6.5m for price fixing

Date: 18.03.2011

Qantas settles with the New Zealand Commerce Commission, pleads guilty to price fixing within its freight division between 2000 and 2006

March 18, 2011

Qantas has reached a settlement with the New Zealand Commerce Commission in relation to price fixing conduct within its freight division between 2000 and 2006.

While the terms of the settlement are confidential, they include an agreement for the airline to pay a fine of NZ$6.5 million.

This recommended penalty reflects a 50 per cent discount for Qantas' cooperation with the Commission in its investigation of the cartel.

Qantas says it will plead guilty to participating in the price-fixing cartel with other international airlines, including Air New Zealand.

The penalty hearing is set for 11 April 2011.

"Qantas will continue to cooperate fully with the Commission in its prosecution of other airlines," the company says in a statement.

"We have already resolved our 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.

New Zealand’s Commerce Commission says it has also reached settlements with British Airways and Cargolux International Airlines.

"The Commission cannot release further information about these settlements until they have been reviewed by the High Court," says Commission General Counsel of Enforcement Mary-Anne Borrowdale.

In December 2008 the Commission commenced proceedings against 13 international airlines, alleging the airlines colluded to raise the price of freight 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.

"Settling with parties who are prepared to acknowledge wrongdoing is consistent with the Commission’s enforcement strategy," Borrowdale says.

"We aim to achieve the swiftest resolution of our enforcement proceedings in the most cost-effective way."

At the same time as reaching the settlements, the Commission has discontinued the case against United Airlines Incorporated.

"We continue to focus our case and direct our efforts towards those airlines with large turnover in New Zealand markets," Borrowdale says.

The Commission is currently preparing for the first stage of the price-fixing case, commencing in May, at which the key issue is the meaning of a ‘market in New Zealand’ and whether air cargo services inbound to New Zealand are part of such a market.

"The Commission is preparing to test whether it can pursue price-fixing conduct that occurs overseas," Borrowdale says.

"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," she says.

The remainder of the case is scheduled to commence in July 2012 and will deal with the Commission’s price-fixing allegations.

The airlines involved in the action include Air New Zealand, Cathay Pacific, Emirates, Japan Airlines International, Korean Air Lines Co, Malaysian Airlines System Berhad, PT Garuda Indonesia, Singapore Airlines Cargo, Singapore Airlines and Thai Airways International.

"As the matter is due to be heard by the High Court, the Commission can make no further comment at this time," Borrowdale says.