Qantas comes clean on cargo cartels

An anti-cartel campaign has prompted Qantas to speak out about its infamous involvement in a freight cartel

Qantas comes clean on cargo cartels
Qantas comes clean on cargo cartels
By Sean Muir |August 31, 2012

The release of an Australian Competition and Consumer Commission (ACCC) film on cartels has spurred Qantas CEO Alan Joyce to speak candidly about an air-cargo cartel that
cost Qantas $200 million in fines and settlements.

In a speech supporting short film The Marker, released yesterday as part of
the ACCC's
new anti-cartel strategy, Joyce highlights the destruction cartels cause to business and employees.

Qantas’ Freight Division participated in a global price fixing cartel in the early 2000s, which led to investigation and prosecution by global antitrust regulators.

"If Qantas had not cooperated completely with global regulators, this cost would have been much more," Joyce says.

"Cartels have no place in the legitimate business world. With Qantas and some of its executives having been through the rigours of an investigation and prosecution, there is no question that participating in cartel activities is a very bad personal and business decision."

According to Joyce, the executives who agreed to participate in cartel conduct believed they were acting in the best interest of Qantas Freight.

But he says the
cost of their actions
far outweighed
attained by participating in the illegal conduct.

"In addition, one Qantas Freight executive in the USA was convicted and spent six months in prison," Joyce says.

"No one wants to face the stress, loss and stigma associated with the very real possibility of a criminal record and time in jail."

The ACCC’s 16 minute film follows the journey of new employee Martin Tully who finds himself caught up in a cartel.

ACCC chairman Rod Sims
says the film is ‘next part’ of an integrated strategy to prevent cartel involvement.

"The ACCC’s approach to stamping out cartels is to partner education with enforcement," Sims says.

"We have stepped up proactive intelligence gathering and data assessment and have identified industries and sectors to monitor."

"Education is the next step. The Marker shows how cartel activity can ruin relationships, careers, reputations and long term financial security, and may ultimately land guilty parties in jail."

"Individuals and businesses who are currently in a cartel or who have been involved in one face potential hefty fines or penalties, including the possibility of up to ten years in jail."

Sims tells SupplyChain Review that concentred supply chains are most susceptible to cartel involvement.

"The classic industries world-wide, are things like construction, cement, chemicals, cables – they are the sort of classic sectors where you have a concentrated supply chain because of the nature of the business," Sims says.

He says Qantas’ cartel involvement
was an exception to the rule as
a lot of players were involved in the arrangement.

In addition to Joyce’s support, the film has also been backed by University of Melbourne Associate Professor Caron Beaton-Wells.

Involvement in cartels can lead to penalties of $10 million, or three times the benefit gained from the conduct, or where this cannot be determined 10 per cent of annual turnover of the company or corporate group.

a new penalty regime, individuals can also face hefty fines, criminal records and up to 10 years in jail.

According to Melbourne University research, over a third of business people surveyed in 2010 either believed the cartel conduct was legal, or they were unsure whether it was against the law.

The research shows that almost one in 10 say they’d still be likely to join a cartel if the opportunity arose.

Meanwhile, litigation is currently underway against two major gas companies accused of arranging an anti-competitive cartel, which allegedly declined to supply gas (LPG) cylinders to each other’s customers in a bid to keep prices high.

The Australian Competition and Consumer Commission (ACCC) announced last week it had begun proceedings in the Federal Court in Sydney against Renegade Gas Pty Ltd (trading as Supagas NSW, a privately owned company) and Speed-E-Gas (NSW) Pty Ltd (a wholly owned subsidiary of Origin Energy Limited).

The ACCC alleges that these companies, through their senior executives and sales staff, engaged in the cartel arrangement in the Sydney basin between 2006 and 2011, in contravention of the Competition and Consumer Act (and formerly the Trade Practices Act).

The ACCC says customers that were deceived came from small and large scale businesses using LPG cylinders to power forklifts and transport goods.

to see The Marker and find out more about cartels.

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