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Antitrust: European Commission re-adopts decision and fines air cargo carriers €776 million for price-fixing cartel. Airlines react

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The European Commission has re-adopted a cartel decision against 11 air cargo carriers and imposed a fine totalling € 776 465 000 for operating a price–fixing cartel. The Commission’s original decision was annulled by the General Court on procedural grounds.

Commissioner Margrethe Vestager, in charge of competition policy, said:

Millions of businesses depend on air cargo services, which carry more than 20% of all EU imports and nearly 30% of EU exports. Working together in a cartel rather than competing to offer better services to customers does not fly with the Commission. Today’s decision ensures that companies that were part of the air cargo cartel are sanctioned for their behaviour.

In November 2010, the Commission imposed fines of nearly €800 million on 11 air cargo carriers who participated in a price-fixing cartel, from December 1999 to February 2006, in the airfreight services market covering flights from, to and within the European Economic Area. The cartel arrangements consisted of numerous contacts between airlines, at both bilateral and multilateral level to fix the level of fuel and security surcharges.

The companies fined in 2010 were Air Canada, Air France-KLM, British Airways, Cargolux, Cathay Pacific Airways, Japan Airlines, LAN Chile, Martinair, Qantas, SAS and Singapore Airlines. A 12th cartel member, Lufthansa, and its subsidiary, Swiss International Air Lines, received full immunity from fines.

All but one of the companies (Qantas) subject to the 2010 decision challenged the decision before the EU’s General Court. In December 2015, the General Court annulled the Commission’s decision against the 11 cartel participants that appealed, concluding that there had been a procedural error. However, it did not rule on the existence of the cartel.

The Commission maintains that these air cargo carriers participated in a price-fixing cartel and is adopting a new decision and re-establishing the fines. This new decision addresses the procedural error identified by the General Court while remaining identical in terms of the anticompetitive behaviours targeted by the Commission. The decision confirms that the Commission will not let cartels go unpunished. Cartels are illegal and cause consumers and business to suffer.

The fines

The fines were set on the basis of the Commission’s 2006 Guidelines on fines (see also MEMO). They were fixed at exactly the same level as in the 2010 Decision for all the companies, except for Martinair. In the 2010 decision, Martinair’s fine had been capped at 10% of the company’s total turnover in 2009. EU rules allow a maximum fine of 10% of the total turnover in the year preceding the adoption of the decision. Martinair’s turnover is significantly lower in 2016 than in 2009. As a result, Martinair’s fine has been lowered to reflect this.

In the 2010 decision, Lufthansa, and its subsidiary Swiss International Air Lines, received full immunity under the Commission’s 2006 Leniency Notice, as it brought the cartel to the Commission’s attention and provided valuable information. Furthermore, the fines for the majority of carriers were also reduced for their cooperation with the Commission under the Leniency Notice.

The individual fines are as follows:

Fine (€)* Reduction under the Leniency Notice
Air Canada 21 037 500 15%
Air France 182 920 000 20%
KLM 127 160 000 20%
Martinair 15 400 000 50%
British Airways 104 040 000 10%
Cargolux 79 900 000 15%
Cathay Pacific Airways 57 120 000 20%
Japan Airlines 35 700 000 25%
LAN Chile 8 220 000 20%
SAS 70 167 500 15%
Singapore Airlines 74 800 000
Lufthansa 0 100%
Swiss International Air Lines 0 100%

(*) Legal entities within the undertaking may be held jointly and severally liable for the whole or part of the fine imposed.

Procedural background

The investigation started as a result of an immunity application by Lufthansa filed in December 2005. In February 2006, the Commission carried out unannounced inspections at the premises of a number of providers of airfreight services. In November 2010, the Commission adopted a decision against 12 air cargo carriers imposing fines totalling €799 445 000.

All carriers except Qantas appealed to the EU’s General Court against the Commission’s 2010 decision. Since Qantas did not appeal, the 2010 Decision became final for it.

In December 2015, the Court annulled the Commission’s 2010 decision after finding a discrepancy between the reasoning and operative part of the decision. The reasoning part of the decision described the infringement as a single and continuous infringement covering all addressees. However, some articles of the operative part suggested that there were four separate infringements with only some addressees participating in all four.

The Commission’s March 2017 Decision addresses the Court’s conclusions by bringing the operative part in line with the reasoning part.

Action for damages

Any person or company affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court and Council Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal. Even though the Commission has fined the cartel participants concerned, damages may be awarded without being reduced on account of the Commission fine.

The Antitrust Damages Directive, which Member States had to implement in their legal systems by 27 December 2016, makes it easier for victims of anti-competitive practices to obtain damages. More information on antitrust damages actions, including a practical guide on how to quantify antitrust harm, is available here.

European Commission – Press release – Brussels, 17 March 2017

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The European Commission has revised its earlier decision and has once again fined eleven airlines for breaches of air freight competition rules

  • A fine has been imposed on SAS Cargo of MEUR 70.2, the same amount as that repaid by the European Commission to SAS in 2016.
  • SAS maintains that SAS Cargo has not participated in any global cartel and will appeal the European Commission’s decision.

On 9 November 2010, the European Commission fined SAS Cargo and ten other airlines for breaches of the air freight competition rules. For the SAS Group, the fine amounted to MEUR 70.2. SAS appealed the European Commission’s decision to the Court of Justice of the European Union’s (CJEU) first instance, the General Court. In December 2015, the CJEU annulled the European Commission’s decision. After the European Commission’s decision not to appeal the CJEU’s judgment, the fine was repaid to SAS in March 2016.

Today, the European Commission has once again decided to impose a fine on SAS Cargo and the ten other airlines encompassed by the annulled 2010 decision.

We strongly question the European Commission’s move to reimpose a decision that has already been annulled once by the CJEU,” says Marie Wohlfahrt, General Counsel at SAS. “Throughout the entire process, SAS has cooperated with the European Commission and, for more than eleven years, has argued against the European Commission’s perception that SAS Cargo had participated in a global cartel,” continues Marie Wohlfahrt. “SAS takes the competition rules extremely seriously and does not accept any breaches. We have a clear regulatory framework in place for compliance with competition law. This encompasses information, guidelines, training programs and control procedures,” says Marie Wohlfahrt.

The fine will be recognized as a nonrecurring expense by SAS in its earnings for the second quarter of 2016/2017.

SAS will appeal the European Commission’s decision. The appeal process could take several years.

March 17, 2017 12:40 / Capital market, SAS News / English

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Kartelbesluit Europese Commissie

Vandaag maakte de Europese Commissie bekend een boete op te leggen aan elf luchtvaartmaatschappijen, waaronder KLM, Air France en Martinair vanwege kartelvorming op het gebied van luchtvrachtvervoer in de periode tussen december 1999 en februari 2006. De boete voor KLM bedraagt €127 miljoen.

Het besluit volgt op een al eerder opgelegde boete door de Europese Commissie op 9 november 2010. Deze werd om dezelfde reden, aan dezelfde luchtvaartmaatschappijen opgelegd, maar later door het Gerecht van de Europese Unie van tafel geveegd, omdat er ‘tegenstrijdigheden zaten’ in de argumentatie van de Europese Commissie. Ook de boetes die aan andere luchtvaartmaatschappijen zijn opgelegd zijn destijds nietig verklaard.

De totale boete voor de AFKL-groep op basis van het nieuwe EC-besluit bedraagt €325 miljoen. Het bedrag valt daarmee lager uit dan de eerder opgelegde sanctie uit 2010. Dat is vooral vanwege een verlaging van de boete voor Martinair om technische redenen. De maatregel van de Europese Commissie heeft mede betrekking op de periode voordat Air France en KLM één groep vormden. Het totaalbedrag voor de AFKL-groep is de som van de afzonderlijk opgelegde boetes aan Air France, KLM en Martinair.

Air France – KLM bestudeert momenteel het nieuwe besluit van de Europese Commissie en overweegt eventuele vervolgstappen. De Groep hield al sinds 2010 rekening met een dergelijk besluit en heeft het bedrag al volledig in haar financiële rapportages verwerkt.

KLM erkent het belang van strikte Europese mededingingsregels en een eerlijke markt voor luchtvaartmaatschappijen. KLM heeft altijd volledige medewerking en openheid van zaken gegeven gedurende het onderzoek.

17 maart 2017

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