Monday, July 07, 2008

Five More Air Carriers Agree to Plead Guilty for Fixing Cargo Rates

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Five more airlines have agreed to plead guilty and pay criminal fines totaling $504 million for participating in a multi-year conspiracy to fix prices for international air cargo rates, the Department of Justice has announced.

Four other carriers have already pleaded guilty to participating in the conspiracy and have paid significant fines. Of the $504 million in newly announced fines, Air France-KLM has agreed to pay $350 million—the second-highest fine ever levied in a criminal antitrust prosecution.

Price fixing charges were filed in the federal district court in Washington, D.C. on June 26 against Société Air France, Cathay Pacific Airways Limited, Koninklijke Luchtvaart Maatschappij N.V., Martinair Holland N.V., and SAS Cargo Group A/S. Air France-KLM now operates under common ownership.

The carriers were charged with fixing cargo rates at meetings and discussions held in the United States, Europe, and Asia. The companies also monitored and enforced adherence to the agreed-upon cargo rates.

According to Associate Attorney General Kevin O'Connor, as a result of the conspiracy, fuel surcharges imposed by some of the conspirators rose by as much as 1,000 percent during the course of the conspiracy, far outpacing any fuel cost increases during the same time period.

The plea agreements are subject to court approval. In addition to Air France-KLM's agreement to pay a fine, Cathay agreed to pay a $60 million criminal fine, Martinair agreed to pay a $42 million criminal fine, and SAS agreed to pay a $52 million criminal fine.

According to the Department of Justice Antitrust Division, the total fines from the investigation in the air transportation industry are anticipated to reach $1.27 billion if the plea agreements are accepted. This would mark the highest total amount of fines ever imposed in a criminal antitrust investigation.

Last year, British Airways Plc and Korean Air Lines pleaded guilty and were each sentenced to pay a $300 million criminal fine. In January, Qantas Airways Limited pleaded guilty and was sentenced to pay a $61 million criminal fine for its role in the conspiracy. Japan Airlines in May pleaded guilty and was sentenced to pay a $110 million criminal fine for its role.

Further information regarding these most recent settlements appear at U.S. Antitrust Cases No. 4953 and 4956 (CCH Trade Regulation Reporter ¶45,108) and at the U.S. Department of Justice, Antitrust Division website.

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