European competition law regulator has fined 14 freight forwarding companies that violated EU antitrust rules. The freight forwarders colluded on surcharges and charging mechanisms on important routes on the Europe-to-U.S. and China/Hong Kong-Europe trade lanes.
Price Fixing Cartel:
The European Commission1 (“Commission”) imposed a 169 million Euros fine to 14 freight forwarding companies that participated in four different cartels between 2002 and 2007, which aimed at fixing prices and other trading conditions on international freight forwarding services. Article 101 of the Treaty on the Functioning of the European Union prohibits cartels and restrictive business practices. The Commission in its press release stated that, four types of cartels were operated during a five year period – the new export system cartel, the advanced manifest system cartel, the currency adjustment factor cartel and the peak season surcharge cartel. The cartelists established and coordinated different surcharges and charging mechanisms which formed component elements of the final price billed to customers for freight forwarding services.
According to the Commission, the cartelists took specific measures to conceal their anti-competitive conduct. In the new export system cartel, code names based on names of vegetables such as asparagus and baby courgettes were used while fixing prices. The participants of the cartels were fully aware of the illegal nature of their activities, and used specific measures to conceal their behaviour which included using non-professional email boxes to engage in anti-competitive discussions.
NES & AMS Cartels:
According to the Commission the freight forwarders involved in the “new export system” (NES) cartel, fixed surcharges according to the size of the customer, to combat the introduction of the electronic declaration of exports in 2003 by UK. In 2003-2004, a group of forwarders agreed to introduce a surcharge for the "advanced manifest system" (AMS) which refers to a regulatory requirement by the US customs to provide advance information on goods to be shipped to the US. Both the NES and AMS cartels related to exports from Europe to the rest of the world and from Europe to the US.
CAF & PSS Cartels:
Some of the freight forwarders agreed in shifting the currency of the contracts from USD to RMB (following the appreciation of the Chinese currency) against the USD in 2005. In the event the shift was not possible the forwarders had agreed on the introduction of a “currency adjustment factor” (CAF) surcharge and on its level. With respect to the “peak season surcharge” (PSS) cartel the freight forwarders agreed on the introduction and timing of a PSS, to be charged during the peak season transport period in the run up to Christmas (from September to December). Such discussions between the freight forwarders were a part of the "Breakfast Meetings" held in Hong Kong where the cartelists discussed the level of the surcharge. Both the CAF and PSS cartels related to the imports of goods from China/ Hong Kong to Europe.
Fines & Companies:
The Swiss logistics firm Kuehne & Nagel will have to pay the highest fines amounting to a total of 53.67 million Euros. Other cartel participants that were fined include well know freight forwarders such as United Parcel Service Inc. (UPS), Panalpina World Transport Ltd, Nippon Express (China) Co Ltd., Expeditors International of Washington, Inc, UTi Worldwide Inc, Beijing Kinetsu World Express Co Ltd. and other companies.
DHL’s parent company Deutsche Post (including its subsidiaries DHL and Exel) received full immunity from fines for its cooperation and for informing the regulator about the cartel. Deutsche Bahn AG, Schenker AG, Schenker China Ltd, Ceva Freight Shanghai Limited, Agility Logistics Limited (Hong Kong) and Yusen Shenda Air & Sea Service (Shanghai) Co. received fine reductions for co-operating with the regulators.
The Commissions’ decision is open for a possible appeal from the companies that have been fined.