The global air cargo cartel was about the biggest price fixing racket ever busted. Name an airline, and you can be pretty sure it was involved.
Back in the mid nineties, the airlines started co-operating globally to fix prices on air cargo fuel and security surcharges. When they got caught, most airlines pleaded guilty, but they still copped massive penalties. In Australia alone airlines paid around $100M in fines. Qantas led the Australian field at $20M, and globally it paid fines of over $105M.
That’s why competition nerds everywhere fell off their chairs last week when news broke that Garuda Indonesia and Air New Zealand had defended the case against them in Australia, and won. After 5 years of litigation, the ACCC’s prosecution failed on a technicality.
The judge found that both airlines had been involved in price fixing, although not to the extent that the ACCC alleged. And a lot of the conduct occurred more than six years before the case commenced, meaning that the ACCC would not have obtained penalties for it even if it had won.
But the ACCC’s biggest problem was that the price fixing didn’t occur in an Australian market, putting it outside the reach of the (then) Trade Practices Act provisions. The ACCC’s case principally related to cargo flights into Australia, and the judge decided that the relevant market was the market for air cargo services in the origin country, not in Australia.
The price fixing laws have changed since this conduct occurred and, under the new laws, we think the outcome would have been different. The new rules prohibit price fixing conduct between competitors. Competitors do not have to be competitors ‘in a market’, but competitors in relation to the supply of the relevant goods or services the subject of the price fixing.
The legislation extends to conduct, but not to markets, outside Australia. That means that, under the new rules, the price fixing conduct would have been caught and the airlines would likely have lost.
Talk about dodging the bullet.