The European Commission announced yesterday that it has fined 11 airlines a total of €800 million for operating a global cartel in relation to air cargo prices.
The Commission investigation found that the airlines had colluded to set a flat-rate fuel surcharge on cargo, in addition to colluding over a "security surcharge". Their collusion meant that the surcharges were always applied in full and so could never become subject to competition (i.e. an airline would never offer lower surcharges to try and undercut competitors). In effect, the airlines had fixed an important element of their pricing upon which they would otherwise compete. The Commission found that this was in breach of EU competition law rules.
The Commission Vice-President for Competition, Joaquin Almunia, stated: "It is deplorable that so many major airlines coordinated their pricing to the detriment of European businesses and European consumers. With today's decision the Commission is sending a clear message that it will not tolerate cartel behaviour".
The parties involved reads like a "who's who" of the airline industry - Air France (and subsidiary KLM), British Airways, Cathay Pacific Airways, Qantas, SAS, Singapore Airlines, and Lufthansa (and subsidiary Swiss International Airlines) have all been found guilty. Lufthansa and Swiss International Airlines received 100% immunity from being fined, whilst the biggest fine (€182m) was received by Air France.
British Airways received a fine of €104m (approximately £90 million). Of course, this is not the first time that British Airways has been fined for fixing the level of flight surcharges. Back in 2007, it was fined a record £121 million for fixing the level of fuel duty surcharges as applied to long haul flights. In that case, its co-conspirator (Virgin Atlantic) received full immunity for being first to confess.
This latest case highlights several points. Firstly, it is unlawful to conspire with your competitors to fix any aspect of your pricing. Secondly, it shows the benefits of being first to the Commission's door with information about the cartel - 100% immunity from fines is a very attractive proposition indeed. Even if you are not first, there may be substantial reductions available for a timely decision to cooperate with the authorities. Any businesses who think they may be operating as part of a cartel should therefore consider the consequences of this, and the options of immunity and leniency that could be available. Finally, this again emphasises that the Commission (and indeed the OFT) will come down hard on cartel behaviour of any sort.
More details of the Commission investigation are available on the Commission website here.