European Commission imposes fine of EUR 799 million on 11 air cargo carriers
The European Commission has fined 11 air cargo carriers, including Air Canada, Air France-KLM, British Airways, Cathay Pacific, Cargolux, Japan Airlines, LAN Chile, Martinair, SAS Singapore Airlines and Quantas, for participating in a worldwide price-fixing cartel relating to air cargo services. Apart from this fine, the airlines will likely be subject to numerous damages claims by customers seeking financial redress for the harm caused by the cartel.
The cartel
The cartel involved price-fixing arrangements among the air cargo carriers on fuel and security surcharges on routes within Europe as well as to countries outside the EU. The investigation into the cartel was initiated in February 2006 by the US Department of Justice, in cooperation with the European Commission and the Korean competition authority. The European Commission's fine will not be the only fine the air cargo carriers will need to pay, as the cartel has attracted the attention of competition authorities around the globe, including those in the United States, Canada, New Zealand and Korea.
The status so far is British Airways, Korean Airlines, Air France, KLM and Martinair, Cathay Pacific Airways, SAS Cargo Group and Cargolux agreed to plead guilty to charges brought by the Department of Justice in the US and pay fines totalling USD 1,223 million. The Canadian Competition Bureau imposed fines of over CD 10 million on Quantas Airways, Air France, KLM and Martinair for participating in the air cargo cartel in so far as it affected Canada. The Korea Fair Trade Commission ("KFTC") levied fines totalling 119 billion won on 19 airlines for their participation in the air cargo market. The KFTC found the cartel to have covered four cargo routes, outbound shipments from Korea, and inbound shipments to Korea from Hong Kong, Europe and Japan.
Damages
The air cargo carriers are not only faced with heavy fines by the competition authorities worldwide, but also need to brace themselves for damage claims by customers seeking financial redress. Damage claims have so far been initiated in Australia, France, the Netherlands, the UK and the United States. In the US, SAS Cargo, Lufthansa, Air France, KLM and Martinair have agreed to pay settlements totalling approximately USD 186 million. In the EU, jurisdiction is generally to be exercised by the courts of the Member State where a) the defendant is domiciled/has its seat in that state or b) the damage or behaviour causing the damage has occurred. The Netherlands is considered as an attractive jurisdiction in the EU to initiate damage claims. Recently, the conditions for collective settlements of mass claims have improved in the Netherlands as well, as a Dutch court held that a collective settlement in a mass litigation case can be declared binding on all class members on an "opt out" basis and such a decision has to be recognised in the rest of Europe.
- IP/10/1487 of 9 November 2010 by the European Commission.
- Legal alert on collective settlement opportunities in the Netherlands of 15 November 2010.
Closer cooperation between China and the EU on competition
Cooperation between the EU and China on competition issues is likely to increase due to the recent signing of a memorandum of understanding by the UK's Office of Fair Trading with China's State Administration for Industry & Commerce, as well as last December's High Level Economic and Trade Dialogue including competition issues.
The UK's Office of Fair Trading has signed a memorandum of understanding with China's State Administration for Industry & Commerce aimed at setting common competition standards. In addition, last December's High Level Economic and Trade Dialogue ("HED") included topics such as the international economy, competition issues, trade and investment, innovation and customs cooperation. With regard to competition, the discussion aimed at achieving greater convergence in the area of competition policy at a global level. The involvement of competition authorities worldwide in the investigation of the air cargo cartel mentioned above serves as a good example as to why unified global competition enforcement seems of ever-increasing significance.
- Press release by Foreign & Commonwealth Office of 16 November 2010.
- MEMO/10/689 of 21 December 2010 by the European Commission.
- IP/10/1754 of 20 December by the European Commission.
Google under scrutiny by various competition authorities
The European Commission, as well as the French, German and Italian competition authorities have been investigating Google for possible abuse of a dominant position.
The European Commission announced in November last year to have initiated an investigation into possible abuse of dominance by Google on the online search market, after having received complaints of, inter alia, unfavourable treatment of search service providers in Google's unpaid and sponsored search results by lowering the ranking of unpaid search results of competing services to the benefit of its own vertical search services.
The French competition authority closed an investigation into Google's behaviour regarding its policy regarding content on its AdWords online advertising platform in October 2010 after having received commitments by Google to resolve its concerns. In a separate inquiry into the online advertising sector, the French competition authority has, however, concluded that Google holds a dominant position on the market for online advertisement search. Google also offered commitments to the Italian competition authority in order to close the investigation into possible abuse of a dominant position by unfavourable treatment of publishers in the online advertising market through its news portal. The German competition authority referred two complaints against Google to the European Commission, but is still looking into allegations of copyright infringement and Google's free usage of newspaper content in Google News.
It is not clear when the European Commission will finish its investigation into Google's behaviour, although it's safe to say that Google will tread carefully under the watchful eye of several competition authorities.
- MEMO/10/47 of 24 February 2010 by the European Commission.
- IP/10/1624 of 30 November by the European Commission.
- Decision no. 10-D-30 of 28 October 2010 by the French competition authority.
- Sector inquiry of 14 December 2010 by the French competition authority.
- Decision of 14 May 2010 by the Italian competition authority.
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