The EC said the 12 airlines colluded to fix the price of fuel and new security surcharges © 123RF
The EC said the 12 airlines colluded to fix the price of fuel and new security surcharges © 123RF

Watchdog launches anti cartel campaign

posted by Su-San Sit
20 March 2017

The UK financial watchdog has launched a campaign against cartels following a massive rise in anti trust activities.

The Competition and Markets Authority (CMA), formed in April 2014, issued £142m of fines last year in relation to breaches of the Competition Act, compared to an annual average of £22m between 2012 and 2014.

The move comes after the European Commission (EC) reinstated fines totalling €776m on 11 major airlines for their role in operating a price-fixing cartel on air freight from 1999 to 2006.

Stephen Blake, senior director of CMA’s Cartels and Criminals Group said cartel agreements, where businesses decide to not compete with each other thus fixing prices for a product or service, had increased in the UK.

“We are seeing an increase in the number of cases and with that an increase in the number of fines,” he said.

“These types of agreements are the most damaging forms of anti-competitive agreement and we are focusing on them as the ultimate losers are customers, ordinary customers, businesses or even the taxpayer.”

The CMA said two furniture parts makers were fined £2.8m for agreeing not to compete on price and who would supply each customer.

Six estate agents in Burnham-on-Sea in Somerset were accused of fixing prices for their services in December 2015, which led to four being fined £372,233, according to the Telegraph.

The CMA said the campaign would see whistleblowers having their identities protected with the possibility of receiving up to £100,000 as a reward if the intelligence enabled authorities to take action.

Blake added the CMA’s leniency programme was aimed at encouraging those involved in cartels to confess, which could lead to a reduced fine and potential immunity from penalties, but would only be seen in a positive light if there was not already an ongoing investigation.

The EC originally imposed the penalties in November 2010, but were annulled by the European Union’s General Court in 2015 on procedural grounds, which ruled there was a technical discrepancy in the prosecution after the airlines appealed.

The EC said it had resolved the discrepancy and would be imposing the financial penalties on 11 air cargo carriers—Air Canada, Air France/KLM, British Airways, Luxembourg-based Cargolux, Hong Kong’s Cathay Pacific Airways, Japan Airlines, LAN Chile, Dutch cargo carrier Martinair, Australia’s Qantas, SAS Scandinavian Airlines and Singapore Airlines.

The fines were unchanged for all the airlines, except for the amount due from Martinair, which was cut to €15.4m from the €29.5m amount set in 2010.

Air France was fined the largest amount of €182.9m, followed by KLM with €127.1m, British Airways at €104.4m, Cargolux at €79.9m and Singapore Airlines at €74.8m. 

After the initial verdict, Australian carrier Qantas accepted the EC’s original ruling and did not participate in the legal challenge.

The EC added that a 12th member of the cartel, German carrier Lufthansa and its subsidiary Swiss International Air Lines, would be spared from the financial penalties after it applied for immunity in 2005 and revealed details of the arrangements between the airlines.

According to the EC, the arrangements were said to consist of collusion between the airlines at both bilateral and multilateral levels to fix the price of fuel and new security measures in the aftermath of the 9/11 terror attacks in the US.

EC commissioner-competition policy Margrethe Vestager said the decision to reinstate the penalties was a message to the cartel.

“Millions of businesses depend on air cargo services, which carry more than 20% of all EU imports and nearly 30% of EU exports,” she said.

“Working together in a cartel rather than competing to offer better services to customers does not fly with the Commission.

“Today’s decision ensures that companies that were part of the air cargo cartel are sanctioned for their behaviour.”

According to Air Transport World, the EU can fine companies participating in cartels up to 10% of their revenue in the year preceding the adoption of a verdict.

Scandinavian airline SAS and Air Canada said they would be appealing against the decision, while Air France-KLM, Cathay Pacific and Cargolux said they would review their options and consider whether to launch an appeal.

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