Air Cargo: Department of Justice finds more carriers at fault in price-fixing scheme

Patrick Burnson -- Logistics Management, 6/30/2008

SAN FRANCISCO— Major international airlines–Société Air France (Air France), Cathay Pacific Airways Limited (Cathay), Koninklijke Luchtvaart Maatschappij N.V. (KLM Royal Dutch Airlines), Martinair Holland N.V. (Martinair), and SAS Cargo Group A/S (SAS)– have agreed to each plead guilty and pay criminal fines totaling $504 million for participating in a multi–year conspiracy to fix prices for air cargo rates, the Department of Justice announced late last week. 

Of the $504 million in fines, Air France-KLM, which now operates under common ownership by a single holding company, has agreed to pay a $350 million criminal fine, the second highest fine ever levied in a criminal antitrust prosecution.

British Airways PLC, Korean Air, Qantas Airways Ltd. and Japan Airlines Corp. pleaded guilty to similar charges earlier in June, and have been fined. In an interview with LM today, DoJ spokesman said yet more carriers may be named as violators. 

“We are not free to say which ones we are looking at,” said Gina Talamona, “but we are conducting an ongoing investigation.”

According to the charges filed last week in the U.S. District Court for the District of Columbia, the airlines each engaged in a conspiracy to suppress and eliminate competition by fixing the cargo rates charged to shippers for international air shipments. The charged conduct affected billions of dollars of consumer and other goods–including produce, clothing, electronics and medicines–shipped by these airlines and their competitors in the air cargo industry. 

The plea agreements are subject to court approval. Along with Air France-KLM’s $350 million fine, Cathay has agreed to pay a $60 million criminal fine, Martinair has agreed to pay a $42 million criminal fine, and SAS has agreed to pay a $52 million criminal fine. If the court accepts the plea agreements, it would bring the total fines imposed in the Antitrust Division’s investigation in the air transportation industry to more than $1.27 billion, marking the highest total amount of fines ever imposed in a criminal antitrust investigation.