Garuda fined $13 million for role in cargo price fixing



Australia’s Federal Court has ordered PT Garuda Indonesia Ltd (Garuda) to pay penalties of AUD 19 million (USD 13 million) for colluding on fees and surcharges for air freight services in what looks to be the final chapter in the long running price fixing saga.

The fine follows the Australian Competition and Consumer Commission’s (ACCC) court action against a global air cargo cartel, which has so far resulted in penalties of AUD 132.5 million against 14 airlines, including Air New Zealand, Qantas, Emirates, Japan Airlines, Singapore Airlines and Cathay Pacific, amongst others. Garuda’s fine is the second hightest meted out, after Qantas’ USD 17 million, while Air New Zealand was penalised the third highest amount at USD 12 million.

Australia price fixing

The Court found that between 2003 and 2006, Garuda made and gave effect to agreements that fixed the price of security and fuel surcharges, as well as a customs fee from Indonesia. As a result of these findings it was ordered to pay AUD 15 million plus a further AUD 4.0 million for the imposition and level of insurance and fuel surcharges from Hong Kong.

Garuda Indonesia VP corporate secretary M. Ikhsan Rosan says the airline denies any price fixing, adding that the fine of AUD 19 million was excessive because when the case concerned cargo valued at USD 1.09 million from Indonesia and USD 656,000 from Hong Kong, according to the Jakarta Post.

“Price fixing is a serious matter because it unfairly reduces competition in the market for Australian businesses and consumers, and this international cartel is one of the worst examples we have seen,” ACCC chair Rod Sims says in a statement.

“We are committed to pursuing cartel conduct from both domestic and overseas operators, and think the total penalty ordered against all the airlines involved sends a strong deterrent message, particularly when it comes to international anti-competitive conduct.”

“The ACCC has recently entered more formal agreements with the FBI [US Federal Bureau of Investigation] on cooperation and information sharing, and has strong links to other competition regulators worldwide, which mean our scope is much broader than Australian businesses,” Sims adds.

This case is a long running one for the ACCC, with the Federal Court initially dismissing the ACCC’s case against Air New Zealand and Garuda in 2014. The ACCC appealed the decision and the Full Court of the Federal Court upheld the ACCC’s appeal. Garuda and Air NZ appealed the decision to the High Court, which subsequently unanimously dismissed the appeal.

“We are pleased to finally have resolution of this matter, which confirms our view that it was an important matter for us to appeal.” Justice Perram also ordered Garuda to pay the ACCC’s legal costs.

The ACCC commenced legal action against 14 international airlines between 2008 and 2010 under the Trade Practices Act (1974) for conduct that occurred between 2002 and 2006.

All goods imported to Australia during the period by the airlines subject to ACCC litigation were impacted by the illegal price agreement including car parts, electronics, vegetables, seafood, flowers, and in one specific circumstance, meat to Australian troops in the Middle East.

Competition regulators around the world have taken action in relation to the air cargo cartel, with fines or penalties ordered against various airlines in Europe, the United States, Korea, New Zealand, Canada, and India.

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