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Air NZ ordered to pay A$15 mln for role in fixing cargo prices, security fees

Wednesday 27th June 2018

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Australia's Federal Court has ordered Air New Zealand to pay A$15 million for its role in a global air cargo cartel through the middle of last decade.

New Zealand's national carrier and Indonesia's PT Garuda were the two hold-outs protesting their innocence in Australia in the long-running price-fixing claim. The case has spanned multiple jurisdictions in several countries, and has been going well over a decade.

In Australia alone, thirteen other airlines have settled with the Australian Competition and Consumer Commission.

Australia's High Court last year rejected the appeal from Air NZ and Garuda. Today the Federal Court ordered Air NZ to pay A$11.5 million for fixing fuel surcharges on cargo from Hong Kong to Australia and a further A$3.5 million over the insurance and security surcharge from Singapore to Australia, the ACCC said in a statement. Air NZ also agreed to pay A$2 million towards the regulator's costs.

"These illegal price fixing agreements unfairly reduced competition for the transport cost for goods flown into Australia," ACCC commissioner Sarah Court said. "Our efforts over the last decade and these significant penalties make clear the ACCC’s commitment to tackling cartels."

The original court action, brought by the ACCC, was dismissed in 2014 in a ruling that found the behaviour didn't occur in a “market in Australia” as was required by the Trade Practices Act 1974 that was in force at the time. The ACCC appealed that ruling to the full Federal Court, which took the regulator's side in 2016.

Air NZ's penalty is the second largest handed out in Australia in the case, behind Qantas Airways' A$20 million fine in 2008. Since the ACCC first launched its investigation in 2006, penalties totalling A$113.5 million have been imposed against 14 airlines. PT Garuda's penalty hearing was held this week with the judgment reserved.

New Zealand's national airline avoided prosecution in other jurisdictions, with European and US regulators dropping their claim against Air NZ. Our national carrier was also excluded from a class action settlement in Australia and clawed back $3.2 million in legal fees.

The airline spent $10 million defending a claim from the New Zealand Commerce Commission, before cutting a $7.5 million settlement with the regulator, ending the domestic leg of the global cartel action in 2013. The Commerce Commission reached settlements with 11 carriers, securing penalties totalling $45 million, or about 10 percent of the revenue generated from air freight forwarding services in and out of New Zealand in 2006.

Air NZ said the decision wouldn't affect earnings guidance for the year ending June 30.

The shares rose 1.3 percent to $3.19.


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