McR Collared: Air New Zealand embroiled in cartel operation

On 10 May 2016, the Australian reported that Air New Zealand has settled a cargo cartel case from 2006 in the US for $47.4m AUD.

Put simply, Air New Zealand was alleged to have participated in price fixing, a form of cartel conduct, along with 28 other airlines, including Qantas, who allegedly formed part of the cartel in relation to air cargo fuel and security surcharges between 2000 and 2006.

Under Australian law, a contract, arrangement or understanding is prohibited if it contains a ‘cartel provision’ i.e. it contains a provision relating to:

price-fixing
restricting outputs in the production and supply chain
allocating customers, suppliers, or territories, or
bid rigging,

by parties that are or would otherwise be, in competition with each other (s 44ZZRA Competition and Consumer Act 2010 (Cth)). Breaching these provisions allows for both civil and criminal penalties to be imposed on corporations and individuals involved.

In associated proceedings in Australia, the Full Court of the Federal Court (ACCC v PT Garuda Indonesia [2016] FCAFC 42) has recently found that price fixing engaged in by Garuda and Air New Zealand in relation to the imposition of agreed surcharges on the carriage of air cargo from ports outside Australia, into Australia, breached Australian anti-cartel laws. The total fines in relation to this cartel, not counting Air New Zealand and Garuda, amount to $98.5m AUD.

In light of this recent settlement, it is pertinent for businesses to consider whether the contracts, arrangements, or understandings they are a party to, give effect to a cartel provision. This is especially so as it remains an enduring priority area for the ACCC.