KEY POINTS:
Air NZ, along with 12 other airlines is being accused of being part of a $2.9 billion price-fixing cartel which jacked up cargo charges for New Zealand importers and exporters.
Competition regulator the Commerce Commission announced this morning that action in the High Court would begin against 13 airlines and seven airline staff, including senior executives, for "extensive and long-term cartel activity in the air cargo market."
It says that airlines throughout the world colluded to raise the price of freighting cargo by imposing fuel surcharges for more than nine years.
A fine "in the tens of millions of dollars" will be sought by the commission from the airlines.
At a press conference just concluded in Auckland, Commerce Commission chair Paula Rebstock said the probe had been triggered by one of the airlines taking advantage of its "leniency" policy, where a cartel member can inform on the others in exchange for immunity.
She would not name which airline had originally come forward, but did say that both Qantas and British Airways had been co-operating with the commission for more than a year.
The executives are not being named by the commission, since there is a possibility they may get name supression.
Rebstock says the total revenue affected by the cartel operating in and out of New Zealand was $2.9 billion.
The price-fixing had caused "extensive harm to the New Zealand economy."
Air NZ, which is 80 per cent owned by the Government, has yet to comment on the cartel charge, but is expected to issue a statement early this afternoon.
News of the prosecution will come as no surprise to the airlines, as they are under similar scrutiny by other competition authorities around the world including the US Department of Justice, the Australian Competition and Consumer Commission and the European Commission.
In June four international airlines - Air France/KLM, Cathay Pacific, SAS Cargo and Martinair agreed to pay the US Justice Department more than half a billion dollars in fines for its part in the air cargo cartel in one of the largest antitrust settlements in US history.
Associate Attorney General Kevin O'Connor called the scam an "international price-fixing cartel" that cost consumers hundreds of millions of dollars between 2001 and 2006. In some instances, for example, fuel surcharges rose by 1,000 per cent.
Earlier, British Airways, Korean Air, Qantas and Japan Airlines filed similar agreements as part of the investigation.
In all, airlines have now agreed to pay more than $1.2 billion in fines.
Air NZ has said it has made no provision for any fine or penalty that may be levied as part of the global cartel investigations.
Just last week Qantas was ordered to pay $24.6 million by the Federal Court of Australia for breaching the price-fixing provisions of the Australian Trade Practices Act.
The NZ Commerce Commission says the cartel started in 1999, under the auspices of the trade organisation International Air Transport Association (IATA). The airlines imposed the fuel surcharges between 2000 and 2006. The allegations also involve a series of regional price fixing agreements.
In addition, the commission says a number of airlines conspired to price fix through the imposition of a security surcharge immediately following the 9/11 terrorist attacks.
The airlines the Commerce Commission is filing proceedings against are:
* Air New Zealand
* British Airways
* Cargolux International Airlines
* Cathay Pacific
* Emirates
* Garuda
* Japan Airlines International
* Korean Airlines
* Malaysian Airlines
* Qantas
* Singapore Airlines
* Thai Airways
* United Airlines
Rebstock said some airlines are cooperating with the Commission and an early resolution may be possible in some cases.
Airlines earn more than an estimated $400 million each year transporting air cargo to and from New Zealand, and over the nine years this agreement was in place the total revenue was approximately $2.9 billion, said Rebstock.
"The alleged collusion to impose additional charges will have caused extensive harm to the New Zealand economy. New Zealand is a long way from its overseas markets and so the harm to our economy and our ability to compete internationally will have been disproportionately greater than in other jurisdictions in which the conduct took place," she said.
"Many New Zealand businesses and every consumer will have been directly affected by the increased air freight costs over many years. It will have resulted in increased costs for exporters and importers and higher overall prices for many consumer goods."
"Anti-cartel enforcement activity is a priority for the commission," said Rebstock. "Participation in cartel activity is internationally regarded as one of the most egregious forms of anti-competitive behaviour. It results in consumers and businesses paying higher prices and having less choice than if competitors were competing honestly. "
Rebstock said cartels had grown on a worldwide basis and often operated at a global level. Importantly, cartels undermined New Zealand's international competitiveness, she said.
"Cartels are insidious, they are difficult to detect and extremely difficult to investigate because of their secretive and international nature."
- HERALD ONLINE
