Australia's High Court rules in favour of competition regulator in air cargo cartel case

14 / 06 / 2017

Price fixing agreements entered into between Air New Zealand (Air NZ), Garuda Indonesia (Garuda) and other international airlines, breached Australia’s competition law, the High Court of Australia has found.

The ruling, on airline agreements in place between 2002 and 2006, is the latest legal twist in an action started seven years ago by the Australian Competition & Consumer Commission (ACCC).

The principal issue on appeal was whether there was a market "in Australia" for the air cargo services for which the airlines competed for the purposes of the Trade Practices Act 1974  (TPA"). The High Court held that the findings of fact made by the primary judge led to the conclusion that there was such a market. 

"This is a significant win for the ACCC in the long-running, highly contested air cargo cartel proceedings,” ACCC commissioner Sarah Court said.

The ACCC took action against Air NZ in 2009 and Garuda in 2010, alleging they colluded with other airlines on charges for fuel, security, insurance surcharges, and a customs fee, for the carriage of airfreight from origin ports in Hong Kong (both airlines), Singapore (Air NZ) and Indonesia (Garuda) to destination ports in Australia. 

Under the law as it then stood, the ACCC was required to establish that the conduct occurred in a ‘market in Australia’.

The High Court dismissed by a majority the appeals by each airline and held that all aspects of the market, including the presence of customers in Australia, need to be considered in deciding whether a market is ‘in Australia’.

“How a market is defined, including considerations of whether conduct occurs in Australia, are critical issues to the understanding and interpretation of Australian competition law,” ACCC's Court said.

She added: “Today’s judgment sends a clear message that the ACCC is committed to pursuing cartel conduct that impacts on Australian business and consumers.”

The matters against Air NZ and Garuda will be remitted to the Federal Court for a hearing as to relief, including penalty.

Between 2008 and 2010, the ACCC took proceedings against 15 international airlines. 13 airlines settled, with Federal Court judges imposing penalties totalling A$98.5m.

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 US, Korea, New Zealand, Canada, and India.

The airlines conduct occurred between 2002 and 2006 under the Trade Practices Act (1974), before the Competition and Consumer Act (2010) came into effect.

In March 2016, Australia’s Federal Court upheld an appeal by the ACCC over the air cargo cartel allegations against Garuda Indonesia and Air NZ, following an October 2014 decision when the federal court had originally dismissed air cargo cartel proceedings against both carriers. 

Both Air NZ and Garuda have yet to comment on the latest ruling.