SIA fined S$112 million for allegedly being part of price–fixing cartel

Singapore Airlines Airbus A380-841 taxis around CDG Airport on March 29, 2010. Singapore Airlines is the flag carrier of Singapore. It was the launch customer of Airbus A380 from Shutterstock.com

The European Commission (EC) has re-adopted a cartel decision against 11 air cargo carriers, one of which is Singapore Airlines (SIA), and imposed a fine totalling €776,465,000 (S$1.2billion) for operating a price–fixing cartel, adding that the Commission's original decision was annulled by the General Court on procedural grounds.

SIA will be fined S$112 million under the new decision.

Commissioner Margrethe Vestager, in charge of competition policy, said, "Millions of businesses depend on air cargo services, which carry more than 20 percent of all EU imports and nearly 30 percent of EU exports. Working together in a cartel rather than competing to offer better services to customers does not fly with the Commission."

"Today's decision ensures that companies that were part of the air cargo cartel are sanctioned for their behaviour," she added.

EC noted that in November 2010, the Commission imposed fines of nearly €800 million (S$1.2billion) on 11 air cargo carriers who participated in a price-fixing cartel, from December 1999 to February 2006, in the airfreight services market covering flights from, to and within the European Economic Area.

The Commission said that the cartel arrangements consisted of numerous contacts between airlines, at both bilateral and multilateral level to fix the level of fuel and security surcharges.

The companies fined in 2010 were Air Canada, Air France-KLM, British Airways, Cargolux, Cathay Pacific Airways, Japan Airlines, LAN Chile, Martinair, Qantas, SAS and Singapore Airlines. A 12th cartel member, Lufthansa, and its subsidiary, Swiss International Air Lines, received full immunity from fines.

EC stressed that all but one of the companies (Qantas) subject to the 2010 decision challenged the decision before the EU's General Court. In December 2015, the General Court annulled the Commission's decision against the 11 cartel participants that appealed, concluding that there had been a procedural error. However, it did not rule on the existence of the cartel.

In December 2015, EC stated that the General Court annulled the Commission's decision against the 11 cartel participants that appealed, concluding that there had been a procedural error. However, it did not rule on the existence of the cartel.

The Commission said it maintains that these air cargo carriers participated in a price-fixing cartel and is adopting a new decision and re-establishing the fines. This new decision addresses the procedural error identified by the General Court while remaining identical in terms of the anticompetitive behaviours targeted by the Commission.

"The decision confirms that the Commission will not let cartels go unpunished. Cartels are illegal and cause consumers and business to suffer," it said.

The fines were set on the basis of the Commission's 2006 Guidelines on fines.

The individual fines are as follows:

EUEC noted that the investigation started as a result of an immunity application by Lufthansa filed in December 2005.

In February 2006, the Commission carried out unannounced inspections at the premises of a number of providers of airfreight services.

In November 2010, the Commission adopted a decision against 12 air cargo carriers imposing fines totalling €799,445,000 (S$1.2 billion).

In December 2015, the Court annulled the Commission's 2010 decision after finding a discrepancy between the reasoning and operative part of the decision.

EC stated that the reasoning part of the decision described the infringement as a single and continuous infringement covering all addressees. However, some articles of the operative part suggested that there were four separate infringements with only some addresses participating in all four.

The Commission's March 2017 Decision addresses the Court's conclusions by bringing the operative part in line with the reasoning part.

EC has announced that any person or company affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the Court and Council Regulation 1/2003 both confirm that in cases before national courts, a Commission decision constitutes binding proof that the behaviour took place and was illegal.

Even though the Commission has fined the cartel participants concerned, damages may be awarded without being reduced on account of the Commission fine.

SIA has stated that it would appeal against the new decision.

This entry was posted in Current Affairs.