Carriers pay up for cargo price fixing

Washington DC
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The air cargo price fixing case that began in February with raids of airline offices could yield more than $1 billion in civil damages even before any government charges are filed.

US antitrust division and European Commission (EC) officials are still probing alleged cartel activity that raised the price of fuel and security surcharges and insurance charges on air cargo. However, several major carriers, led by Lufthansa, have agreed to settle separate but related civil class-action charges brought by law firms on behalf of airfreight forwarders and others.

Lufthansa’s $85 million settlement offer, revealed in mid-September, is just a small part of the possible total, according to the lead attorney. Paul Gallagher of Washington firm Cohen, Milstein, Hausfeld & Toll says damages “could total well in excess of $1 billion, based on the market shares of the carriers”.

Lufthansa, in a brief statement, says only that it will be released from the civil actions and that it has “applied for leniency to the US Department of Justice, the EU Commission and other cartel authorities in other countries and received conditional immunity”.

By coming forward as a whistleblower or co-operating party, Gallagher says, “Lufthansa acted responsibly and its actions should go long way toward rebuilding its relationships with forwarders and other air cargo customers”.

American and United have agreed to similar settlements without financial penalties. But they are unable to join Lufthansa as an “amnesty applicant” because such a role can only be played by one party. The US Justice Department antitrust investigation could continue with or without charges, it says. The agency declines to comment on the status of its probe. But American Antitrust Institute president Albert Foer says the USA is likely to move aggressively against foreign cartels as EC/US trade tensions increase.

The alleged price-fixing activities extend as far back as 2000, according to Lieff, Cabraser, Heimann & Bernstein, a San Francisco antitrust firm. More than 20 carriers from Asia, Europe and North America are named as defendants in the class-action suits, which represent several cargo shippers and their industry associations.

The lawsuit alleges cargo carriers, by publicly announcing their surcharges, in effect signalled each other, which would be a classic violation of antitrust laws. The carriers “really reached an agreement by express understanding and handshakes to raise prices above what they should have been had they been competitive”, says Michael Hausfeld of Cohen, Milstein, Hausfeld & Toll. ■