Transnational Antitrust—Airline Cargo Carriers

In a massive “worldwide cartel probe,” European, US, and South Korean antitrust officials have raided the offices of British Airways, Lufthansa, Air France-KLM, Japan Airlines, Cathay Pacific, United Airlines, Korean Air, Asiana Airlines, and several other air cargo companies.^[1] In addition, American Airlines and Polar Air have received subpoenas in the probe which is characterized by airline officials as focusing “on the way in which the industry imposed surcharges for items such as fuel and security, a process that some shippers said lacked transparency.”^[2]

In Europe, European Commission officials “carried out unannounced inspections at the premises of several EU member states,” and regulators have “reason to believe that the companies concerned may have violated” EU rules banning price-fixing.^[3] In the United States, Antitrust Division officials at the US DOJ are also investigating the industry.^[4] Polar Air and American Airlines have received subpoenas and are reported to be cooperating with the investigations; American stresses it is not a target of the investigation.^[5]

While the European Commission does not release the names of the companies it investigates, British Airways—which partners with American—has announced that it had received information requests from both the Commission and the US Antitrust Division, and that its offices at Heathrow and in New York had been raided.^[6] United “said that its cargo office in Frankfurt was targeted by European officials.”^[7]

Asian companies were targeted as well. Cathay Pacific—which noted that its offices in Frankfurt, Los Angeles, and San Francisco were raided—stated that it “is in strict compliance with the applicable legislation in all of its operating market.”^[8] Japan Airlines saw its Frankfort office raided, while South Korea’s Fair Trade Commission “raided the Gimpo offices of Korean Airlines Co. and Asiana Airlines”; the Commission’s spokesman, Park Hyun Chul would not confirm whether the raids were connected to the EU and US DOJ inspections.^[9]

In the United States, antitrust violations carry stiff criminal and civil penalties. The applicable law is the Sherman Act, 15 U.S.C. § 1, which states that every contract, combination, or conspiracy that restrains trade of commerce among states or foreign nations can be fined up to US$100 million, imprisoned for up to 10 years, or both. Corporate The antitrust laws of the US also explicitly provide for criminal penalties for the directors, officers, and agents of corporations which violate any of the penal provisions of the antitrust laws; they can be fined up to US$5,000, imprisoned for up to one year, or both.^[10]

Antitrust officials in the United States and the European Union have been quite busy recently. A couple of weeks ago, Elpida Memory was fined US$84 million for engaging in price-fixing in the DRAM market; this followed a similar guilty plea and fine for Samsung in the amount of US$300 million. This Spring, the US DOJ and Federal Trade Commission will be holding hearings on single-firm anti-competitive conduct.

At the end of December 2005, the EU conducted raids on companies in the telecommunications, construction, and banking industry; fines in the EU have been as high as €702 million. Microsoft, which is perpetually being investigated by the EU, is today facing a deadline “to answer European Union complaints that it has failed to comply with an antitrust ruling or face daily fines of up to nearly [US]$2.4 million.”^[11]

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[1] Tobias Buck, Airlines Raided in Worldwide Cargo Cartel Probe, Fin. Times, Feb. 15, 2006. (subscription only)
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] EU, U.S. Probe Airlines Over Cargo Units’ Extra Fees, Bloomberg, Feb. 15, 2006.
[9] Id.
[10] 15 U.S.C. § 24.
[11] Aoife White, Microsoft Faces Deadline to Answer EU Antitrust Complaints, Associated Press (via moneysense.ca), Feb. 15, 2006.