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Current as of 26/12/14 07:40PM NZST

Owen Hembry

Business news editor of the New Zealand Herald

Airlines' price fix case starts in court

Photo / Thinkstock
Photo / Thinkstock

Battle lines will start being drawn this week in a cartel case by the Commerce Commission against carriers including Air New Zealand at the High Court at Auckland.

The commission's case alleges airlines colluded to raise the price of freighting cargo.

It accuses Air New Zealand, Cathay Pacific, Emirates, Japan Airlines, Korean Air, Malaysian Airlines, Singapore Airlines Cargo and Singapore Airlines, and Thai Airways.

The first stage of the cartel case starts on Wednesday and will lay the ground for the remainder of the case due in July next year to deal with the price-fixing allegations.

The commission said the key issue for the first stage was the meaning of a market in New Zealand and whether air cargo services inbound to the country were part of such a market.

Commerce Commission general counsel for enforcement Mary-Anne Borrowdale said in March the commission was preparing to test whether it could pursue price-fixing conduct that occurred overseas.

"We need to know whether deliberate collusion overseas to affect New Zealand markets is something that we can take enforcement action against," Borrowdale said.

The Herald understands that if the court finds the commission has no jurisdiction over the inbound market, the second part of the trial next year will be limited to the outbound market.

Possible appeals of the first ruling would need to be heard before the second hearing.

Air New Zealand general counsel John Blair last month said the carrier had maintained from the start of the commission's investigation more than five years ago, that neither the airline nor its employees had committed any breach of the Commerce Act.

The NZX-listed airline, which is 74.7 per cent owned by the Government, said it had successfully defended its position and practices at the European Commission after a probe into the cargo activities of 22 airlines, and had also been cleared last year after an investigation by the Korean Fair Trade Commission.

Air New Zealand shares closed up 1c on Friday at $1.13.

Goldman Sachs head of research Marcus Curley said the market was not showing much concern about the case.

"[It] would be of the belief that any potential fine if there was one would be somewhat irrelevant compared to the broader business," Curley said.

The New Zealand Commerce Commission started proceedings in 2008 against 13 international airlines and eight executives, alleging the carriers colluded to raise the price of freighting cargo by imposing fuel surcharges on shipments in and out of New Zealand.

Proceedings have been dropped against United Airlines, PT Garuda Indonesia and six Air New Zealand executives.

The two airline executives remaining as part of the case are not employees of Air New Zealand.

The commission in March said Qantas Airways, British Airways and Cargolux International Airlines had agreed settlements, which involved admitting liability and paying penalties.

The High Court in Auckland last month imposed penalties against Cargolux International Airlines and British Airways of $6 million and $1.6 million respectively.

Qantas in March said the terms of its settlement with the commission were confidential but included an agreement to recommend to the High Court that the airline pay a $6.5 million fine. The court judgment is pending.

"Qantas will continue to co-operate fully with the commission in its prosecution of other airlines," the Australian carrier said.

The first part of the cartel case is due to start on Wednesday and is expected to last five weeks.

CARTEL CASE

The New Zealand Commerce Commission started proceedings in 2008 against 13 international airlines and eight executives alleging the carriers colluded to raise the price of freighting cargo by imposing fuel surcharges on shipments in and out of New Zealand.

DROPPED
United Airlines, PT Garuda Indonesia and six Air New Zealand executives.

SETTLED
Qantas Airways, British Airways, Cargolux International Airlines.

DEFENDING
Air New Zealand, Cathay Pacific Airways, Emirates, Japan Airlines International, Korean Air Lines, Malaysian Airlines System Berhad, Singapore Airlines Cargo and Singapore Airlines, Thai Airways International Public and two airline executives (not from Air New Zealand).

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