Qantas hit with record $6.5 million fine

By Owen Hembry

Qantas has agreed to co-operate with the Commerce Commission in its ongoing prosecution of other airlines, including Air New Zealand. Photo / Paul Estcourt
Qantas has agreed to co-operate with the Commerce Commission in its ongoing prosecution of other airlines, including Air New Zealand. Photo / Paul Estcourt

Qantas Airways has paid the biggest penalty in New Zealand for price-fixing, says the Commerce Commission.

Qantas was ordered to pay $6.5 million by the High Court at Auckland yesterday after admitting it breached the Commerce Act.

The penalty had been recommended to the court by the commission and Qantas as part of a pre-trial settlement in an air cargo cartel case.

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

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

Qantas said in March it would continue to co-operate fully with the commission in its prosecution of other airlines.

In his judgment Justice Christopher Allan noted the commission had filed proceedings against a number of other international airlines alleging similar participation in the cartel.

"It is appropriate to record here that any factual admissions made by Qantas are limited in their application to this proceeding only," he said.

The judgment said the parties had agreed on a starting point of $13 million for the penalty and that a 50 per cent discount was appropriate for mitigating factors.

The High Court at Auckland last month imposed penalties against Cargolux International Airlines and British Airways of $6 million and $1.6 million respectively, bringing the total for settlements to $14.1 million.

Commerce Commission general counsel for enforcement Mary-Anne Borrowdale said when parties admitted breaches of the act early and co-operated with its investigation there were significant benefits for them "and it is in the public interest, since court hearings can be a costly and drawn-out way of resolving matters".

"It is appropriate to recognise that Qantas admitted its price-fixing at the very earliest opportunity, and is providing genuine assistance with the commission's case against the defending airlines," she said.

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 employees of Air New Zealand - are defending the case.

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

The first stage of the case continued in the High Court at Auckland yesterday and was expected to take five weeks.

The commission has said the issue in 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.

The case will continue in July next year to deal with the price-fixing allegations.

- NZ Herald

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