Cartel case out of line, say airlines

Air New Zealand is among the defendants. Photo / APN

A Commerce Commission cartel case against several major airlines - including Air New Zealand - is an attempt to extend jurisdictional reach beyond the proper scope of the act, the carriers say.

The commission's case alleging the airlines colluded to raise the price of freighting cargo by imposing fuel surcharges on shipments in and out of the country started this week in the High Court at Auckland.

Alan Galbraith, QC, presenting the opening submissions for the airline defendants, said the Commerce Act was not consumer protection legislation but was about the structure of markets and competition.

The commission has said the issue in the case's first stage is the meaning of a market in New Zealand and whether air cargo services into the country are part of such a market.

The second stage, due in July next year, tackles the price-fixing claims.

Air cargo went only one way, Galbraith said. "It goes from origin to destination. The market is where the trade takes place and the trade takes place at origin."

The airline defendants' opening submissions said the local regulators of an overseas market would have the responsibility and incentive to enforce competition regulation there.

Any country's competition laws represented a particular choice of economic policy, it said.

Air New Zealand general counsel John Blair said outside the court: "This case is not about collusion, it is about whether prices approved by foreign regulators for all airlines operating from those countries can breach New Zealand competition law."

The commission says revenue between 2000 and 2006 was boosted through the defendants price-fixing air cargo services by agreeing on fuel and security surcharges.

The defendants' revenue for air cargo services into and out of New Zealand during the relevant period was more than $1 billion, it said.

In its opening submissions this week the commission said the effects of price-fixing on inbound air cargo would be felt most keenly by consumers in New Zealand, not elsewhere.

No other regulatory body in any other jurisdiction had a mandate to enforce anti-trust law, as may exist, to protect consumers in New Zealand, it said. Counsel for the commission said that where participants performed a service was where they competed, and where they competed was the location of the market.

Defending the case are 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.

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

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

The High Court last month told Cargolux and British Airways to pay $6 million and $1.6 million, with Qantas this week told to pay $6.5 million.

The Herald understands that if the commission is found to have no jurisdiction over the inbound market, stage two next year will be limited to the outbound market.