EU/USA Cops Raid Air Cargo

    Air cargo historians may remember yesterday, October 10, 2007 as “Black Wednesday” when USA and EU law enforcement carried out the most extensive one-day raids of companies and hand out of subpoenas connected to alleged industry collusion and price fixing.
     Schenker, in addition to having its USA office in Long Island, New York searched by FBI on Wednesday, also yesterday saw its offices in Essen, Germany inspected by European competition regulators and the German Federal Cartel Office.
     Sources say that Deutsche Post, which owns DHL, was also put under the lamp by European and Swiss Cartel inspectors.
     The European Commission admitted that it is conducting ongoing surprise inspections at several freight forwarding companies as this is written.
     In a statement European Commission said it “has reason to believe that the companies concerned may have violated (EU) rules that outlaw restrictive business practices.”
     FBI raids were also reported across USA at cargo operations of Eagle and Kuehne + Nagel and agents reportedly served information subpoenas in Houston, Texas.
     Expeditors International of Washington said it also was served with a subpoena from the U.S. Department of Justice to provide information and records.
     Also yesterday October 10, the offices of Kuehne + Nagel in Switzerland, USA, and the UK were raided by law enforcement.
     For its part Kuehne + Nagel, a company of 47,000 people at 830 locations said that it “sees no reason to suspect any such violations and considers the inspections excessive.”
     In New York, according to sources the FBI invaded Schenker, “swarming all over that company’s facility in Freeport, Long Island near JFK International Airport.
     As FBI was swooping down on Schenker, Swiss Federal Competition Commission (Weko) searched the premises of Panalpina in Basel.
     While all of this is going on, some air cargo executives are wondering, aside from the stated reasons what the real drivers are in bringing this kind of coordinated scrutiny to air cargo right now.
     Last year there were several instances of legal papers served by law enforcement on both sides of the Atlantic and also in Asia seeking information and detail about how air cargo does business.
     In one instance even FedEx and UPS reportedly received demand for information.
     So far only Lufthansa and Virgin Atlantic agreed to a plea deal settlement for an unspecified amount to avoid further prosecution.
Heads or tails it comes up the same, as UK flags British Airways and Virgin Atlantic are snagged and pay big fines for anti-competitive
behavior.

    One reaction to that settlement was a comment from a forwarder who said, “U.S. DOJ would not make an agreement just for a payment.”
     But with almost all the legendary air cargo carriers on some kind of legal notice, some questions are being raised wondering if the airlines have in fact turned over on their forwarder partners?
     Most people we talked to said because of the extent and width of the price fixing investigations and information subpoenas it is nearly impossible to lay the blame for this widening probe at any one carrier’s doorstep.
     Many people we spoke to voiced the belief that after years of very low zero-rates that eventually somebody would wonder how air cargo could manage to stay in business.
     “It’s not about any airline turning tail,” a source said.
     “Once they (Iaw enforcement) opened up possible price fixing, they unlocked a Pandora’s Box.”
     “It’s a fishing expedition with hell to pay on the hook,” said another.
     “I used to think we were not getting a fair deal from the airlines as surcharges continued to rise, while rates were almost zero and we were for the most part acting as a collection agency for the airlines,” a small forwarder told Air Cargo News/Flying Typers.
     “If it turns out that some forwarders were in on a deal with the airlines, it will serve all of those bastards right, and maybe air cargo can straighten itself out once and for all.”
     "We had visits (in Germany) from the European Commission authorities, and other offices in the U.S., South Africa, and Switzerland were visited as well," said Peter Sauer, the vice president of communications at Schenker in Essen. Schenker is a unit of German rail giant, Deutsche Bahn.
     Mr. Sauer confirmed that German Cartel Office authorities also spent time at Schenker.
     He said the European Commission authorities took documents and files with them after spending a full day at the offices.
     Mr. Sauer didn't provide a comment when asked why the offices were raided exactly and what Schenker expected to happen as a result.
     Sauer said authorities didn't provide a timeframe or an indication as to how the process would go forward.
     He said the company is cooperating fully with the investigation.
     Asked if he thought the companies (including others implicated) were snitched on by an outsider - like Lufthansa as part of its plea deal - Mr. Sauer said:
     "We have ideas about it, but whatever you say is just an idea," not specifying Lufthansa.
     Schenker released the following statement late Thursday:
     “Within the framework of an inspection ordered by the Commission of the European Communities in Brussels, representatives of the General Directorate for Competition and of the German Federal Antitrust Authority, (Cartel Office), have been carrying out an investigation into Schenker AG in Essen.
     “Similar investigations have been conducted at Schenker's offices in South Africa, Switzerland and the U.S. by the competent authorities of the various countries.
     “A number of other international freight forwarding companies have also been targeted by the investigations carried out by the competition authorities in Germany, Switzerland, South Africa and the US. Based on information emanating from the European Commission, they have reason to believe that the EU Treaty rules with reference to competition may have been violated.
     “Free and unhampered competition is a top priority for Schenker.
     “Consequently the company has assisted the representatives of the competition authorities in all matters connected with these investigations.
     “Schenker will continue to contribute to the clarification of the facts of the case.”
     Just in case anybody thought Michael O’Leary would go gentle into the good night, Ryanair said that it submitted on Thursday October 11 a complaint to the European Competition charging blatant price fixing by Lufthansa, Swiss, KLM and Air France while announcing 200,000 seats for sale at five Euros each from Bremen and Hamburg Lubeck.
     “In a six-hour period on 25th September, four airlines which account for some 30% of the European short haul market, Lufthansa, Swiss, KLM and Air France all increased their fuel surcharges by another €5 to as high as €70 per seat.
     “Last month British Airways was fined by the British and American Governments for price fixing,” O’Leary said.
     Apparently the circus is only just underway.
Geoffrey