Wednesday, November 28, Australian
flag carrier Qantas Airways Limited said it had entered a plea agreement
with U.S. government authorities regarding “illegal price fixing
conduct within its freight division,” and had agreed to pay a fine
of U.S. $61 million.
Chief Executive Officer of Qantas, Geoff
Dixon said the illegal conduct involved fuel surcharges in the international
air cargo market between 2000 and 2006.
"Similar investigations to those being
carried out by the United States Department of Justice (DOJ) are being
undertaken by antitrust regulators in other countries, including Australia.
"We understand more than 30 other airlines
are included in these investigations," he said in a statement issued
Wednesday.
Mr. Dixon said upon being advised of the
allegations, in May 2006, Qantas had cooperated fully with investigations
by the DOJ and other antitrust regulators.
"These investigations confirmed that
the practices adopted by Qantas Freight and the cargo industry generally
to fix and impose fuel surcharges breached relevant antitrust laws,"
he said.
According to the statement, Mr. Dixon said
the facts revealed by the investigation related only to Qantas' Freight
division and did not in any way involve the company's passenger business.
"Qantas takes its obligations to comply
with the law very seriously. We have a comprehensive competition compliance
program in place, and expect all of our employees to comply with these
requirements at all times," he said.
"In this case, Qantas did not meet
this expectation. The conduct was wrong and we apologize unreservedly
for this."
Mr. Dixon said the plea agreement entered
into by Qantas settled the criminal liability in the U.S.A. for Qantas
and all of its employees who had not been specifically excluded from the
plea agreement.
"All investigations have confirmed
that knowledge of the conduct was confined within the Qantas freight division.
"Four past and two current employees
of Qantas Freight have been excluded from the plea agreement and the DOJ
has reserved the right to investigate these cases further. This does not
mean the individuals have been involved in any illegal conduct nor that
the DOJ would prosecute them.
"The two current employees of Qantas
Freight who have been excluded from the plea agreement deny involvement
in any illegal conduct."
Mr. Dixon said Qantas would continue to
cooperate with the investigations being undertaken by the DOJ and other
antitrust regulators, which could take up to two years to complete.
"Our 2006/07 financial statements included
a U.S. $40 million provision for the U.S. liability. We do not believe
this or any further financial penalties will materially affect future
operating results," Mr. Dixon said in the statement.
The U.S. Department of Justice released
the following statement Tuesday, November 27:
Australian-based Qantas Airways Limited
has agreed to plead guilty and pay a U.S. $61 million criminal fine for
its role in a conspiracy to fix rates for international air cargo shipments.
According to the charges filed (Nov. 27)
in the U.S. District Court for the District of Columbia, Qantas engaged
in a conspiracy to eliminate competition by fixing the rates for shipments
of cargo to and from the United States and elsewhere from at least January
2000 to February 2006. During the time period covered by the felony charge,
Qantas was the largest carrier of cargo between the United States and
Australia and earned more than $600 million from its cargo flights to
and from the United States. Under the plea agreement, which is subject
to court approval, Qantas has agreed to cooperate with the Department’s
ongoing investigation.
"Qantas’ guilty plea sends a
clear message that those who engage in price fixing and other forms of
illegal collusion will pay a heavy price for their crimes," said
Thomas Barnett, Assistant Attorney General in charge of the Department's
Antitrust Division.
"The shipment of consumer products by air
transportation is critical to our global economy. Our investigation into
this important industry will continue, and we will aggressively pursue
those who engage in criminal conduct that harms American consumers,"
Mr. Barnett said in the statement.
Qantas is charged with carrying out the
price-fixing conspiracy with co-conspirators by:
Participating in meetings, conversations
and communications in the United States and elsewhere to discuss the cargo
rates to be charged on certain trans Pacific routes to and from the United
States;
Agreeing, during those meetings, conversations
and communications, on the cargo rates for certain trans-Pacific routes
to and from the United States; Levying cargo rates in accordance with
the agreements reached; and Engaging in meetings, conversations and communications
to monitor and enforce the agreed-upon rates.
How Plea Deals Impact Cargo
Qantas agreeing to pay a fine to
U.S. on the face of it looks bad for the airline and great for justice.
But lurking beneath the headline is
the fact that U.S. Justice will not settle for just a chump change
sum of $61 million as it readies a greater surge into the goings on
of the airline and air cargo business.
“Anybody who thinks that these
airline fines are what this investigation is all about as an end all
to further probes has rocks in their head,” a source said.
“What it is all about is information.
“The problem is once law enforcement
and various politicians get a hold of an issue, all hell breaks loose.
“Just look at the compliance havoc
over politician-mandated USA cargo security going on around the world
right now.
“These plea deals have turned
the mattress over along with details that will open up even more probes.”
Another concern is for organized air
cargo itself, especially for trade shows and industry events held
in the USA.
Although FT has no report of anyone
being tagged with summons at the recent Air Cargo Americas in Miami,
earlier this year at Cargo Network Services (CNS) Partnership Conference
in San Diego some attendees were slapped with summons along with their
room service orange juice.
“Part of our air cargo trade show
team may have to include a lawyer,” one highly-placed air cargo
executive quipped.
“Meantime I have to be very careful
what I say and where I show up because they are coming after us as
individuals and in some cases the company may not be able to protect
us.”
It will be interesting to see who shows
up and who doesn’t as air cargo events unfold in 2008. |
In August 2007, British Airways Plc and
Korean Air Lines Co. Ltd. pleaded guilty and were sentenced to pay separate
$300 million criminal fines for their roles in conspiracies to fix the
prices of passenger and cargo flights.
The Antitrust Division’s National
Criminal Enforcement Section and the Federal Bureau of Investigation are
conducting the ongoing investigation.
Qantas is charged with price fixing in violation
of the Sherman Act. A violation of the Sherman Act carries a maximum fine
of $100 million for corporations. The maximum fine may be increased to
twice the gain derived from the crime or twice the loss suffered by the
victims of the crime, if either of those amounts is greater than the statutory
maximum fine.
Anyone with information concerning price
fixing or other anticompetitive conduct in the air transportation industry
is urged to call the National Criminal Enforcement Section of the Antitrust
Division at 202-307-6694.
George Frey
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