Clayton Utz Insights
05 July 2012
By Mihkel Wilding.
Malaysia Airlines is the ninth court-endorsed settlement reached between the ACCC and an airline in the air cargo investigation.
On 14 June 2012 the Federal Court in Sydney made orders giving effect to a settlement between Malaysia Airlines Cargo System Berhad and the ACCC concerning price fixing conduct between Malaysia Airlines and competitors on fuel and security surcharges and customs fees applicable to freight carried from Indonesia to Australia and other countries between 2001 and 2005.
The Court ordered that Malaysia Airlines pay $6 million in penalties and $500,000 towards the ACCC's costs for its participation in the cartel conduct.
This is the ninth court-endorsed settlement reached between the ACCC and an airline in the air cargo investigation. It brings the total amount in Australian penalties imposed by the Court in respect of air cargo proceedings to A$58 million.
Prior to settling the case, Malaysia Airlines had failed to convince the Federal Court that it was entitled to sovereign immunity on the basis of government ownership and control which would have entitled it to immunity under the Australian Foreign States Immunities Act 1985.
Another airline, Garuda Indonesia, is still fighting on that foreign immunity basis and its appeal to the ultimate appellate court in Australia (the High Court) is reserved after argument was heard recently.
Status of the ACCC penalty case and class action
Five international airlines (Singapore Airlines, Cathay Pacific, Emirates, Air New Zealand and Thai Airways International) are continuing to defend or contest the ACCC's action and at this stage those proceedings are due to proceed to trial in October of this year. It is set down for four months.
A class action brought by customers alleging they were overcharged by the freight cartel involving some of the airlines sued by the ACCC (including many of those that have settled their proceedings with the ACCC) is currently proceeding in the Federal Court in Melbourne. The respondent airlines have made claims for contribution to any damages payable against airlines which have made admissions settling the ACCC proceedings. This class action is at the discovery stage.
The Malaysia Airlines settlement demonstrates that the ACCC will require parties settling later in time to pay a slightly higher tariff than earlier settling parties. Other parties with a similar market share usually paid around A$5 million in settlements beginning in 2009. The ACCC has not published its "tariff" for fines and there are no fine guidelines in Australia.
However, we infer the ACCC decided that parties which settle later in time should not be rewarded for doing so, given the costs and time incurred by the regulator in prosecuting cartel conduct which is denied and defended for a longer period.
The settlement also demonstrates that the ACCC will be prepared to accept admissions for conduct which are relatively narrow in scope in terms of the time over which the relevant contraventions occurred, provided that the penalty paid for the admitted conduct as a whole is higher than the penalty paid by earlier settling parties and can be justified to the Court.
In recent settlements reached with the ACCC, the admitted conduct has concerned freight carried between Australia and one other jurisdiction only. The admitted conduct has not related to the carriage of freight between multiple jurisdictions where cartel conduct was alleged in the respective claims.
No doubt the parties who have reached court-endorsed settlements of their proceedings with the ACCC will be interested to see whether the ACCC can make good its claims relating to the defending airlines' alleged cartel conduct when it goes to trial later this year. There are five airlines going to trial.
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