South Africa: Settlement Agreements In Air Cargo Industry Confirmed

Settlement agreements in air cargo industry confirmed

On 22 October 2012 the Competition Tribunal (Tribunal) confirmed a settlement agreement between British Airways (BA) and the Competition Commission (Commission). This agreement follows an investigation by the Commission into the setting of fuel surcharges by BA and its competitors in the international market for air freight and/ or cargo services, including services into and from South Africa. BA has agreed to pay an administrative penalty in the amount of approximately ZAR 12 million to the Commission. The Commission initiated its complaint in March 2006.

In another matter, the Tribunal confirmed a settlement agreement between Air France Cargo (Air France) and KLM Cargo (KLM). This agreement follows an investigation into selling prices for cargo service and in respect of which Air France and KLM have agreed to collectively pay an administrative penalty of approximately ZAR 25 million.

In the BA matter, the Commission's investigation revealed that BA World Cargo (BAWC), a division of BA, had engaged in discussions and exchanged and confirmed information with its competitors between March 2002 and February 2006. The Commission concluded that BAWC's conduct constituted a contravention of the Competition Act.

Following the investigation and subsequent referral of the complaint by the Commission, BA entered into a settlement agreement with the Commission, admitting that it had engaged in the alleged conduct. The Commission found that BA had been fully co-operative during the Commission's investigation. The administrative penalty is less than 10% of BACW's annual turnover.

In the Air France and KLM matter, the Tribunal also confirmed a settlement agreement between Air France, KLM and the Commission. The Commission investigated allegations that Air France and KLM, along with other air cargo operators, had directly or indirectly fixed elements of selling prices for cargo services.

During its investigation, the Commission found that it was a common practice among airlines providing air freight or cargo services to communicate and align their position on the charging and/ or determination of levels of various surcharges.

The Commission found that Air France had engaged in discussions and exchanged and confirmed information on the movement of air cargo fuel surcharges in order to monitor and coordinate the application of fuel surcharges. KLM was also found to have engaged in discussions, mainly with Lufthansa Cargo, regarding the movement of international air cargo fuel surcharges.

To read the British Airways consent order, click here.
To read the Air France Cargo consent order, click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.