EU high court grounds airfreight cartel

(CN) — A price-fixing saga that began with quiet agreements over fuel and security surcharges two decades ago reached its final stop before Europe’s top court on Thursday, as judges made clear airlines cannot sidestep European competition law simply because their planes took off outside the bloc.

In 13 coordinated rulings, the Court of Justice of the European Union knocked down almost every appeal brought by major cargo carriers, including Air France, KLM, British Airways, Lufthansa and Singapore Airlines, against the General Court’s 2022 judgments. Only SAS Cargo Group carved out a sliver of relief after judges identified a misstep in the recalculation of its fine.

Strip away the legal briefs, and the case came down to a high-stakes question: Can Brussels crack down on a price-fixing scheme for cargo flights heading into Europe when parts of the coordination took place abroad?

The airlines argued inbound routes from third countries fell beyond the European Commission’s reach. Because the pricing contacts and parts of the coordination occurred outside the European Union or the European Economic Area, they said Brussels lacked territorial jurisdiction. 

The judges were unconvinced. Drawing on the commission’s 2017 analysis, they focused on the knock-on effects inside Europe, stressing that anticompetitive practices on inbound freight services were “liable to have immediate, substantial and foreseeable effects within the EU [and the] EEA, as the increased costs of air transport to the EEA, and consequently higher prices of imported goods, are by their very nature liable to have effects on consumers in the EEA.”

The judges signed off on that reasoning. EU competition law, they made clear, reaches conduct carried out inside the bloc and conduct crafted to produce real, foreseeable effects there. What tipped the scale was not where the conversations happened but whether the agreed surcharges filtered through to prices paid in Europe.

They also backed the view that this was one global scheme, not a string of disconnected route-by-route contacts. An airline that knowingly joined the common plan could be held liable for the broader infringement, even on routes it did not fly. A last-ditch effort to argue that some of the conduct was out of time went nowhere because the point had not been properly raised earlier in the case.

The conduct itself ran from December 1999 to February 2006, when major cargo airlines aligned on fuel and security surcharges and agreed not to pay commission on those add-ons to freight forwarders. Regulators later said those coordinated charges quietly drove up the cost of shipping goods around the world.

The commission first stepped in in 2010, imposing about 799 million euros in fines (roughly $942 million). The airlines fought back, and in 2015, the General Court threw out that decision, pointing to contradictions in the commission’s reasoning.

Brussels tried again in 2017, issuing a revised decision and setting fines at 776 million euros, about $915 million, with a tightened legal explanation. In 2022, the General Court largely upheld that second round of penalties, confirming the existence of a single worldwide cartel while adjusting some amounts. That left one final round of appeals, now resolved by Europe’s highest judges.

Only one airline saw its position shift in Luxembourg. SAS Cargo Group argued its fine had been recalculated on unequal treatment grounds. The Court of Justice agreed the General Court had relied on that principle without demonstrating that other carriers had in fact been treated differently, set aside that reasoning and exercised its own jurisdiction to determine the correct figure, ultimately fixing SAS’ fine at a lower level than the one imposed by the General Court.

Thomas Höppner, competition lawyer and partner at Geradin Partners, described the ruling as a welcome clarification of long-running disputes over jurisdiction, proof and the scope of liability in the Airfreight cartel cases. 

On territorial reach, he noted the court confirmed the commission needs to satisfy only one test: Either the conduct was implemented in the EU or it produced foreseeable, concrete effects there.

He also highlighted the court’s stance on participation: “Even if undertaking participated only in some of the cartel conduct, but were aware of all the other conduct of the cartel, or could reasonably have foreseen such conduct, the commission is entitled to attribute liability to that undertaking in relation to all the forms of anticompetitive conduct.” Once attendance at cartel meetings is shown, he added, the burden shifts to the company to demonstrate it clearly distanced itself and did not share the anticompetitive intent.

A spokesperson for the European Commission said Brussels welcomed the outcome, noting the court “fully upholds the commission’s and General Court’s assessment of the cartel conduct concerning the provision of airfreight services on a global basis and the commission’s jurisdiction to prosecute international cartels.”

Air France-KLM said it had “taken note of the judgment” rejecting its appeal and stressed that the practices at issue “date back more than 20 years” and that the decision “has now become final.” The group reaffirmed its commitment to comply with competition rules and noted provisions had been made for the fines.

Lufthansa Group, which received full immunity in 2006 under a leniency program and was not fined, acknowledged the ruling and said it “strictly complies with the applicable competition rules.”

With Thursday’s judgments, the legal road is effectively at an end.  The Court of Justice is the bloc’s final judicial stop in competition cases, so there is no further appeal on the substance. With the exception of the adjustment to SAS’ fine, the commission’s 2017 decision now stands confirmed, and the penalties are final and enforceable.

Courthouse News reporter Eunseo Hong is based in the Netherlands.