Price Fixing Case Settled Against Major International Airlines

Price Fixing is really part of corporate corruption, where the organization, not an individual, gains profits.

The article below talks about a SECOND round of international airlines convicted of price fixing. When I first read the names of the airlines, I wondered why British airways wasn't mentioned, because I don't believe the British yet have country standards against such practices.

But, then you read further and BA was in the first round of convictions, including Korean Airlines.

Price fixing means everyone gets around a table and sets market share as well as prices, so all the participants make fat profits without having to cut prices to compete. In this case, it was pricing for air cargo shipments.

In the 1970's, I worked at a US construction materials company, but we were owned by a British firm, and they appointed their own president. When we were running into price competition in Houston, he asked why we couldn't just get the competitor to a table and set prices and market share "like we do in the UK" to maintain profit margins.

Our company had to send the new UK president to a three day course on anti-trust and anti-competition laws in the US to get him up to speed about why we couldn't do that here. He always looked down on the US operations after that due to his disdain for restrictive laws that reduced the ability to do backdoor deals. The parent company was huge, and used to competing via backdoor deals, and not improved efficiency practices.

We still made money anyway using old fashioned competitive business practices, and were later sold to an Australian firm.
vj

Lessons Learned:
- Don't allow conditions to exist that allow price fixing.
- BUT, if you are competing against foreign firms who DO practice price fixing and bribe paying, you need to know about it, and have a strategy to compete. (One strategy is to turn them in to authorities, if laws exist to prevent such practices).

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from THIS WashintonPost.com source

By Sholnn Freeman
Washington Post Staff Writer
Friday, June 27, 2008; Page D03

Four international airlines agreed to plead guilty and pay $504 million in criminal fines to settle charges that they conspired to fix air cargo rates, the Department of Justice said yesterday.

Air France and KLM Royal Dutch Airlines, which operate under common ownership, agreed to pay $350 million in total fines. Associate Attorney General Kevin J. O'Connor, who announced the plea agreements, said the Air France-KLM fine was the second-largest in a criminal antitrust investigation by the department.

In addition, Hong Kong's Cathay Pacific Airways agreed to a fine of $60 million, Dutch carrier Martinair agreed to pay $42 million, and Denmark's SAS Cargo Group agreed to a $52 million fine to settle similar charges. The settlement was filed yesterday in U.S. District Court for the District of Columbia and is subject to a judge's approval.

The guilty pleas are the latest to arise from a multinational antitrust investigation into the air transportation industry by investigators on both sides of the Atlantic. In yesterday's filing, the government accused the carriers of trying to artificially set prices for base cargo rates as well as fuel and other surcharges in e-mails and during meetings in the United States and Europe.
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O'Connor said the conspiracy, which began as early as 2001 and continued through 2006, affected billions of dollars in shipments of consumer goods, including electronics, clothing, produce and medicines.

"These enforcement actions demonstrate the antitrust division's successful efforts to aggressively investigate and prosecute illegal cartel activity -- here and abroad -- in order to ensure that American consumers and businesses are not harmed by illegal anticompetitive activities," O'Connor said.

In separate statements, the chief executives of Air France, KLM, SAS and Cathay said their companies had taken steps to comply with U.S. antitrust laws. Officials at Martinair could not be reached for comment. The fines come at a time when high oil prices are causing many airlines to cut routes, trim workforces and consolidate.

"We have taken thorough steps across the organization to prevent recurrence, as Air France is committed to the highest standards of corporate governance," Jean-Cyril Spinetta, chairman and chief executive of Air France, said in a statement.

The announcement yesterday follows several investigations of other carriers. In August, British Airways and Korean Airlines pleaded guilty and each paid $300 million in fines for their roles in fixing prices on air fuel surcharges for passengers, who were charged an extra $110 per ticket in 2006 for round-trip fares. U.S. carriers have not been implicated.

Qantas Airways has pleaded guilty to price-fixing and paid a $61 million fine, and Japan Airlines pleaded guilty to the same and paid a $110 million fine, according to the Justice Department. A Qantas executive agreed to serve eight months in jail for his role in the conspiracy.

O'Connor said the Justice Department's investigation is ongoing. The European Commission is conducting a separate investigation into carriers' air cargo operations. O'Connor declined to say whether U.S. airlines could face charges in that investigation.