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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.
Sovereign immunity
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.
Comment
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.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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Readers will remember that last year we reported on the decision in Australian Competition and Consumer Commission v Nuera Health Pty Ltd (In Liquidation) [2007] FCA 695, where the Federal Court found the defendants to have engaged in reprehensible conduct in falsely promoting a treatment to cancer patients.
