The $225 million in air freight price-fixing fines
handed out Wednesday by the European Commission to 14 air forwarders has dwarfed previous penalties or settlements for related cases in other jurisdictions.
The European Union antitrust division’s case
for the penalties – including more than $140 million against Kuehne + Nagel, Panalpina, and UPS alone – amounted to “four distinct cartels aimed at fixing prices and other trading conditions for international air freight forwarding services, in breach of EU antitrust rules.”
The investigation began in 2007 with pre-dawn raids at some of the world’s biggest forwarders based on tips from Deutsche Post subsidiaries DHL Global Forwarding and Exel. The infringements were alleged to have occurred between 2002 and 2007.
The first cartel related to surcharges assessed based on an electronic declaration system for exports from the United Kingdom introduced in 2003. According to the EU, forwarders involved in the cartel agreed to establish a surcharge on this reporting service and to fix the amount according to the size of the customer.
Members of this cartel, dubbed the New Export System cartel, were Kuehne + Nagel (fined $7 million), BAX Global (now owned by Schenker, fined $4.9 million), UPS Supply Chain Solutions (fined $3 million), CEVA Logistics (fined $2.8 million), DHL, and Exel. CEVA had 35 percent of its penalty reduced under the EU’s leniency notice, while DHL and Exel paid no fines. The NES cartel related to shipments from the UK to outside the European Economic Area.
The second cartel related to a surcharge based on the commencement of U.S. Customs’ advanced manifest requirements in 2003-2004. The EU said members of this cartel “agreed to introduce a surcharge for the AMS service, i.e. for processing the electronic transmission of such information to the U.S. Customs authorities. They also agreed not to use the surcharge as a tool for competition.”
Members of the so-called AMS cartel were Kuehne + Nagel (fined $48.9 million), Panalpina (fined $31.5 million), Schenker and Deustche Bahn (fined $30.7 million, with a 25 percent leniency reduction), UPS (fined $4.8 million), UTi Worldwide (fined $4.1 million), Agility (fined $3.1 million, with a 30 percent leniency reduction), DSV Air & Sea (fined $504,000), DHL, and Exel.
The AMS cartel, which is related to shipments from Europe to the United States, was easily the most heavily penalized, with roughly 55 percent of the total fines coming from this group.
The third cartel related to the valuation of China’s currency. As the EU put it, “following the appreciation of the Chinese currency (RMB) against the U.S. dollar in 2005, international freight forwarders agreed on a shift of contracts from U.S. dollars to RMB or, if this was not possible, on the introduction of a CAF surcharge and on its level. The collusion was driven by the fact that in general, the local services at Chinese airports were paid for by forwarders in RMB, while the customers of forwarders were billed in U.S. dollars, which consequently might have led to losses.”
Members of this currency adjustment factor cartel were the China offices of Schenker (fined $7.3 million, including fines for BAX Global, with a 20 percent leniency reduction), UPS (fined $5.2 million), Panalpina (fined $4.3 million), CEVA (fined $1.2 million, with a 50 percent leniency reduction), Nippon Express (fined $1.1 million), Kintetsu World Express (fined $830,000), Kuehne + Nagel (fined $600,000), Yusen Air & Sea (fined $425,000, with a 5 percent leniency reduction), DHL Global Forwarding and DHL Logistics.
The final cartel related to peak season surcharges (PSS) “the freight forwarders agreed in so called ‘breakfast meetings’ held in Hong Kong on the introduction and timing of a PSS, to be charged during the peak season transport period in the run up to Christmas (lasting generally from September to December) and on occasions also discussed the level of the surcharge.”
Members of this cartel were Panalpina (fined $26.1 million), Kuehne + Nagel (fined $14.9 million), Hellman Worldwide Logistics (fined $5.7 million), Expeditors International (fined $5.5 million), Toll Global Forwarding (fined $3.9 million), Agility (fined $3.5 million, with a 25 percent leniency reduction), Schenker (fined $3.5 million, with a 50 percent leniency reduction), DHL Global Forwarding and DHL Supply Chain.
The last two cartels related to shipments from China to the European Economic Area, with the peak season surcharge cartel specifically related to shipments from South China and Hong Kong.
The EU said the fines were set on the basis of the EU 2006 Guidelines
on fines. Deutsche Post (including its subsidiaries DHL and Exel) received full immunity from fines, while Deutsche Bahn (including Schenker and BAX), CEVA, Agility and Yusen received reductions of fines ranging from 5 to 50 percent, which reflected the timing of their cooperation and the extent to which the evidence they provided helped the commission prove the respective cartels.
“In most cases, the freight forwarders took specific measures to conceal the cartel behavior," the EU said. “In the ‘new export system’ cartel, the participants organized their contacts in a so-called ‘Gardening Club’ and code names based on names of vegetables – such as asparagus and baby courgettes – were used when talking about fixing prices. In another, (the currency adjustment factor cartel) a specific Yahoo email account was set up to facilitate exchanges between the cartel participants.” — Eric Johnson