Air cargo cartel judicial marathon finally ends after two decades

The European Court of Justice (CJEU) has upheld a judgement first pronounced 16 years ago against around a dozen major airlines that were handed fines totaling several hundred million euros for being part of a cartel which colluded on air freight prices over a prolonged period.

The players in this judicial marathon included Air France-KLM and its subsidiary Martinair, Lufthansa, Latam Airlines, British Airways, SAS, Air Canada, Cargolux, Cathay Pacific, Singapore Airlines, and Japan Airlines.

The cartel’s activities related to several elements of the price of services provided in the air freight market, including the introduction of fuel and security surcharges, as well as the refusal to pay commission to freight forwarders on those surcharges.

These price-fixing practices lasted just over six years, from December 1999 to February 2006 and resulted in fines totaling nearly €800 million ($931million) being imposed by the European Commission in November 2010.

Lufthansa and two of its subsidiaries subsequently escaped fines, having alerted the EU competition authority of the existence of the cartel.

Long and Complex Legal Battle

However, the 2010 judgment only marked the beginning of a long and complex legal battle. The airlines appealed for the fines to be annulled; their defense focused on questioning the Commission's authority to sanction agreements on services from third countries to the European Union.

In 2015, a ‘technical victory’ for the carriers forced the Commission to correct procedural irregularities. A new decision was adopted in 2017, re-imposing almost identical fines, which the airlines challenged unsuccessfully. But the legal wrangling dragged on. 

In 2022, a court of first instance ruled that the Commission did have the necessary legitimacy to intervene when the European market was affected by such practices. It is this ruling that the CJEU recently upheld, rejecting the airlines’ argument for good and leaving the amount of the fines almost unchanged.

Heaviest Fine for Air France-KLM Group

Among the ‘cartel’ carriers, Air France-KLM Group will pay the biggest fine - €368 million ($428 million), which it said it had almost fully provisioned for. It underlined that the full amount will be paid during the current month, thus not weighing on its annual results.

“The practices in question date back more than 20 years and have been the subject of administrative proceedings before the European courts, resulting in a decision that is now final,” the Group noted.

It went on to confirm its “commitment to strict compliance with competition rules by continuously ensuring the effectiveness of the prevention measures it implements as part of its general compliance policy."

Civil Lawsuits

While Lufthansa has escaped fines from the EU, having acted as a whistleblower by denouncing its accomplices in 2005, it has not emerged completely unscathed from the cartel affair. It is reported to have been the object of significant civil lawsuits. In the US, the German airline group has reached settlement agreements totaling $85 million.

In Germany, it also had to settle with state railway utility Deutsche Bahn (DB), which initially claimed several billion euros in compensation on behalf of its subsidiary DB Schenker (now part of DSV) and other customers affected by the cartel.

DB is also the prime mover in civil actions against the air freight cartel that are pending before other national courts.