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EU court upholds €169m forwarding cartel fines

General Court of the European Union rejects arguments by Kühne + Nagel, Panalpina, CEVA/ EGL, and Schenker/Deutsche Bahn over air freight collusion decision and penalties.

The General Court of the European Union has upheld fines totalling €169 million imposed by the European Commission on a number of forwarding groups and their subsidiaries for their participation in cartels in the international air freight forwarding sector between 2002 and 2007, including those imposed on Kühne + Nagel, Panalpina, CEVA/ EGL, and Schenker/Deutsche Bahn.

The companies concerned had brought actions before the General Court for the annulment of a European Commission decision in March 2012 against the forwarders, or for a reduction in their respective fines.

However, the General Court said it “rejects all their arguments and decides to uphold the fines imposed on them. The Court holds in particular that it is appropriate to base the calculation of the fines on the value of sales linked to freight forwarding services as a package of services on the trade lanes concerned.”

But a fine of €3.07 million imposed initially on UTi Worldwide was reduced to €2.97 million.

In March 2012, the Commission had imposed fines amounting in total to €169 million on a number of companies because of their participation between 2002 and 2007 in various agreements “and concerted practices” on the market for international air freight forwarding services. The Commission held that the anti-competitive conduct of the companies, which agreed on the fixing of various pricing mechanisms and surcharges, gave rise to four distinct cartels.

The ‘new export system’ (NES) cartel concerned a pre-clearance system for exports from the UK to countries outside the European Economic Area thatwa s introduced by the UK authorities in 2002. A group of freight forwarders agreed to introduce a surcharge for NES declarations.

The ‘advanced manifest system’ (AMS), introduced after the terrorist attacks of 11 September 2001, describes legislative provisions of the United States customs authorities that require companies to submit in advance data on goods that they intend to ship to the United States. A number of freight forwarders coordinated the introduction of a surcharge applicable to the AMS service, for the electronic communication of the data concerned to the United States authorities.

The ‘currency adjustment factor’ (CAF) cartel was designed to achieve agreement on a common tariff strategy in order to deal with a risk of a fall in profits owing to the decision of the People’s Bank of China in 2005 that it would no longer peg the Chinese currency (renminbi or RMB) to the United States dollar (USD). A number of international freight forwarders decided to convert all contracts with their customers into renminbi and to introduce a CAF surcharge, setting the amount.

Lastly, the ‘peak season surcharge’ (PSS) cartel concerned an agreement between a number of international freight forwarders relating to the application of a temporary rate adjustment factor. That factor was imposed as a reaction to increased demand in the air freight forwarding sector at certain times, which led to a shortage of transportation capacity and an increase in transport rates.

The Commission said the agreements had been designed to protect the freight forwarders’ margins.

The court said that an appeal, limited to points of law only, may be brought before the Court of Justice against the decision of the General Court within two months of notification of the decision.

It was unclear at the time of writing whether any of the companies involved would appeal against the court’s decision.

Source: Lloyds Loading List

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