Antitrust Law Daily Wrap Up, ANTITRUST NEWS: EU General Court upholds €169M fines in airfreight cartel actions, (Mar 1, 2016)

By Linda O’Brien, J.D., LL.M.

The General Court of the European Union has upheld the fines imposed by the European Commission (EC) on several companies for their participation in cartels in the international air freight forwarding services industry, according to an announcement yesterday.

In March 2012, the EC imposed fines totaling €169 million on a number of companies by reason of their participation, from 2002 to 2007, in various agreements and concerted practices in the market for international air freight forwarding services. The companies were Engility Holdings, Inc., Kühne + Nagel International, UTi Worldwide, DB Schenker, Deutsche Bahn, and Panalpina World Transport. Those services included the organization of transportation of items and could include activities such as customs clearance, warehousing, or ground services on behalf of customers, according to their needs.

The Commission held that the anticompetitive conduct of the companies, which agreed on the fixing of various pricing mechanisms and surcharges, gave rise to four distinct cartels. First, the “new export system” (NES) cartel concerned a pre-clearance system for exports from the UK to countries outside the European Economic Area which was introduced by the U.K. authorities in 2002. Second, the “advanced manifest system” (AMS), introduced after the terrorist attacks of September 11, 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. Third, 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 to the United States dollar. Last, 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.

A number of the companies concerned brought actions before the General Court for the annulment of the Commission’s decision or for a reduction in their respective fines.

The General Court rejected all their arguments and decided to uphold the fines imposed on them. In particular, the Court found that it was 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.

However, with respect to UTi Worldwide, the parent company of UTi Nederland and UTi Worldwide (UK), the Court determined that, where the liability of a parent company was purely derivative of that of its subsidiary and where no other factor individually distinguished the conduct for which the parent company is held liable, the liability of the parent company could not exceed that of its subsidiary.

In this case, the Commission chose, for the purposes of setting the fine, to round down the infringement periods imputed to the subsidiaries, while no such rounding down was carried out for the benefit of the parent company. The General Court held that the parent company whose liability was entirely derived from that of its subsidiaries must benefit from the same reduction in liability as that provided to its subsidiaries. Consequently, the General Court recalculated the fine of €3.07 million initially imposed on UTi Worldwide and reduced the amount to €2.97 million.

Companies: Engility Holdings, Inc.; Kühne + Nagel International; UTi Worldwide; DB Schenker; Deutsche Bahn; Panalpina World Transport

News: Antitrust