May 28, 2007

Qantas in probe on cartel pricing

QANTAS is co-operating with US and British regulators investigating price-fixing of fuel surcharges.

In a breakthrough for Britain's Office of Fair Trading and the US Department of Justice, British Airways admitted to cartel involvement and set aside pound stg. 350 million ($847 million) in provisions two weeks ago to cover potential compensation for freight customers who might have been overcharged.

A Qantas official told The Australian last night that it was co-operating with the investigations. Qantas has not admitted to price-fixing.

Besides BA and Qantas, Singapore Airlines, Cathay Pacific, Air New Zealand, Lufthansa and Japan Air Lines are being investigated for colluding on freight fuel surcharges, post-September 11 security surcharges and "war risk" surcharges relating to insurance costs associated with the war in Iraq.

Plaintiff law firm Maurice Blackburn Cashman served a $200 million cartel class action on Qantas and the other carriers in January and is believed to have signed "hundreds" of freight clients to the lawsuit.

Fuel surcharges comprise some 10 per cent of freight costs in the $50 billion global market.

MBC principal Kim Parker said yesterday that freight surcharges had been inflated over the past seven years and compensation was due.

"British Airways are now saying that they did it. They also say they will put aside funds to make good the losses and to pay any fines," she said.

"The businesses affected by this price-fixing cartel should take a great deal of confidence from an open admission of this kind and it certainly shows that the recovery of their losses from the responsible airlines is completely justified."

Lufthansa settled with a class action of air freight clients in the US last year for $US85 million ($103.7 million) after some 80 civil claims were consolidated. The German carrier also settled in Canada.

BA said the US Department of Justice, the OFT and the European Commission were investigating anti-competitive activity on "long-haul passenger and cargo fuel surcharges" and conceded it had "become apparent that there have been breaches of (competition compliance) policy in relation to discussions about these surcharges with competitors".

The company had made provisions to settle claims and for "potential government fines in a number of countries" and for civil claims in the US, Australia and Canada.

The Australian Competition & Consumer Commission is believed to have been involved in the investigation.

By Michael West

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