Cartels in disguise: Fourteen freight groups fined #169 million

Cartels in disguise: Fourteen freight groups fined #169 million


Author: Jaime Moore

The European Commission has fined 14 international groups of companies a total of #169 million for their participation in four freight forwarding cartels.

The cartels were set up to fix prices and other trading conditions for freight forwarding services.

The fines come more than four years after the Commission conducted dawn raids (unannounced inspections) at the premises of various providers of international freight forwarding services for suspected infringements of EU competition law.

Freight cartel rumbled

Following the dawn raids, the Commission issued a statement of objections in 2010 alleging that various companies had fixed prices by colluding on the amount, timing, and application of some freight forwarding surcharges. The collusion occurred on routes from the EEA to the US, from China/Hong Kong to the EEA, and from the UK to outside the EEA.

Freight forwarders provide services to businesses and consumers for the organisation of door-to-door transportation of items, such as organising warehousing and customs clearance. Various types of surcharges were introduced in 2003 as a consequence of the UK's decision to introduce an electronic declaration system for exports.

Breakfast meetings and garden vegetables

The Commission found that, between 2002 and 2007, 14 international groups of companies participated at different times in four distinct cartels relating to surcharges and charging mechanisms.

In some cases, the Commission found that the cartelists had gone out of their way to conceal their behaviour.

One of the cartels used existing, informal industry gatherings to set up a 'Gardening Club', which the cartel used as a 'front' for its activity. It employed code words based on the names of vegetables, including asparagus and baby courgettes, to discuss their price fixing plans.

Another cartel created a dedicated email account to facilitate discussions between cartel members. It also held 'Breakfast Meetings' in Hong Kong, at which participants discussed the level of surcharges.

The Commission granted Deutsche Post (together with its subsidiaries, DHL and Exel) complete immunity from fines, because it was the first to reveal the existence of the cartels to the Commission.

Other cartelists, including Deutsche Bahn, CEVA, Agility, and Yusen, received reductions in their fines of up to 50%, to reflect the extent and timing of their co-operation with the Commission's investigation.

Commission vice president in charge of competition policy, Joaquín Almunia, said: 'In times of crisis, it is all the more important to stamp out the hidden tax that cartels impose on our economy'.

But with indications that a number of the companies involved will challenge the Commission's findings before the European Courts, the matter may not end here.

A lesson to the unwary

Although this case involved very deliberate cartel activity, it serves as a reminder that meetings with competitors, however informal, are fraught with potential competition law dangers.

It also sends a clear message that the Commission will continue to work hard to discover and penalise those involved in cartel activity.

Companies should remind employees to be careful about 'talking shop' with competitors at all times, even on the golf course or in the pub. Because as Joaquín Almunia puts it: 'Companies should be aware that crossing the line and colluding on prices comes at a high price.'