Fixing collusion victims

   I began covering the air cargo industry in 2010. As a complete newcomer, I first had to get a handle on the major concepts of transporting freight by air—and the basic ideas behind supply chain management, etc., in general—quickly. During those initial few months I got a crash course in price-fixing, learning why certain airline executives from overseas never attended conferences in the United States lest they face legal trouble and watching airline industry mainstays say goodbye as they were carted off to prison. It seemed like so much was happening that the fallout couldn’t last long. I was wrong. The air cargo price-fixing saga doesn’t seem to end.
   The latest page in the book on collusion was written July 10 when Judge John Gleeson, presiding over the U.S. District Court for the Eastern District of New York, certified a class-action lawsuit brought by six freight forwarders serving as representative plaintiffs for the untold number of shippers affected by cargo collusion. The alleged conspiracy to fix fuel surcharges occurred between Jan. 1, 2000, and Sept. 30, 2006. This follows a 112-page opinion by Magistrate Judge Viktor V. Pohorelsky of the Eastern District of New York, recommending that class status be granted.
   “Class certification will allow hundreds of thousands of claims to be resolved adequately, efficiently, and fairly,” Pohorelsky wrote. In the opinion, he also found that “plaintiffs have submitted a trove of direct and circumstantial evidence that strongly suggests the existence of an agreement among the defendants to fix prices.” Pohorelsky called the undertaking “a global conspiracy.”
   The most recent defendant to settle with the plaintiffs, EVA Airways, agreed to pay $99 million to purchasers of cargo services. Before that announcement, more than 20 other airlines had settled for a total of $1.038 billion. The largest payouts came from Korean Air at $115 million, Singapore Air at nearly $92.5 million, and China Airlines at $90 million.
   For now, only Polar Air Cargo, Atlas Air Worldwide Holdings, Air New Zealand, Air China and Air India stand as the only carriers that haven’t signed settlement agreements. 
   Hollis Salzman, co-chair of the Antitrust and Trade Regulation Group at Robins Kaplan LLP, will serve as co-counsel for the plaintiffs. 
   “After more than nine years of hard fought litigation, this ruling is a major victory for the hundreds of thousands of businesses that purchased air cargo shipments during the alleged cartel,” she said in a statement. “Now that we have reached this milestone, we look forward to trying our case against the remaining defendants.”
   The class-action case against the airlines follows the same general idea as the government suits. In 1999, Lufthansa developed a fuel surcharge metric based on one produced by the International Air Transport Association, with the carrier and a number of competitors basing new fuel surcharges off the scale. When fuel surcharges were first being implemented, carrier representatives stressed the importance of industry-wide acceptance during face-to-face meetings and over emails. The parties involved knew gathering together to set the fuel surcharge rate could be seen as collusion; Pohorelsky detailed findings for approval of the class-action suit referenced emails that read “pls do not reference LH in your email as we do not want hard evidence of us coordinating with LH to be out in the market.”
   Regulatory bodies gave the carriers clear direction on the law and let them know that, in some cases, they were very close to skirting it, so it seems that many of the airlines knew exactly what they were doing. 
   In the October finding, Pohorelsky laid out the issue as plainly as possible:
   “The defendants conspired to develop and implement an industry-wide index for calculating fuel and security surcharges that were applied to thousands of routes flown worldwide by the defendants, including flights to and from the United States. By partially eliminating the threat of competition through fixed surcharges, the plaintiffs contend, the defendants were able to charge their customers supra-competitive rates and to collusively adjust these rates in lockstep 28 times during the class period.”
   William M. Hannay, a partner with Schiff Hardin LLP in Chicago, put the price-fixing saga into a broader context.
    In The Air Cargo Antitrust Conspiracy, he wrote: “The air cargo cases illustrate the same old story that we have seen time and again in antitrust price-fixing conspiracies, that is, the extraordinary ability of highly placed executives to deceive themselves into believing that it is somehow acceptable to collude with their competitors and to cheat their customers by fixing prices on the goods and services that they sell.”
   Only time will tell if this is the last chapter in the epic tale of air cargo collusion.

Exotic events
   Unrelated to collusion, the recent press coverage and public outrage over the killing of a lion in South Africa has resulted in swift reactions from airlines. American Airlines, Delta Air Lines and Air Canada have all issued new rules either banning or curbing their previous policies on the cargo transport of taxidermy animals.
   In its statement, Delta said that it had transported animal “trophies” for customers as long as the shipments complied with protected-species regulations. As of Aug.3, however, “Delta will officially ban shipment of all lion, leopard, elephant, rhinoceros and buffalo trophies worldwide as freight.” The airline said it will continue to review this policy, implying that it may add more animals to the list.  
   American echoed Delta’s ban on the five trophy animals, with Air Canada updating its rules as well, but adding that such shipments have been “extremely rare” on its flights.
   The Humane Society of the United States is also trying to exert some pressure on other airlines, stating “by banding together and refusing to transport hunting trophies, the industry has a unique opportunity to support conservation efforts and greatly reduce the ability of trophy hunters to take home their kill.”
   Ross, a former American Shipper editor, writes about air transport and freight issues. He can be reached by email at jonhross@gmail.com.

This column was published in the September 2015 issue of American Shipper.