Australian Competition and Consumer Commission v British Airways PLC

• Jurisdiction: Australia Federal only
• Court: Federal Court
• Judgment Date: 23 December 2008
• Neutral Citation: [2008] FCA 1977

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v British Airways PLC [2008] FCA 1977

TRADE PRACTICES – contravention of Pt IV of Trade Practices Act 1974 (Cth), s 45(2) – arriving at and giving effect to understanding having purpose or likely effect of substantially lessening competition – understanding between respondent (British Airways) and other international airlines as to surcharge to be imposed on international carriage of freight in consequence of increases in price of fuel – Fuel Surcharge Understanding – agreed statement of facts and joint submissions – penalty of $5 million and injunction for five years sought by both parties – consideration of relevant factors and of role of Court – relevant considerations – appropriateness of injunction of limited duration.

Held: pecuniary penalty and injunction in terms as agreed.

Trade Practices Act 1974 (Cth), ss 4E, 5, 45(2), 45A, 76, 80

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

v BRITISH AIRWAYS PLC (ARBN 002 747 597)

NSD 1695 of 2008

LINDGREN J

23 DECEMBER 2008

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1695 of 2008

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	BRITISH AIRWAYS PLC (ARBN 002 747 597) Respondent

JUDGE:	LINDGREN J
DATE OF ORDER:	5 november 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. Leave be granted to any person to inspect the affidavit of Paul Malcolm Taylor affirmed on 28 October 2008 including its annexures.

2. Judgment is reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1695 of 2008

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	BRITISH AIRWAYS PLC (ARBN 002 747 597) Respondent

JUDGE:	LINDGREN J
DATE OF ORDER:	11 DECEMBER 2008
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The respondent pay the Commonwealth of Australia within 14 days of this order a pecuniary penalty in the total sum of $5,000,000 in respect of the contraventions of s 45(2)(b)(ii) of the Trade Practices Act 1974 (“the Act”) in that:

1.1 in or around March 2002, the respondent arrived at an understanding with Lufthansa Cargo Aktiengesellschaft (“Lufthansa”), a competitor of the respondent for the supply of services for the international carriage of air cargo, which understanding contained a provision which had the purpose and likely effect of fixing or maintaining a component of the price charged by each of them for the said services, called a fuel surcharge, and is thereby deemed, pursuant to s 45A of the Act, to substantially lessen competition within the meaning of s 45(2)(a)(ii) of the Act,

1.2 the respondent gave effect to the said provision of the understanding between March 2002 and February 2006 by, inter alia:

1.2.1 increasing or decreasing in that period the amount of the fuel surcharge it imposed per kilogram of cargo in accordance with the said understanding; and

1.2.2 applying the fuel surcharge on its international air cargo services, including on certain international cargo routes involving Australia.

THE COURT ORDERS BY CONSENT THAT:

2. The respondent be restrained, for a period of five years from the date of this order from making, arriving at, or giving effect to, any contract, arrangement or understanding with any of its competitors for the supply of the services of the carriage of international air cargo, containing provisions which have the effect of fixing, controlling or maintaining the price or any part of the price at which it or any of them will supply those services in competition with each other unless:

2.1 the said contract, arrangement or understanding does not involve or relate to the carriage of goods to or from Australia;

2.2 the said contract, arrangement or understanding is necessary for the purpose of interlining between two or more carriers in the course of supplying services of the carriage of international air cargo; or

2.3 the respondent is specifically authorised to do so under section 88 of the Act.

3. The respondent have liberty to apply on 7 days notice for a variation of this injunction.

4. The respondent pay the applicant within 14 days of this order $200,000 as a contribution towards its costs of and incidental to these proceedings.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1695 of 2008

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	BRITISH AIRWAYS PLC (ARBN 002 747 597) Respondent

JUDGE:	LINDGREN J
DATE:	23 DECEMBER 2008
PLACE:	SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION

1 The applicant, Australian Competition and Consumer Commission (Commission), seeks against the respondent, British Airways PLC (British Airways), the imposition of a pecuniary penalty pursuant to s 76 of the Trade Practices Act 1974 (the Act) and injunctive relief pursuant to s 80 of the Act. The application relates to a collusive understanding entered into between British Airways and its competitor Lufthansa Cargo Aktiengesellschaft (Lufthansa) in respect of an element in the price to be charged by them for the carriage of international air cargo between March 2002 and February 2006 (the relevant period).

2 British Airways and Lufthansa arrived at an understanding which had the purpose and likely effect of fixing fuel surcharges for their carriage of air cargo on certain international cargo routes including routes to and from Australia (the Fuel Surcharge Understanding).

3 The Commission and British Airways have put before the Court a “Statement of Agreed Facts and Admissions by [British Airways]”, together with “Joint Submissions”, in support of the imposition of a penalty of $5 million and the granting of particular injunctive relief.

4 The two documents entitled “Statement of Agreed Facts and Admissions by [British Airways]” and “Joint Submissions” were annexed to an affidavit. They should not have been. Apart from any other reason why they should not have been is that being part of an affidavit they could not be inspected without the leave of the Court or a Judge: see O 46 r 6(3)(a) of the Federal Court Rules. The rule applies even in respect of an affidavit that has been read in whole or in part on a hearing. Apparently the documents were annexed to the affidavit due to an oversight, and there was no opposition to my making an order on the hearing that leave was granted to any person to inspect the affidavit.

5 For the purpose of this proceeding only, British Airways has admitted that its conduct in arriving at and giving effect to the Fuel Surcharge Understanding constituted conduct in contravention of s 45 of the Act.

6 The parties acknowledge that it is for the Court to be satisfied that British Airways did contravene s 45 of the Act occurred and to determine the quantum of any pecuniary penalty and the nature of other relief that to be ordered.

BRITISH AIRWAYS’ CONDUCT

7 What follows under this heading is paras 2-59 of the “Statement of Agreed Facts and Admissions by [British Airways]”, my observations being shown in square brackets:

Description of the Market

2. International air cargo is carried both on passenger aeroplanes, using available hold capacity, and on dedicated air freighters. Carriers issue a document known as an air waybill (or bill of lading) for the carriage of air cargo. The air waybill contains the terms and conditions for the carriage of international air cargo including the price of carriage from origin to destination, and serves as the receipt for the shipper, indicating that the carrier has accepted the cargo and is obliged to carry it to its destination. Fuel surcharges, the subject of the contravening conduct were included on the air waybill.

3. Air cargo services are provided “one way” from origin to destination, either directly or using an indirect route via one or more midpoints. Most carriers provide air cargo services on a network-wide basis using their own route networks that offer regular services in different directions. Through interline and other arrangements with other carriers they also offer air cargo services to or from airports which their own aircraft do not serve directly. The networks of carriers extensively overlap such that there are various carriers operating to and from any international airport.

4. Airlines predominantly provide international air cargo services to freight forwarders although individual shippers also acquire their services. Freight forwarders generally organise the integrated transport of goods on behalf of a range of shippers. In doing so, they purchase air cargo services from the carriers. ...

5. The Commission considers, and British Airways does not dispute for the purposes of these proceedings, that the most appropriate market for analysing the conduct the subject of these proceedings is and has been at all material times a worldwide market for air cargo services, hereinafter referred to as the Air Cargo Market, and international air cargo carriers, including British Airways and Lufthansa, are, and at all material times have been, actual or potential competitors in the supply of international air cargo services in the Air Cargo Market.

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