Go ahead for Commerce Commission freight forwarding cartel case against Kuehne + Nagel
18 October 2011
The High Court has given the Commerce Commission the go ahead to proceed to trial against Kuehne+Nagel International AG (Keuhne + Nagel) in relation to the Commission's ongoing freight forwarding cartel case.
Kuehne+Nagel is the remaining defendant to a case brought by the Commission last year against six international freight forwarding companies for breaches of the Commerce Act. The Commission alleged collusion on surcharges imposed to cover the costs of complying with security measures required by airlines and national authorities. All defendants but Kuehne + Nagel have since settled with the Commission, and the High Court has ordered penalties under the Commerce Act totalling $8.85 million.
The Commission claims that Kuehne + Nagel gave effect in New Zealand to cartel agreements reached with competing freight forwarders. Kuehne + Nagel, based in Switzerland, had challenged the Commission's jurisdiction to bring proceedings against it, on the basis that it was a holding company without involvement in the operation or management of freight forwarding.
The High Court at Auckland found that the Commission had established good arguable grounds that implementation of the alleged agreements in New Zealand may be attributed to Keuhne + Nagel, through its direction of, or with the consent or agreement of, companies within its corporate group.
On a review of the Commission's evidence, the High Court found that the Commission could proceed to trial on five of the seven cartel agreements it alleges Kuehne + Nagel implemented in New Zealand.
"The Court's decision confirms the Commission's view of the practical reality in this case," said Kate Morrison, General Manager of Competition at the Commission. "It is important that the Commission is able to pursue parties in New Zealand courts for anticompetitive conduct that we allege they have implemented through their regional and local networks."
The High Court's judgment is available on the Commission's website.
As the matter will proceed to trial, and the High Court's judgment on jurisdiction may be the subject of an appeal, the Commission will not be making any further comment at this time.
The air freight forwarding industry is a complex industry and refers to all facets of the logistical arrangements for the movement of goods, by air, from origin to destination. Generally, freight forwarders are independent from the physical carrier of freight and are therefore able to choose the best option for customer's distribution needs.
In 2006 the provision of air freight forwarding services into and out of New Zealand generated revenue of approximately $450 million. This figure only includes the air freight component, which is composed of the air freight charge levied by carriers, the carrier-imposed surcharges as well as commissions and discounts payable to the forwarders.
These proceedings should be distinguished from 'air cargo case', which is a separate proceeding instituted by the Commerce Commission against a number of airlines in relation to security and fuel surcharges applied to the international carriage of air cargo in the air cargo industry.
The case to date In December 2010 EGL Inc settled with the Commission and was ordered to pay a penalty of $1.15 million. In the same month Geologistics International (Bermuda) Limited also settled and was ordered to pay a penalty of $2.5 million.
In June 2011, BAX Global Inc (BAX), Schenker AG (Schenker) and Panalpina World Transport (Holdings) Ltd (Panalpina) reached settlements with the Commission, which were accepted by the High Court. BAX was ordered to pay $1.4 million, Schenker $1.1 million and Panalpina $2.7 million.