Important win on jurisdiction issue for Commerce Commission in freight forwarding case
1 June 2012
The Court of Appeal has confirmed the New Zealand High Court's jurisdiction in the Commerce Commission's ongoing freight forwarding cartel case against Kuehne+Nagel International AG (Kuehne+Nagel).
"This is an important clarification of the Court's jurisdiction over overseas companies," said Dr Mark Berry, Chair of the Commission. "The decision recognises the potential for overseas parent companies to be held to account in this country for the conduct of their New Zealand subsidiaries."
The Commission claims that Kuehne+Nagel gave effect in New Zealand to cartel agreements reached with competing freight forwarders. Kuehne+Nagel challenged the Commission's jurisdiction to bring proceedings against it, on the basis that it was a Swiss holding company without involvement in the operation or management of freight forwarding.
Last year, the High Court at Auckland found that the Commission had established a good arguable case that the acts of the New Zealand subsidiary Kuehne+Nagel NZ could be attributed to its Swiss parent company. The Court of Appeal yesterday upheld the High Court judgment in all respects.
Kuehne+Nagel is the remaining defendant to a case brought by the Commission 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.
As the matter is now likely to proceed to trial, the Commission will not be making any further comment at this time.
The Court of Appeal's judgment is available on the Commission's website at www.comcom.govt.nz/competition-enforcement-outcomes
Kuehne+Nagel is a company incorporated in Switzerland and the ultimate holding company for a group of companies (including a New Zealand company, Kuehne+Nagel Ltd) that provide freight forwarding services worldwide. The KN Group is structured as a corporate network, utilising subsidiary companies in the countries in which it operates.
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 the '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.