Air freight cartel nets almost $12 million in penalties

The “Gardening Club” cartel saga has come to an end, with the New Zealand High Court ordering Swiss company Kuehne + Nagel International AG to pay a penalty of $3.1 million plus costs for breaches of the Commerce Act.

The Kuehne + Nagel’s penalty brings the total penalties ordered in this case to $11.95 million and sends a strong message to the business community that cartel behaviour is unacceptable.

In a media release New Zealand Commerce Commission chairman Dr Mark Berry says Kuehne + Nagel is the last defendant in a long-standing case brought by the Commerce Commission against six international freight forwarding companies for a range of hard core cartel behaviour.

The other five defendants admitted their role in the cartel and paid penalties in 2010 and 2011. Kuehne + Nagel challenged the Commission’s jurisdiction but were unsuccessful in both the High Court and Court of Appeal.

In the final hearing in April Kuehne + Nagel admitted to being part of a secret cartel that called itself the ‘Gardening Club’. The Gardening Club agreed to charge surcharges on air freight forwarding services from the UK to countries including New Zealand, ostensibly to cover the costs of increased security measures imposed in the UK. The cartel participants agreed they would each pass on certain costs to customers, rather than compete in the usual way and determine their own pricing structures and price levels.

“The ‘Gardening Club’ was a classic hard-core cartel. Members attended covert, off-site meetings outside of business hours and used code words to describe the agreed surcharges,” says Dr Berry.

“Our investigation uncovered emails in which ‘Gardening Club’ members referred to the agreed surcharges as “…the new price for asparagus for the forthcoming season…,” and “the price of marrows.”

“When members lacked confidence that cartel members were performing the illegal agreement, they emailed in terms like, “I hear… concerns about the price of produce from the garden of Velcro, which appears to be operating as a charitable cooperative for the benevolence of vegetable eaters rather than growers…”” continued Dr Berry.

“We are extremely pleased to have closed the book on this long-running case involving anti-competitive conduct in a key New Zealand industry,” said Dr Berry. “The Commission took this case in 2007 and we have seen it through to its conclusion. Businesses that act anti-competitively can expect the same determination from us.”

Read more

• The judgment is available on the Commerce Act Enforcment Response Register
• Air Cargo Magazine – NZ completes air cargo blitz, but promised new law is nowhere in sight