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Competition, Consumer & Regulatory

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Client Update: ACCC successfully appeals air cargo cartel – the widening of 'market in Australia'

23 March 2016

In brief: The ACCC has won an appeal in the Full Federal Court in the air cargo cartel case against Air New Zealand and Garuda. Those airlines were found to have engaged in price fixing conduct within a 'market in Australia' even though the point of competition was outside the country. The case clarifies and potentially expands the circumstances in which conduct engaged in overseas may be caught by Australia's competition laws. Partner John Hedge (view CV) and Lawyer Jessica Rusten report. 

The decision

The decision is the latest development in a long running air cargo cartel investigation by the ACCC (in which 13 other airlines had already reached settlements for an aggregate of $98.5 million in civil penalties).

The ACCC alleged that Garuda and Air New Zealand engaged in cartel conduct by fixing surcharges and fees on the carriage of air cargo from Hong Kong, Singapore and Indonesia into Australia.

The first instance decision found that the alleged conduct did not occur in a 'market in Australia', and was therefore not caught by the price fixing provisions in the then Trade Practices Act 1974 (Cth) (now the Competition and Consumer Act 2010 (Cth)). This was on the basis that the relevant market was located at the point of origin of the cargo (ie Hong Kong, Singapore and Indonesia). This decision was overturned by the Full Federal Court, with the majority judgment determining that the conduct did occur in a 'market in Australia'.

The proceedings have now been remitted to the Federal Court to determine relief, including declarations and civil penalties.

Approach to market definition and future significance

The Full Court confirmed that:

  • a market could be 'in Australia' even if the market was also in another country;
  • no single dimension of a market will be determinative of whether a market is held to be 'in Australia'; and
  • the following factors were relevant in this case in determining that the market was 'in Australia':
    • the presence of customers (importers) in Australia;
    • the fact the airlines targeted their marketing activities to shippers in Australia;
    • that barriers to entry existed in Australia; and
    • that important components of the suite of services offered by the airlines were performed in Australia.

The requirement that the conduct relate to a 'market in Australia' remains a central component of many prohibitions in the Competition and Consumer Act.1 The Full Court's approach is significant in that it potentially results in a wider range of conduct occurring outside of Australia contravening Australia's competition laws than was previously thought to be the case.

Footnotes
  1. While the concept of 'market in Australia' may no longer be relevant to the cartel prohibitions, it is still a central feature of many of the other prohibitions in the Competition and Consumer Act.

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