EU General Court Overturns EU Commission’s Decision to Fine Airlines €790 Million in Connection with Price-Fixing Cartel

by Patterson Belknap Webb & Tyler LLP

On December 16, the General Court of the European Union, the second highest court in the EU, overturned the decision of the European Commission, the EU’s competition authority, to fine 11 airlines a total of €790 million ($864 million) in connection with an air cargo price-fixing cartel.  As we previously reported here, this freight price-fixing cartel was brought down by a cooperative investigation by the EU Commission and the Department of Justice, and the DOJ ultimately levied $1.8 billion in criminal fines against 22 airlines and 21 individuals.  The investigations also spawned massive class action lawsuits that resulted in hundreds of millions of dollars in settlements.  Now, the fines levied by the EU Commission have been annulled.  The EU General Court overruled the Commission’s decision to fine the airlines because the court found an inconsistency in the description of the conspiracy between different aspects of the decision.  Specifically, the court ruled that the decision grounds, the section that summarized the Commission’s factual findings, charged the airlines with participating in a single continuous conspiracy, but the operative part of the decision, the section that identified exactly which party was being held liable for what conduct, referred to “either four separate single and continuous infringements or just one single and continuous infringement.”

The Commission’s investigation into airline freight pricing practices began in December 2005 when Lufthansa and its Swiss Airlines subsidiary applied for immunity under a Leniency Notice, blowing the whistle on a conspiracy to fix fuel and security surcharges.  In February 2006, the Commission acted on the information supplied by Lufthansa and conducted simultaneous raids with the DOJ on the offices of the major airlines.  An official investigation of 20 airlines was opened in December 2007 and ultimately, in November 2010, 11 airlines were fined a total of €790 million.  All of the carriers that the Commission found to have participated in the cartel were fined, with the exception of Lufthansa and its subsidiaries, which were granted immunity.

Ten of the eleven carriers that were fined brought actions in the EU General Court challenging the Commission’s decision.  The airlines contended that the decision was internally inconsistent, and the court agreed.  The court explained that the operative part of a commission decision needs to be clear and precise so the penalized parties can understand and contest their liability and the national courts can understand the scope of the anticompetitive activity.  This decision, however, described the airlines participating in a single overarching conspiracy, but the operative part referenced four discrete price-fixing arrangements that operated across different routes during different periods of time.   Due to the deficiencies in the decision, the General Court annulled the fines the Commission had levied against the airlines.

The Commission now has two months to decide if it wishes to appeal the decision to the EU’s highest court, the Court of Justice.  A Commission spokeswoman, Lucia Caudet, pointed out that the court annulled the fines on procedural grounds and did not contest that the underlying behavior of the airlines constituted illegal cartel conduct.  She said the Commission “will carefully examine the judgments and their implications as well as potential next steps.”

A press release summarizing the General Court’s decision can be found here.

The decision of the General Court can be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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