Indonesia's national airline Garuda has been savaged by a federal court judge and ordered to pay a $19 million penalty as a long-running price fixing case comes to a close.
The penalty ordered by the Federal Court on Thursday brings the total carriers including Qantas, Air New Zealand, Singapore Airlines and Cathay Pacific have had to pay to Australian authorities to $132 million for their roles in a global air cargo cartel.
Garuda Indonesia has been ordered to pay $19 million for its part in a price fixing cartel. Credit: Bloomberg
The Australian Competition and Consumer Commission (ACCC) launched legal action against 14 airlines in 2008, alleging they fixed the surcharges on air cargo on flights into Australia.
Federal Court Justice Nye Perram on Thursday ordered Garuda to pay $15 million for fixing the price of security and fuel surcharges and a customs fee, for freight deliveries from Indonesia. Justice Perram ordered it pay another $4 million for imposing insurance and fuel surcharges from Hong Kong.
The means Garuda will pay the second highest penalty of any of the airlines prosecuted in Australia behind only Qantas, which paid $20 million. The fine, according to the judgment, exceeded Garuda's total cargo revenue from 2003-2006 on all its routes.
In handing down the penalty Justice Perram said while the penalty was high it was proportionate given the way Garuda had conducted the case and evidence that its senior staff were aware of the conduct.
This international cartel is one of the worst examples we have seen.
ACCC's Rod Sims
"Unlike any of the other airlines it was shown in Garuda’s case that the cartel conduct was known about at a very high level within the company. This is a significant aggravating matter," the judgment says.
"Garuda’s conduct of the penalty hearing where it solemnly invited the court to impose no penalty whatsoever well shows that it is in no way contrite and does not accept that it bears any responsibility for its conduct."
The judgment brings the cartel actions to a close. The ACCC's case against Garuda and Air New Zealand initially failed in the Federal Court in 2014, but the competition watchdog successfully appealed that decision.
The two airlines then appealed to the High Court, which dismissed the matter.
ACCC chairman Rod Sims said he was pleased to finally have resolution in the "important" matter.
“Price fixing is a serious matter because it unfairly reduces competition in the market for Australian businesses and consumers, and this international cartel is one of the worst examples we have seen,” he said.
The ACCC entered a memorandum of co-operation with the United States' Federal Bureau of Investigation last month, forming a "rare" partnership that Mr Sims said would help the watchdog detect, investigate and prosecute cartels.
“Any business anywhere that enters an agreement that affects Australian businesses and consumers should clearly take note," he said.
Garuda was contacted for comment.
Meanwhile, the Federal Court on Thursday also ordered budget airline Jetstar to pay a $1.95 million penalty for misleading customers about their legal right to a refund on air tickets.
Australia's four major airlines all entered court-enforceable undertakings with the ACCC after it caught them lying to customers about their access to a refund when a flight was delayed or cancelled.
The ACCC said that Qantas' budget arm Jetstar was the worst offender, making claims on its website that consumers could not receive a refund if they bought a cheaper class of fare. Jetstar also falsely told customers that standard consumer guarantees did not apply to its flights.
"All flights come with automatic consumer guarantees that cannot be excluded, restricted or modified, no matter how cheap the fare,” Mr Sims said.
The ACCC and Jetstar agreed on a $1.95 million fine last year and submitted it to court for approval.
A Jetstar spokesman said the airline never intended to mislead customers and had worked with the ACCC to bring its website into line with the law.