In what the Justice Department calls one of the largest antitrust settlements in U.S. history, four international airlines agreed on Thursday to pay $504 million to settle charges that they conspired to fix air cargo rates. The airlines involved in the settlement are Air France-KLM, Cathay Pacific, SAS, and Martinair.
“As part of the conspiracy, several companies and their coconspirators artificially raised the price to ship into and out of the United States consumer goods of all types, including electronics, clothing, produce, and medicines,” associate attorney general Kevin O’Connor said in announcing the settlements. “This conspiracy, conservatively, has affected billions of dollars of shipments…the total harm to American consumers and businesses [could be] in the hundreds of millions of dollars.”
Several firms, including Crowell & Moring, DLA Piper, Skadden, Arps, Slate, Meagher & Flom, Linklaters, and Gibson, Dunn & Crutcher, advised the four carriers in their deals with the Justice Department. All the airlines have agreed to cooperate with the government in its ongoing investigation.
New York-based litigation partners Thomas McGrath and James Warnot, Jr., of Magic Circle firm Linklaters advised Roissy, France-based Air France, a subsidiary of Air France-KLM. (The two companies merged in 2005 to form the world’s largest airline in terms of operating revenue.) Litigation associates Daniel Macaluso, Robert Bell, Melissa Iachan, and Edouard Sarrazin rounded out the team from the London-based firm.
Air France and its partner, KLM Royal Dutch Airlines, will pay a combined $350 million to resolve allegations that they engaged in anticompetitive trade practices on air cargo shipments between May 2001 and February 2006.
Skadden antitrust partners John Nannes and Gary MacDonald advised KLM. The $350 million fine is the second largest criminal fine ever levied by the Justice Department’s antitrust division and one of the largest ever imposed by Main Justice.
Hong Kong’s Cathay Pacific turned to preventive litigation partner Sheldon Krantz and antitrust partner Martin Dajani of DLA Piper. Under its agreement with the Justice Department, Cathay pled guilty to a one-count violation of the Sherman Act for price-fixing actions beginning in May 2002 and continuing through February 2006. The company will pay a $60 million fine.
Antitrust partner Jeffrey Blumenfeld and litigation partner Stephen Byers from Washington, D.C.’s Crowell & Moring advised Copenhagen-based SAS Cargo Group, a subsidiary of Stockholm-based airline SAS AB, in its settlement resolving allegations of anticompetitive activity in the air cargo business from February 2002 though February 2006. Firm chairman Kent Gardiner, who specializes in antitrust matters and complex litigation, also advised the company along with associates M. Brinkley Tappan, Ann Mason, and Ana Caínzos. SAS pled guilty to one violation of the Sherman Act and will pay a fine of $52 million.
Amsterdam-based Martinair was represented by Gibson, Dunn & Crutcher antitrust cochairs Daniel Swanson and Gary Spratling. Antitrust partner Jarrett Arp also advised the company, which is jointly owned by KLM and Nedlloyd Holding, a unit of Danish shipping giant A.P. Moller – Maersk. Martinair will pay a $42 million fine for antitrust violations occurring between September 2001 and February 2006.
In addition to O’Connor and Scott Hammond, a deputy assistant attorney general in charge of criminal enforcement for the antitrust division, the government’s legal team included national criminal enforcement antitrust chief Lisa Phelan, assistant chief Mark Rosman, and assistant U.S. attorney’s Brent Snyder, Mark Grundvig, Katie Hellings, Liz Aloi, Carsten Reichel, Michael Whitlock, Deana Timberlake-Wiley, Nancy McMillen, and Kate Schlech.
Yesterday’s actions follow similar agreements that the Justice Department’s antitrust division reached with British Airways and Korean Air Lines in August 2007. Both airlines agreed to pay $300 million for fixing prices on air cargo rates and passenger fares. In November 2007, suburban Sydney-based Qantas Airways agreed to a $61 million fine for its role in the price-fixing scheme–the company’s former highest-ranking U.S. executive pled guilty to a criminal conspiracy charge in May. Japan Airlines faced a $110 million penalty in May after it pled guilty to an antitrust violation