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Cade Imposed a BRL 300 million fine against International Air Cargo Cartel


Investigation started with leniency agreement
published: Aug 28, 2013 03:00 PM last modified: Apr 15, 2016 02:33 PM

In the public trial session on August 28th, 2013, CADE’s Tribunal condemned airlines ABSA Aerolineas Brasileiras S.A., Varig Logistica SA, American Airlines Inc., and Alitalia Linee Aeree Italiane S.P.A., plus seven individuals for cartel formation in the international air cargo sector. The fines sum more than BRL 293 million.

The four airlines and the employees involved were condemned for fixing the price and the date for application of additional fuel charge in international air cargo in Brazil. Considering there was not any evidence to prove their participation in the cartel, United Airlines Inc. and an individual connected to the company were acquitted by the Tribunal (Administrative Proceeding no. 08012.011027/2006-02).

"The exchange of information aimed not only at coordinating the implementation of fuel charge, but also at coordinating the final price of air freight, because the fuel charge value was a substantial part of the full price", declared case Reporting Commissioner, Ricardo Machado Ruiz. The Commissioner added that the cartel had resulted in international condemnation and agreements in various jurisdictions such as the European Commission, the United States, Canada, South Korea and Australia.

In Brazil, collusion occurred between 2003 and 2005 and participating companies came to control about 60% of the market during that period. "The price cartel generated abusive prices that were passed on to consumers and to the supply chain. We are talking about air cargo, this practice clearly had an impact on the country’s logistics costs", said the president of Cade, Vinicius Marques de Carvalho.

Leniency - The investigation of air cargo cartel began in 2006 following the signing of a leniency agreement between CADE and airlines Deutsche Lufthansa AG, Lufthansa Cargo AG, Swiss International Airlines, plus five individuals who denounced the illegal activity. In 2007, a dawn raid was held at the headquarters of the investigated companies. The evidence obtained confirmed the existence of collusion.

At trial, the Tribunal removed any punishment against leniency signatories. The leniency agreement allows reduction or cancellation of the penalty for a cartel participant that denounces the anti-competitive practice and presents evidence to prove the offense.

For the president of Cade, the case demonstrates how the Leniency Program is an important tool in the fight against cartels in the country. He stated that this kind of arrangement is adopted in more than 50 jurisdictions around the world.

Agreement - In February, 2013, the airlines Societé Air France, KLM, and two individuals signed a Cease and Desist Agreement (TCC, for its acronym in Portuguese) with Cade, whereby they confessed involvement in collusion and pledged to cease the practice and pay about BRL 14 million of cash contribution. The contribution will be collected by the Brazilian Diffused Rights Fund (“FDD” for its acronym in Portuguese), which entrusts the money to public agencies and civil nonprofit projects that aim at the recovery of assets and protection of diffuse rights like those entrenched within the ambit of environment protection, historical and cultural heritage or consumer rights.