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Archive for Friday, August 24, 2007

Airlines fined $300M each in price-fixing conspiracy

August 24, 2007

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— Two major airlines were fined $300 million apiece Thursday after admitting they conspired to fix prices on international flights and agreeing to help prosecutors investigate other airlines.

British Airways PLC, Britain's largest airline, and Korean Air Co., South Korea's national carrier, pleaded guilty to antitrust conspiracy charges. They acknowledged colluding with rivals over cargo rates and fuel surcharges, which were added to fares in response to rising oil prices. That meant higher costs for international shippers and passengers.

U.S. District Judge John D. Bates said the case "involved considerable commerce and reflected long-term and widespread conduct involving major airlines and players."

Both saw their potential fines reduced because they cooperated with Justice Department investigators. Korean Air's fines could have been twice as high and British Airways could have faced fines closer to $900 million, but the Justice Department and the judge credited the companies with cooperating.

"Any anticompetitive behavior is to be condemned at British Airways or at other companies. It will not be tolerated and we remain vigilant in this respect," British Airways Chief Executive Officer Willie Walsh said in a statement released after court.

Korean Air released a statement saying it was "committed to antitrust compliance" and was taking steps to make sure the conduct was never repeated. Neither company addressed the extent of its cooperation or how widespread the practice was in the industry.

Earlier this month, authorities in London announced $246 million in fines for British Airways in a parallel trans-Atlantic investigation. Both inquiries are ongoing.

Scott D. Hammond, deputy assistant attorney general for criminal antitrust issues, said the sentences proved that "those who violate the antitrust laws and seek to deny American consumers and businesses the benefits of competition will be held accountable."

Other companies were not named. Virgin Atlantic has been identified in London but is not expected to face a fine there because it reported its misconduct to authorities.

As part of their plea deals, the airlines acknowledged they colluded with other unidentified companies from 2000-06. The cargo rate scheme meant higher shipping costs for businesses. For passengers, the scheme meant more expensive tickets because the surcharges were wrapped into the ticket fare.

Between 2004 and 2006, fuel surcharges rose from about $10 to about $120 per ticket for a round-trip, long-haul flight on BA or Virgin.

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