Price fixing knows no borders
By Roxanne Ker and Jerome Veldsman
Air New Zealand Ltd and PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission, a decision of the High Court Australia (the apex Court) on 14 June 2017, dealt with horizontal price fixing (conspiring to set prices for their services).
For the period 2002 to 2006, the two airlines had reached an ‘understanding’ involving the imposition of surcharges and fees associated with the carriage of air cargo from ports in Hong Kong, Singapore, and Indonesia to destination ports in Australia. The airlines’ orders largely emanated from importers into Australia.
At the time, the (Australian) Trade Practices Act, 1974 (since replaced) was the operative competition legislation. The relevant provisions in this Act prohibited price fixing in any market in Australia.
The airlines’ primary defence was that the price fixing had not occurred in any market in Australia; and had occurred (only) in Hong Kong, Singapore, and Indonesia. This defence was successful in the Court of first instance, but not on appeal to the next Court. And in the appeal to the High Court, all five Judges rejected the appeal:
“In the present case, while the circumstance that contracts for supply of air cargo services were made and the performance of those services commenced at locations outside Australia may tend to suggest that suppliers were competing in a market of which these overseas locations are a feature, it does not, of itself, accurately describe the geographical dimension of the market; much less establish that Australia was not within that market.”
“The airlines were actively engaged in attempting to capture the demand for services emanating from shippers in Australia as an integral part of their business. The airlines’ deliberate and rivalrous pursuit of orders emanating from Australian shippers was compelling evidence that they were in competition with each other in a market that was in Australia.”
How would the South African Competition Tribunal or Competition Appeal Court decide on similar facts; say two South African companies fixing prices of imports from another African country? We think a similar conclusion may be reached, especially as the South African Competition Act applies to economic activity within South Africa, or having an effect within South Africa.