Four Takeaways From The Ongoing Air Cargo Price-Fixing Litigation

Nippon Cargo Airlines Co. Ltd last week agreed to pay $36.55 million to settle claims that it conspired with other airlines to fix rates for air cargo services in the early 2000s. Two dozen airlines have settled in the long-running multi-district litigation (MDL), bringing the settlement fund to more than $900 million.

The case commenced in 2006, when consumers of air cargo services brought more than 90 law suits against dozens of air cargo carriers. These cases were later consolidated in the Eastern District of New York MDL titled In re: Air Cargo Shipping Services Antitrust Litigation.

The MDL concerns claims that air cargo carriers agreed in secret meetings, conversations, and other communications on cargo rates to and from the United States. The conspirators allegedly carried out the conspiracy by enforcing the agreed-upon rates and engaging in subsequent communications to monitor enforcement.

With dozens of defendants and a growing settlement fund, this case is notable for both its scope and impact. The four main takeaways from this litigation to date are:

1. The civil litigation came on the heels of one of the largest DOJ criminal investigations in history. The DOJ and the European Commission began investigating a price-fixing conspiracy in the air freight industry in 2006. In February of that year, authorities on both sides of the Atlantic simultaneously raided the offices of major airlines. The conspirators were forced to pay around $3 billion in criminal fines in the United States and Europe. DOJ fines made up more than $1.8 billion of that amount, with charges against 22 airlines and 21 individuals. This was the largest amount for a single investigation in DOJ history. The DOJ's fines in the ongoing auto parts price-fixing conspiracy have since surpassed the airline cargo conspiracy fines, totaling more than $2.4 billion to date.
2. This past October, U.S. Magistrate Judge Viktor Pohorelsky recommended certification of a class of tens of thousands of direct purchasers of air cargo shipping services. The recommended class period spans Jan. 1, 2000 to Sept. 30, 2006. In making this recommendation, Judge Pohorelsky rejected the airlines' argument that the wide-variety of affected routes, regions, or times periods across seven countries could not be used as common proof for a global class. The Second Circuit upheld the dismissal of indirect-purchaser plaintiffs from the suit in 2012, holding that federal aviation law preempted price-fixing claims against foreign carriers brought under state antitrust statutes.
3. The settlements to date have ranged from $3.2 million with Malaysia Airlines to $115 million with Korean Air Lines Co., Ltd. Their terms include costs of administration of the class action and requirements that airlines provide witnesses and documents to help plaintiffs pursue their case against remaining defendants. The settlement amounts generally represent a percentage of sales of air freight shipping services to and from the United States to class members during the class period.
4. Claims remain against five airlines. These include Air China Ltd., Air India Ltd., Eva Airways Corp., Air New Zealand Ltd., and Atlas Air Worldwide Holdings Inc.'s Polar Air Cargo.

A final fairness hearing regarding outstanding proposed settlements is scheduled for Friday, January 16, 2015, before U.S. District Judge John Gleeson.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.