Photo: Garuda Indonesia

JAKARTA (TheInsiderStories) – Management of PT Garuda Indonesia Tbk (IDX: GIAA) assessed the Australian federal court’s decision to order state-owned flight carrier to pay penalties of US$13.2 million (Rp189 billion) for colluding on fees and surcharges for air freight services as unfair and has a legal loophole to appeal.

The penalties follow the Australian Competition and Consumer Commission’s (ACCC) court action against a global air cargo cartel, which has so far resulted in penalties of A$132.5 million against 14 airlines, including Air New Zealand, Qantas, Singapore Airlines and Cathay Pacific.

The Court found that between 2003 and 2006, Garuda made and gave effect to agreements that fixed the price of security and fuel surcharges, as well as a customs fee from Indonesia. It was ordered to pay A$15 million. A further A$4 million was ordered for the imposition and level of insurance and fuel surcharges from Hong Kong, ACCC said in a statement.

“Price fixing is a serious matter because it unfairly reduces competition in the market for Australian businesses and consumers, and this international cartel is one of the worst examples we have seen,” ACCC Chair Rod Sims said.

Responding to this, Garuda’ VP Corporate Secretary Ikhsan Rosan explained that the incident was an old case and had not yet been legally binding, so there was still a legal loophole that made it possible to appeal.

“We consider that this case is unfair and Garuda Indonesia has never carried out this practice in its business, and this accusation is inappropriate,” he said.

This case is a long-running one for the ACCC. In 2014, the Federal Court initially dismissed the ACCC’s case against Garuda and Air New Zealand. The ACCC appealed the decision and the Full Court of the Federal Court upheld the ACCC’s appeal. Garuda and Air New Zealand appealed the decision to the High Court, which unanimously dismissed the appeal.

“While 13 other airlines decided to go through a peace mechanism by pleading guilty, and have been fined and the amount of compensation ranging from A$3 million to A$20 million,” Rosan said.

Then on May 30, 2019, the Federal Court handed down a verdict, and Garuda – Air New Zealand were charged a fine of A$19 million and also ordered to pay the ACCC’s legal costs, he adds.

According to him, the fine, in this case, is very unfair and should also not exceed A$2.5 million, taking into account that the transportation of Garuda cargo from Indonesia at that time amounting to A$1.1 million and freight transportation revenues from Hong Kong amounting to A$656 thousand.

Garuda has previously coordinated intensely with the Australian Embassy since 2012 and the Team of the Directorate General of Law and International Treaties, the Ministry of Foreign Affairs since 2016 because this legal case concerns interstate diplomacy.

“We also previously coordinated regularly with the Indonesian Business Competition Supervisory Commission,” he ended.

The ACCC commenced legal action against 14 international airlines between 2008 and 2010 under the Trade Practices Act (1974) for conduct that occurred between 2002 and 2006.

All goods imported to Australia during the period by the airlines subject to ACCC litigation were impacted by the illegal price agreement including car parts, electronics, vegetables, seafood, flowers, and in one specific circumstance, meat to Australian troops in the Middle East.

Competition regulators around the world have taken action in relation to the air cargo cartel, with fines or penalties ordered against various airlines in Europe, the United States, Korea, New Zealand, Canada, and India.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com