Cathay Pacific Pleads Guilty to Price-fixing Conspiracy

OTTAWA, ONTARIO--(Marketwired - June 20, 2013) - The Competition Bureau announced that Cathay Pacific Airways Limited (Cathay Pacific) pleaded guilty today to criminal conspiracy under the Competition Act and was fined $1.5 million by the Ontario Superior Court of Justice for its participation in an air cargo price-fixing cartel.

Cathay Pacific's guilty plea relates to navigation surcharges that it imposed on international air cargo shipments to and from Canada between April 13, 1999 and August 14, 2003.

"When the Bureau obtains evidence of wrongdoing, it does not hesitate to pursue those who engage in price-fixing agreements that harm Canadian businesses and consumers," said John Pecman, Commissioner of Competition. "These types of agreements represent one of the most egregious forms of anti-competitive behaviour."

Price-fixing conspiracies are, because of their secretive nature, very difficult to detect and prove. High or identical prices are not in and of themselves evidence of criminal activity. There must be evidence that competitors have agreed to set those prices. When there are substantiated allegations of wrongdoing in the marketplace, the Bureau will not hesitate to take action.

To date, the Bureau's air cargo surcharges investigation has resulted in eight criminal convictions and fines of over $24 million. Cargolux, Air France, KLM, Martinair, Qantas, British Airways, and Korean Air have also pleaded guilty to fixing one or more air cargo surcharges, including fuel surcharges, for shipments on certain routes from Canada. The Bureau's investigation into the alleged conduct of other air cargo carriers continues.

The Bureau's investigation benefitted from cooperation of companies under the Bureau's Immunity and Leniency Programs. These programs create incentives for parties to address their criminal liability by cooperating with the Bureau in its ongoing investigation and prosecution of other alleged cartel participants.

Under the current conspiracy provision in the Competition Act, it is a criminal offence for two or more competitors or potential competitors to conspire, agree or arrange to fix prices, allocate customers or markets, or restrict the output of a product. An offence under this provision is punishable by a fine of up to $25 million and/or imprisonment for a term of up to 14 years. In this case, the conduct occurred under the former conspiracy provision, which provides for a fine of up to $10 million and/or imprisonment for a term of up to five years.

To secure a conviction under the former conspiracy provision of the Act, the Bureau is required not only to prove an agreement between competitors to fix prices, but also that the agreement was likely to have an undue economic effect on competition in the market. This significantly increases the complexity of proving a violation of the Act.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.