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A Garuda Indonesia Airbus A330-200 (Photo: byeangel from Tsingtao, China (Garuda Indonesia Airlines Airbus A330-243 PK-GPI) [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons)

Garuda Indonesia Drops Appeal, Will Pay $15 Million Fine

The Australian Federal court has approved a payment plan for Garuda Indonesia after ordering the airline to pay a 19 million Australian dollar ($14.7 million) penalty in relation to a prior price-fixing case after the Indonesian flag carrier dropped its appeal against the initial penalty levied a couple of years ago.

Between the years of 2008 and 2010, the Australian Competition and Consumer Commission (ACCC) proceeded to take legal action against 15 airlines globally under the then Trade Practices Act 1974 — now the Competition and Consumer Act 2010 — under the allegations of cartel conduct between 2002 and 2006 with regard to possible fixing surcharges on air freight services.

Out of the 15 global airlines, 13 chose to settle with the ACCC. Air New Zealand and Garuda Indonesia chose to take their cases to trial, which concluded in May 2013. In October 2014, the Federal Court initially dismissed the ACCC’s case against the two airlines, but later changed its mind after the ACCC appealed the decision.

Garuda Indonesia and Air New Zealand appealed the decision to the country’s High Court, which unanimously dismissed the appeal, and in May 2019, the Federal Court had ordered the penalty against Garuda Indonesia. The airline appealed the penalty order in June 2019 but has now chosen to withdraw its appeal.

All imported goods to Australia by the 15 airlines at the specific time were impacted by the illegal price agreement, and the goods ranged from car parts and electronics to food and fresh flowers.

Competition regulators worldwide have taken action with regard to the air freight cartel, with stricter fines or penalties ordered against various airlines in Canada, Europe, India, South Korea, the U.S and New Zealand.

Monthly Payments

With Garuda Indonesia’s consent, the Federal Court ordered for the airline to pay the 19 million Australian dollar penalty, as well as a contribution to the ACCC’s costs, in monthly installments between December 2021 and December 2026, taking into account that the airline industry has been devastatingly affected due to the weakened demand for air travel amid the Covid-19 pandemic, hurting every airline’s revenue.

Under the given orders, if Garuda Indonesia misses a monthly payment, the entire remaining outstanding amount must be paid in full within thirty working days.

“The airline industry has suffered significantly because of the pandemic and these [court] orders take account of that. What is important is that Garuda has been ordered to pay the full penalty for its role in this serious price fixing cartel without a further appeal,” said ACCC Chair Rod Sims in a statement.

The organization is hoping the final court order will be the conclusion for the ACCC’s “long-running case against 15 global airlines, including Air New Zealand, Cathay Pacific, Garuda, Qantas and Singapore Airlines, which has resulted in total penalties of 132.5 million Australian dollars being ordered by the Court.”

With a responsibility of facilitating and protecting competition in the domestic air passenger services industry, the ACCC added that “businesses of all sizes should note the ACCC’s determination to fight this large international cartel,” emphasizing that “significant penalties, like the 19 million Australian dollar penalty ordered against Garuda, send a strong warning that anti-competitive conduct has serious consequences.”

Charlotte Seet
Charlotte Seet
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