THAI faces cartel probe
The European Union's antitrust regulators have lodged a formal charge against Thai Airways International (THAI), accusing it of acting as part of a suspended air freight cartel, charges which could lead to hefty fines for the national carrier.
The formal complaint is known as a statement of objection and initiation of proceedings, and is the first in a possible string of legal steps.
THAI, 51% owned by the Finance Ministry, is charged along with 25 other major international carriers, including Germany's Lufthansa, Air France-KLM, British Airways, Japan Airlines, Scandinavia's SAS and Cargolux for cartel acts. They are accused of colluding in setting air freight rates, as well as surcharges for fuel, security, war risk and other levies in the provision of air cargo services.
If an accused airline admits to guilt or is found guilty, EU rules allow for a fine of up to 10% of annual sales.
THAI yesterday confirmed receiving a letter of complaint from the Commission of the European Communities (EC) only recently. It has hired a local law firm, Siam Premier, which will work with its European legal advisers on the case.
The airline has secured an agreement from the EC to delay submission of its clarification to the EU commission to April 16 from the March 3 deadline.
The flag carrier will seek to defend the charges by stressing that its air freight rates are determined by an official panel set up by the Transport Ministry and whose members include customers.
"We definitely do not have the liberty to collude with other freight service providers, but we must follow the government's set rates," a senior THAI executive, who asked to remain anonymous, told the Bangkok Post yesterday.
If the EC is not satisfied with the explanation, THAI is basically left with two options: accept guilt and pay the fine or fight the case in court.
Some accused airlines including Lufthansa and Malaysia Airlines have reportedly chosen to co-operate with the EC through participation in a "corporate leniency programme" in return for receiving immunity and avoiding criminal conviction. But other carriers like Singapore Airlines and Japan Airlines are fighting the charges.
The EC has taken a tough stance on antitrust violation and last year imposed more than 3.3 billion euros in fines on members of illegal cartels - the most it has imposed in a single year.
Air cargo users have complained for years about surcharges that airlines were applying, prompting investigations by antitrust regulators. In 2006, antitrust regulators in the EU, Asia and the United States raided the offices of major airlines.
British Airways and Korean Air have already pleaded guilty in US courts to antitrust charges levied against them by the US Department of Justice, while Qantas reached a plea agreement with the department in which it admitted that its cargo division had "breached relevant antitrust laws".
THAI executives said the case could drag on. "It would probably take a year, if not longer," one said.
Bangkok Post Feb. 15, 2008