ACCC seeks $30M penalty in Garuda cartel case
Competition & Consumer Protection June 22, 2018 11:04 pm By Miklos Bolza | Sydney

The Australian Competition & Consumer Commission is seeking up to $30 million in penalties against Garuda Indonesia after the airline was found guilty of participating in a price fixing cartel.

Garuda was found to have cooperated with a number of other airlines to fixed its fuel surcharges on air freight travelling between both Indonesia and Hong Kong and ports in Australia between 2002 and 2006. The Commission is seeking between $10 million and $15 million for both the Indonesian and Hong Kong violations.

ACCC barrister, John Halley, SC, told Justice Nye Perram that Garuda acted as the “ringleader of the cartel” in Indonesia given that it accounted for 45 percent of all air freight within the country.

Halley further attacked Garuda’s conduct, saying that it had “shown no contrition, remorse or cooperation” throughout the proceedings. It was also the only airline within the cartel in which senior executives were involved, with then Vice President of Cargo, Simon Pulungan, himself attending the collusive meetings.

Justin Gleeson, SC, representing Garuda, called the ACCC’s proposed penalties “manifestly excessive”, accusing the Commission of linking the penalty to yet unproven allegations such as a poor culture of compliance.

“[The ACCC] is clearly seeking very serious findings against Garuda as the basis [of the penalty] and those findings should not be made,” he told the court.

He questioned why Garuda should receive a higher penalty than other, much larger airlines, which had settled for between $5 million to $20 million, for simply exercising its Australian legal rights and bringing the case to court.

Furthermore since Garuda “did not have the critical facts” that they were working within an Australian market and thus were in breach of Australian law, he asked whether such a large punishment was necessary.

“Do you need to punish that person? Do you need to deter them?”

In October 2014, Judge Perram ruled in favour of Garuda, but the Full Federal Court reversed that decision in March 2016 on appeal by the ACCC. Garuda then took the case to the High Court where it was ultimately dismissed.

A separate case by the ACCC against Air New Zealand for the same cartel conduct was also taken to the High Court and dismissed.

The central question for the High Court was whether the actions of Air New Zealand and Garuda were inside a “market in Australia” and could be caught by the then Trade Practices Act 1974, now the Competition and Consumer Act 2010.

The second day of the Garuda hearing continues Monday. The penalties hearing for Air New Zealand will be held separately in the Federal Court Wednesday before Justice Jacqueline Gleeson.

The ACCC is represented by the Australian Government Solicitor. Garuda is represented by Norton White.

The case is Australian Competition & Consumer Commission v P.T. Garuda Indonesia Ltd ARBN 000 861 165.

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Miklos Bolza

Miklos Bolza has been a journalist for three years. He has written for a variety of publications, including NZ Lawyer, HRD Australia, and Australian Broker. He is currently the Sydney court reporter for Lawyerly.