Last week, with my A2 class, I had a few discussions about oligopolies, game theory, and the existence of cartels. In the Weekend New Zealand Herald there was a very relevant article on the case of a cartel between 13 international airlines who had colluded to raise the price of freighting cargo by imposing fuel surcharges on cargo shipments into and out of New Zealand. The New Zealand Commerce Commission started proceedings against the 13 airlines in December 2008 and the price fixing period was between 2000 and 2006.
Of the 13 airlines there are some major carriers including: British Airways, Air NZ, Cathy Pacific, Emirates, Japan Airlines, Korean Airlines, Malaysian Airlines, Singapore.
Qantas admitted liability and agreed to a settlement of NZ$6.5m which is approximately a 50% discount for co-operating with the Commerce Commission. Other airlines that have settled are British Airways, Cargulox International Airlines. The price-fixing case starts in May and the main issue is what was the definition of a ‘market in New Zealand’ and if air cargo services inbound to New Zealand were part of such a market.