Compass Lexecon’s Client Prevails in Suit against the Australian Competition and Consumer Commission

Australian Competition and Consumer Commission v. Air New Zealand Limited

The Australian Competition and Consumer Commission (“ACCC”) alleged that Air New Zealand colluded with other airlines to fix surcharges and fees on the carriage of air cargo from Hong Kong and Singapore to Australia. Justice Perram of the Federal Court of Australia dismissed the case, finding the markets at issue were outside of Australia. In dismissing the charges, Justice Perram relied upon the testimony of Professor Richard Gilbert of Compass Lexecon.

The ACCC brought suit under the Trade Practices Act of 1974, which covers only conduct that takes place in a market in Australia. Thus, a key issue in the litigation was the question of the location of the markets for air cargo services to Australia for cargo originating outside of Australia. The ACCC’s economic experts claimed that the markets for air cargo destined for Australia encompasses Australia because the demand for goods delivered by air cargo was located in Australia and decisions regarding which air carrier to use were sometimes made in Australia, among other reasons.

Air New Zealand retained Professor Richard Gilbert and Compass Lexecon to address the geographic location of markets for air cargo. Professor Gilbert opined that the appropriate method for determining the location of a market was to identify the boundaries of the relevant geographic market. Moreover, relevant market analysis shows the connections to Australia that the ACCC’s experts highlighted do not imply that the market for air cargo services to Australia encompasses Australia. Instead, the competition among air carriers to provide transportation to Australia takes place overseas because the competing alternatives to transport cargo from points overseas to Australia are located overseas.

Relying on Professor Gilbert’s testimony, the Court found that to the extent there were agreements regarding fuel surcharges, they occurred in markets outside of Australia. Notably, Air New Zealand and Garuda were the only two airlines to take the ACCC to trial on these issues. Other airlines reached settlements with the ACCC and paid fines totaling $98.5 million (AUD).

Professor Gilbert was assisted by a team in Compass Lexecon’s Boston office led by Steven Peterson. Compass Lexecon worked closely with Michelle Carr of Corrs Chambers Westgarth.