Commerce Commission v Emirates - [2012] NZHC 1858

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
COMMERCIAL LIST

CIV 2008-404-8349 [2012] NZHC 1858

BETWEEN THE COMMERCE COMMISSION Plaintiff

ANDEMIRATES Defendant

Hearing: 26 July 2012

Appearances: J C L Dixon and F J Cuncannon for plaintiff
M R Dean QC and A Birkinshaw for defendant

Judgment: 27 July 2012

JUDGMENT OF ALLAN J

In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of 3.30 pm on Friday 27 July 2012

Solicitors/counsel :
Crown Solicitor Auckland john.dixon@meredithconnell.co.nz
Buddle Findlay, Auckland anita.birkinshaw@buddlefindlay.com mirian@barrist.co.nz

COMMERCE COMMISSION V EMIRATES HC AK CIV 2008-404-8349 [27 July 2012]

[1] The defendant (Emirates) having admitted breaches of Part 2 of the Commerce Act 1986 (the Act), the plaintiff asks the Court to impose a pecuniary penalty. The Commission and Emirates are agreed that an aggregate penalty of $1.5 million is appropriate, together with costs totalling $259,079.18.

Background

[2] Emirates is a Dubai corporation established by decree of the Ruler of the Emirate of Dubai in 1985. During the relevant period it carried on business in New Zealand and elsewhere as a carrier by air of both passengers and cargo. In 2006, it was the ninth largest airline in the world in terms of freight volume carried. It has about 18,000 staff, and operates in some 82 countries in the international air freight industry, which involves all facets of the movement of goods by air on passenger aircraft, using available belly air space capacity and on dedicated air freighters.

[3] Emirates commenced operations to New Zealand in August 2003. Between October 2001 (at the earliest), and August 2003 (at the latest), Emirates reached an understanding with PT Guruda Indonesia and other members of the Air Cargo Representative Board Indonesia, regarding the imposition of a fuel surcharge on cargo carried by air from Indonesia to New Zealand (the FSU). Under the FSU, Emirates and other participants would:

(a) exchange information as to their fuel surcharge intentions on Air

Cargo Services from Indonesia to New Zealand;

(b) charge a fuel surcharge on Air Cargo Services from Indonesia to New

Zealand in accordance with those expressed intentions;

(c) adjust or maintain the fuel surcharges on Air Cargo Services from Indonesia to New Zealand, as agreed at meetings between the participants.

[4] Fuel surcharges were imposed in order to meet the rising cost of aviation fuel. Similar arrangements were made between participating carriers in respect of the imposition of a security surcharge on cargo carried by air from Indonesia to New Zealand (participants entered into a Security Surcharge Understanding (SSU) in order to recover, at least in part, the cost of taking certain security initiatives following terrorist activities in the USA in September 2001). Participants in the SSU reached materially the same understandings as participants to the FSU.

[5] Between August 2003 and February 2006, Emirates and other participants gave effect to both the FSU and the SSU, in respect of the carriage of freight from Indonesia to New Zealand by:

(a)…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Commerce Commission v Emirates

Details

AGLC: Commerce Commission v Emirates [2012] NZHC 1858
Case: [2012] NZHC 1858
Decision Date: 27 July 2012

CaseChat Overview and Summary

The plaintiff, the Commerce Commission, sought to impose a pecuniary penalty on the defendant, Emirates, for breaches of Part 2 of the Commerce Act 1986 (the Act). Emirates admitted that it had breached the Act by entering into and giving effect to two agreements: a fuel surcharge understanding (FSU) and a security surcharge understanding (SSU) in relation to cargo carried by air from Indonesia to New Zealand. The FSU and SSU related to the imposition of surcharges on the carriage of freight from Indonesia to New Zealand, which Emirates and other participants agreed to impose in order to meet the rising cost of aviation fuel and to recover, at least in part, the cost of taking certain security initiatives following terrorist activities in the USA in September 2001. The court was required to determine an appropriate penalty, having regard to all relevant matters, in particular, the nature and extent of any commercial gain. The court noted that the proper approach to penalty assessment under section 80 of the Act is to determine the maximum penalty, establish an appropriate starting point, and adjust the starting point for defendant-specific factors. It was common ground that the maximum penalty for each breach was $10 million. The court found that the starting point for the penalty should lie in the range between $1.8 and $2.3 million. The court then turned to factors specific to the defendant, including the admission of liability, cooperation with the Commission, remorse, and compliance training. The court found that a discount of 25% was appropriate, resulting in a final penalty in the range of $1.35 to $1.725 million. The court approved the proposed penalty of $1.5 million, and ordered Emirates to pay costs to the Commission of $259,079.18.

Orders