By Keith Norbury
There’s an elephant in the room that everyone in the freight forwarding world is aware of, but that not everyone wishes to talk about. That elephant has the form of jumbo-sized fines levied this spring by the European Commission against 14 freight forwarding companies, including several of the planet’s biggest, for alleged anti-competitive behaviour.
“From my perspective, the Association’s perspective, I don’t speak to that subject,” said Ruth Snowden, executive director the Canadian International Freight Forwarders Association. “I will say that some of the multinational freight forwarding companies are no longer allowed to have their employees participate in certain activities. But that’s all I have to say on that matter.”
The European Commission levied fines totalling 169 million euros (about $225 million Cdn.) in March against companies it says participated in four cartels. One of those cartels, dubbed the “new export system,” involved a “gardening club” ruse where participants allegedly used vegetable code names, like asparagus, to communicate price-fixing schemes.
Elephantine companies slapped with the fines included Kuehne + Nagel (53.7 million euros), Panalpina (46.5 million euros), and United Parcel Service (9.8 million euros). One big company not fined was Deutsche Post, even though its subsidiaries DHL and Exel were implicated in the scandal. That’s because the Commission granted the German post office immunity from prosecution for being the first company to reveal the existence of the cartel. Other companies, such as Agility Logistics, and Deutsche Bahn and its subsidiaries DB Schenker and Bax, had their fines reduced. In Deutsche Bahn’s case, the reductions were 20 to 25 per cent on 34.9 million euros in fines. Agility had two fines totalling 4.9 million euros cut by 25 to 30 per cent.
Some of the companies, such as Kuehne + Nagel and Panalpina, have indicated they will appeal the fines. Kuehne + Nagel chairman Karl Gernandt said in a news item on the company website the day the ruling came down that “we are of the opinion that the Commission has not correctly investigated the facts and the participation of Kuehne + Nagel and has drawn significantly incorrect factual and legal conclusions.” He added that his company’s “comprehensive cooperation throughout the investigation was not adequately acknowledged.”
Harmeet Kohli, who teaches international business management at George Brown College in Toronto, said he’ll discuss the anti-trust case next semester with students in his trade law class.
Mr. Kohli, whose teachings include a post-graduate diploma program with a freight-forwarding certification option, said the European Union is very strict on trade matters “to make sure there’s fair competition.” While he acknowledged that the scandal “absolutely could be” a black eye for the entire freight forwarding industry, he doubted that the fines will have much impact on the company’s bottom lines. “No, they’re so huge, it doesn’t make a difference,” Mr. Kohli said. Nevertheless, he expects the fines will discourage future anti-competitive behaviour. And that will also benefit smaller companies in the industry. “The thing is it will give small players at least a chance to come in and do some work,” Kohli said.
Gavin Magrath, a Toronto lawyer who specializes in freight forwarding law and who is the current editor of Forwarderlaw.com, doubts the fines will create an image problem for the industry. Both he and Mr. Kohli pointed out that anti-trust charges have been brought against other large companies such as Microsoft and Apple. “I think these are a reality of doing business, and sometimes a consequence of success,” Mr. Magrath said in an email message.
As for Canada, he noted, it has a huge number of freight forwarders of all sizes and specialities. As a consequence, he would find it “very unlikely that there is or could be anti-competitive behaviour here that would justify regulatory investigation.”
Joaquín Almunia, the European Commission Vice-President in charge of competition policy, said in announcing the fines that cartels impose a hidden tax on the economy. “These cartels affected individuals and companies shipping goods on important trade lanes,” Mr. Almunia said. “Many European exporters and consumers of imported goods may have been harmed as a result. Companies should be aware that crossing the line and colluding on prices comes at a high price.”