Chilean Airlines Pleads Guilty in Canadian Air Cargo Cartel

Copy-of-DSC_0051Chile-based LATAM Airlines has been fined C$975,000 by the Ontario Superior Court of Justice after pleading guilty on 20 August 2013 to participating in an air cargo price-fixing cartel from March 17 2003 until February 14 2006.

LATAM stated it had “… cooperated closely with Canadian authorities throughout the investigation process” It is the ninth party to be convicted as part of a Canadian investigation into cargo price-fixing.

“The Bureau’s investigation into the alleged conduct of other air cargo carriers continues.” the Canadian Competition Bureau said in its statement. To date, the Bureau’s investigation into the fixing of fuel and other surcharges has secured more than CA$25 million in fines. Previously, Air France, KLM, Martinair, Qantas, British Airways, Cargolux, Korean Air and Cathay Pacific have also pleaded guilty to fixing one or more air cargo surcharges for shipments on particular routes to and from Canada.

Three Executives Convicted in Canadian Petrol Cartel

imagesOn 16 August 2013, Canada’s Competition Bureau announced the sentences for three individuals found guilty in March for conspiring to fix the price of petrol at the pump. The Bureau’s investigation into price-fixing of retail petrol in certain local markets in the province of Quebec was first made public in 2008. The three individuals were charged on 15 July 2010 and found guilty on 22 March 2013 after a two month trial before the Quebec Superior Court.

Yves Gosselin, an Irving employee, Michel Lagrandeur, an independent dealer under the Shell banner, and Linda Proulx an independent dealer under the Petro-Canada banner have each been ordered to pay CAD15,000. They have not been given custodial sentences. Another guilty verdict was entered on 9 August 2013 against Les Pétroles Global Inc. after a two week trial. The Ontario based company has yet to be sentenced by the court, but the Bureau has indicated that it will be looking for a fine of up to CAD10 million.

The latest verdicts take the total charged in the investigation to 39 individuals and 15 companies. 33 individuals and seven companies have either pleaded or been found guilty. Six people have been given terms of imprisonment totalling 54 months and fines of more than CAD3 million have been imposed. Several defendants have been ordered to make donations to charity rather than going to prison or paying a fine to government.

It is alleged that most of the gas retailers in the Sherbrooke, Magog, Victoriaville and Thetford Mines communities of Quebec participated in the cartel between 2004 and 2006. Charges were filed under the Competition Act after investigators with wiretaps leaned that gas retailers agreed through telephone calls the prices they would charge motorists at the pumps.

While most of the companies and individuals charged are associated with major oil companies including Royal Dutch Shell PLC, Petro-Canada, Irving Oil Corp. and Esso, the Bureau has stressed that the cartel was limited to the four markets in Quebec and that local operators were responsible for the price manipulation.


On 13 August 2013 the Governor of Sao Paulo, Brazil, announced that the state plans to sue German engineering firm Siemens over allegations of price-fixing during bidding for a contract relating to construction of the city of Sao Paulo’s metro rail system.  Governor Geraldo Alckmin made it clear that any other companies found to be involved will also face legal action. Prosecutors in the state also announced last week that they had launched a criminal investigation after uncovering strong indications of price rigging during the bidding. The investigation relates to suspected criminal cartel conduct in tenders issued by the Sao Paolo commuter rail company CPTM and the Sao Paulo Metro Company from 1999 to 2009.

The announcements follow reports in July that Siemens had been granted federal immunity from criminal proceedings for both the corporation and senior executives after self-reporting cartel conduct to the Administrative Council for Economic Defence (CADE), the Brazilian competition regulator. The state prosecution office has stated that it has seen documents held by CADE, and that its investigation is based on these. It also said that it had asked Siemens twice to provide information but that it had not complied.

Early in July 2013 CADE searched the offices in a number of cities seizing evidence at thirteen firms. Siemens is the only corporation that has been officially named, but others reported to be involved are Spain’s CAF, Japan’s Mitsui and Bombardier of Canada, a part of French company Alstom. CADE is expected to take up to three months to assess the documents.

Siemens is alleged to been involved in a bid-rigging cartel for the construction, fitting and maintenance of metro trains and lines in Sao Paulo and Brasilia between 1990 and 2007 resulting in bids that were 10 to 20 per cent higher than the market standard. Siemens has been awarded a number of contracts in Brazil in recent years including a contract in 1990 to build Sao Paulo’s metro line number 5 worth 600 million reais and a contract in 2007 for the maintenance of the metro in Brasilia worth 96 million reais.

The allegations are another blow for Siemens who were at the centre of a bribery and corruption scandal in Germany in 2006, and in 2008 paid a record USD1.6 billion fine to settle investigations in both Germany and the US. Siemens issued a statement  in July 2013 saying that it is aware of the probe in Brazil and that is has made great efforts to develop a new and effective compliance system and to encourage employees to comply with antitrust guidelines following its past failures.

As well as demonstrating the difficulties for large multi-national corporations of running an effective compliance system, this case also demonstrates the risks of self-reporting in some countries where federal immunity is not always the end of the matter and state level fines and prosecutions may follow.


Office of Fair Trading logoOn 8 July 2013, the UK’s Office of Fair Trading (OFT) published its final revised Guide to applications for leniency and no-action in cartel cases. The Guide, which took effect on publication, follows two consultations on the draft revisions, the second of which specifically addressed the issue of waiver of legal privilege in leniency applications (covered in paragraphs 3.15 to 3.23 of the Guide).

The OFT has announced that it will no longer require leniency applicants in cartel cases to waive legal privilege under any circumstances. The existing policy is that while waivers are not required in civil competition investigations, they may be in certain circumstances in criminal cases. Applicants may still be asked if they are willing to waive legal privilege, but a refusal to do so will not have any adverse consequences for the leniency application.

The decision not to insist on waiver of legal privilege has been made primarily due to concerns that any requirement would act as a disincentive to potential leniency applicants. In particular, if applicants feel unable to make full and frank disclosure to their legal advisers then it is difficult for them to obtain proper advice in order to make an informed decision about action to take in relation to any cartel activity, especially given that leniency is not usually confirmed until late in the process.

The OFT has also taken into account that many other competition authorities, such as the European Commission and the United States Department of Justice Antitrust Division, do not require waiver as a condition of leniency, and the fact that the Government has confirmed that waiver of legal privilege will not be a condition of the proposed Deferred Prosecution Agreements.

While this change has been overwhelmingly welcomed, the introduction of a new independent counsel to which applicants may be required to submit material over which they are claiming privilege for assessment as to whether that claim is justified, is more controversial.

Critics have pointed out that the disclosure of materials to the independent counsel could result in a waiver of legal privilege over those documents in some jurisdictions, in particular the US. The OFT did not consider these concerns relevant because they deal with considerations outside of the UK legal framework. It remains to be seen whether companies, especially those with wide-ranging international interests, will consider this risk significant enough to deter them from taking part in the leniency process. There are also concerns that an appeal by a leniency applicant against a decision of the independent counsel that privilege does not apply may adversely affect the OFT’s view as to whether the applicant is complying with its obligation of continuous and complete cooperation under the leniency programme. The OFT has said that this will be dealt with on a case by case basis.

Despite these concerns, the decision by the OFT to change its policy and cease to require leniency applicants to waive legal privilege in both civil and criminal proceedings is a significant step forward, and demonstrates the results that robust responses to official consultations can achieve.

The OFT has also published two new Quick Guides to cartels and leniency, one for businesses and one for individuals.