Brenton Chin's Blog

Cartels: Have you heard of them?

November 24th, 2010 · No Comments

Air Canada was among a handful of airlines FINED by European Union officials Tuesday for fixing cargo prices. Altogether, EU anti-trust regulators fined 11 air cargo carriers $1.11 billion US. The carriers co-ordinated surcharges for fuel and security without discounts over a six-year period from December 1999 to Feb. 14, 2006.

In the biggest case, Air France was ordered to pay $474 million US — a HEFTY fine. Air Canada faces approximately $29.2 million US in fines. Air Canada’s penalty was reduced by 15% because of its willingness to co-operate with the commission. Air Canada said it can “more than adequately” cover the fine by dipping into the $125 million it put aside for this purpose in 2008.

For those of you who don’t know about cartels, they are an agreement among competing firms who agree to fix prices, marketing, and production. This relates to business ethics in that, by creating a monopolistic-like atmosphere,  it fixes prices to maximize company profits, while maintaining extremely high prices at the expense of the consumers.

I’ll leave you all with a video regarding the cartel scandal and a quote by vice-president for competition, Joaquin Almunia, stating that “it is deplorable that so many major airlines co-ordinated their pricing to the detriment of European businesses and European consumers”.

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