In general terms, what were the airlines accused of doing and why?
An important concept of economic that is applicable to businesses is cartel. This concept of Cartel implies the fixation of prices for products and services by businesses with a view to outperform in competition in the industry. This is an important strategy applied by businesses with a view to gaining higher profit from the market. In this particular strategy, the main focus area has been to charge higher from customers by way of fixing prices for commodities at higher level. This is generally a threat to competition and the ultimate losers are the end customer because they have to pay higher prices for the products and services they consume. An analysis of the given airline industry also indicates that this particular strategy of cartel has been applied by many of the Airlines with a view to performing competition and achieving higher profitability. Some of the examples of airlines that have entered into this particular strategy of cartel are discussed as follows:
- Cathay Pacific and Singapore Airlines are the two airline companies that have entered into this particular strategic choice of cartel whereby they aimed at benefiting themselves in terms of charging higher prices from the customers. This strategy of cattle as entered by these airlines is treated as against the law and both these Airlines are accused of, for entering into such strategic choice of Cartel. There have been penalties imposed on both these airlines equivalent to 23 million dollars (ACCC, 2012)
- Another example whereby the airline companies are accused of is mainly related to Air New Zealand and Garuda. Both these airlines were accused of fines and penalties buy competition watchdog because of fixing the freight charges over a five year period. As per ACC, both these Airlines are alleged of violating Consumer Protection laws by way of fixing sur-charges for their cargo services. This has resulted in 2 penalties imposed on both these Airlines for entering into cartel strategy as a part of fixing higher prices for the services (O'Sullivan, 2014)
- Emirates are also a major airline company that has been accused of charges for price fixation issues. An analysis indicates that Emirates has been ordered to pay dollar 10 million for price fixing (ACCC, 2012)
Overall the analysis of all these Airlines indicates that they are accused of charges by consumer Commission because of considering cartel strategy by them with a view to fixing higher prices for their cargo services. The main reason for these airline companies accused of charges is mainly to avoid these companies 2 benefit unethically by way of ignoring competition. The main reason is to encourage competition within these Airlines so that the end consumers would ultimately benefit from such competition.
Q. What difficulties are there for such agencies in attempting to take enforcement action against such companies?
Q. Why are these accusations so important both to the airlines (and other companies in terms of their forward planning for risk management) and for the enforcement agencies involved?
Q. What does this example suggest as to the role of, and limitations to, national law and institutions in managing and regulating behaviour in a global economy?
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