DB Files Multibillion Euro Lawsuit Against Cargo Airlines

On Monday (December 1) Deutsche Bahn together with its logistics arm DB Schenker submitted an action to the Cologne regional court against eleven cargo carriers, among them are Singapore Airlines, LH Cargo, Qantas, British Airways, and Air Canada. DB Schenker demands compensation for financial damages amounting to 1.7-plus billion euros, allegedly caused by an international ‘cargo cartel’ between 1999 and 2006.

Christopher Rother / source: DB
Christopher Rother / source: DB

DB Schenker’s claims are listed in a 3,200 page document made up from a thorough investigation and which was handed over to Cologne’s judges last Monday together with thousands of supporting documents filed accurately in 400 single folders. The papers reveal in detail the financial damages the logistics firm claims to have suffered as a result of continuous and illegal price fixing by the defendants. According to DB Schenker the losses exceed €1.7 billion, including accrued interest of €560 million.

“One of the world’s most efficient cartels” (Rother)
The allegations filed are based on illegal price fixing on fuel and security surcharges from 1999 to at least 2006, levied by airlines for cargo transports on intra-European and global routes with the exception of flights to and from the U.S.
“We decided to go to court for seeking relief against a global price-fixing cartel formed by numerous air cargo companies,” Christopher Rother, Head of Antitrust and Competition at Deutsche Bahn, DB Schenker’s parent company, explained to the press. This, he said, seems to be the only way of getting financial compensation for year-long anti-competitive practices.

Negotiations did not produce any results
Today’s step follows a lawsuit filed in December 2013 on a provisional basis at the regional court in Cologne. This was done as precautionary measure to prevent the entire case from becoming time-barred. Prior to this “we had negotiated this issue time and again with the carriers involved during a time-span of about four years to possibly reach an amicable settlement outside the courts but they didn’t seem to be interested in any form of mutual agreement,” Rother regretted. However, even after today’s filing of the class-action lawsuit he made it clear that the doors are not slammed for closing this chapter without involving any judges. “As a matter of principal we prefer to settle judicial conflicts outside the courts,” Deutsche Bahn’s antitrust expert emphasized. 

Leniency applicants remain liable in civil cases
The lawsuit alleges eleven carriers were involved in the same price-fixing conspiracy that came to light 2006 by the outing of Lufthansa Cargo. As the “whistleblower” in the case, LH Cargo was immune from fines under the European Commission’s leniency program but remains liable in civil cases. “They are one of our biggest customers so I estimate the German airline accounts for something between 10 to 20 percent of the total damage we are talking about,” stated Rother. To put it in numbers: This would amount to something between 200 and 400 million euros, provided Cologne’s judges decide in DB Schenker’s favour.

Stern warning
Rother insisted that Deutsche Bahn’s decision to file the action is a clear signal and warning to “all of our suppliers and business partners." “They should know that in case they want to harm us by building cartels all wrongdoers participating in any conspiracy will be taken to court immediately.”
In the U.S DB Schenker has taken legal action last August against five cargo carriers, claiming similar compensations for damages caused by illegal price fixing arrangements between 1999 and 2006. The lawsuit has been brought before a court in Brooklyn, New York with the judges now deciding the case. In this case, the complainant alleges that for at least 6 years, AF-KLM-Martinair, Cargolux, SAS, Qantas and All Nippon Airways illegally conspired to overcharge DB Schenker for fuel and security surcharges on cargo shipped to, from and within the United States. Deutsche Bahn estimates that these overcharges reached into the hundreds of millions of dollars.

What about the shipper’s claims?
Asked by CargoForwarder Global if it wasn’t the shippers more than the forwarders that suffered long-term financial damages caused by the cargo cartel, Rother admitted that they are the ones hit worst financially. He added, however, that transferring the expected compensation payments to the industry is difficult to realize since they don’t know the purchases prices of their forwarding agents. If pursuing the matter before a court the shippers would have to quantify the pecuniary damage occurred, Rother explained.
Does that then mean that in the event that DB Schenker wins their claim, they get the money back but don’t re-compensate the shippers to whom the surcharges were passed down on a 1 to 1 basis?
In reality, that will hardly be possible. Given this fact and provided the courts in Cologne and New York decide the lawsuits in favour of Deutsche Bahn and their offspring DB Schenker any compensation payment the judges condemned the airlines to make would fill the coffers of the logistics firm, with the shippers not getting a single cent. 
Asked about this issue a speaker of Lufthansa Cargo declined any comment with reference to the pending court case.

DB Schenker’s poison list  /  source: DB
DB Schenker’s poison list / source: DB

Adequate strategy?
Seeing Deutsche Bahn’s decision to go to court rather than reaching a friendly agreement with their logistics partners from a holistic perspective the question arises if this is an adequate way to interact between forwarders and carriers. After all, they are basically partners, not enemies.
We should not be misunderstood: Building cartels by fixing prices is a criminal act and must be interdicted by all means, also by court decision. Conversely, forwarders should themselves opt for a more transparent strategy by opening up their books to their shippers to enable them to seek compensation for over-paid money.
It could be assumed, due to the size of the amount in question, that DB Schenker have a valid case, as why go to the bother of investing so much time and money into a long drawn out court case.
However, is it really a fact that the carriers said to be involved are not willing to even discuss or come to terms with DB Schenker.
Hard to imagine seeing the importance of the world’s number two in airfreight as a customer for these airlines.
There have been many rulings of late against carriers for so called “price fixing” and different opinions in the trade as to whether they were all really valid and if some carriers had not just paid up in order to avoid long drawn out court proceedings.
Normally speaking, “where there’s smoke – there’s fire,” but it would benefit both carrier's and agent's relationships if this were to be settled out of court otherwise the massive size of this claim could set a judicial precedent.

A law for the rich and a law for the poor?
Is DB Schenker really the victim in all of this? Back in 2012 the EU Commission levied fines to the amount of €196 million on fourteen different airfreight agents, among whom was DB Schenker which was fined a total of €35 million.
The fines were for alleged collusive price fixing for airfreight services for their clients.
We would be highly interested in the views of our readers in our “Comments Box.” These can of course be given anonymously.

Heiner Siegmund  / John Mc Donagh

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Comments: 4
  • #1

    Marcel F. (Tuesday, 02 December 2014 12:15)

    Merci for your clear news on the Schenker claim.
    As a manager in France for having shipping car parts worldwide, we also use the service of European agents.
    We have spend many Euros on air cargo transport but I have never had seen any agent telling us that we will get surcharge money back.
    In honesty we do not understand how even to contact agents on this. Can someone advise?
    Marcel F.

  • #2

    Chris Wentora (Tuesday, 02 December 2014 12:52)

    Dear CFG crew
    Me and my colleagues really enjoyed reading your report on Schenker filing a lawsuit.
    Besides delivering valuable facts we fully agree with your indication that in this case the main defrauded isn’t really Schenker but it’s their clients – the consignors.
    So it was them who unknowingly paid the fixed prices demanded by airlines and passed on by their forwarding agent to them.
    The way we understand it when talking about damage caused by the cargo cartel it’s the producers of goods that were financially cheated, not so much the agents as loudly trumpeted by Schenker yesterday when filing the claim.
    Will see what the outcome of all this will be and if the agents pass on any financial compensation to their clients.
    Keep on delivering further thrilling stories!
    Yours Chris Wentora

  • #3

    Dieter Haltmayer (Tuesday, 02 December 2014 13:28)

    Dear Heiner,
    I refer to the article "rate fixing“. For years QCS has told the media that we have no control as to how airlines calculate their fuel surcharges. They started with 10 cents per kilogram but soon they found an addition profit zone with surcharges climbing to EUR 1.50 p kg. In the end the fuel surcharge was calculated on ( air) volume freight. How they calculate the security charges is another issue that must be requested.
    When it comes to distances flown and surcharges demanded we never understood that transporting 1000 kg FRA/ZRH costs as much fuel surcharge as 1000 kg on the route FRA/SHA.
    In addition, we had and still have to carry the financial risks as IATA collected the charges from forwarding agents through their CASS organization.
    We always claimed for a commission on our risk working as the carrier's bank. The airlines did not risk their money might get lost.
    Seen the case from the angle of a mid-sized company it is good to see that a forwarder moving large volume across the globe looks into this matter a little deeper.
    Kind regards

    Dieter Haltmayer

    President
    QCS-Quick Cargo Service GmbH

  • #4

    Nol van Fenema (Wednesday, 03 December 2014 15:12)

    Enough is enough - DB Schenker case a fallacy

    Can anyone tell us when the airlines, after admitting guild in previous trials and paying billions of dollars to various governments with some of them even having senior management spending time in jail in the US, will finally tell all price-fixing claimants, including DB Schenker, that enough is enough?

    The DB Schenker case is a fallacy because, as you rightly point out in your editorial, it was Schenker itself which in 2012 was fined 35 million euros by the European Commission for collusive price fixing.

    Christopher Rother's statement that “they (the airlines) should know that in case they want to harm us by building cartels all wrongdoers participating in any conspiracy will be taken to court immediately" is therefore scandalous and frivolous.

    It looks more like DB Schenker's recent legal action, including its carefully planned related media blitz, is aimed at forcing the airlines to accept out of court settlements without admission of guilt, rather than facing lengthy trials and the related massive legal costs!

    You quote Rother as admitting that ultimately the shippers have been hit worst financially by the price-fixing actions. However, according to the Deutsche Bahn executive, it will be difficult to compensate shippers for the price-fixing activities of air freight agents, such as DB Schenker, because "they (the shippers) don’t know the purchase prices of their forwarding agents."

    How about, as you rightly suggest, DB Schenker opting for "opening up their books to their shippers to enable them to seek compensation for over-paid money", or if they want to continue their accounting secrecy, pay the shippers a pro-rata compensation out of the billions (if they are awarded!) that are now being claimed!

    For now it looks like DB Schenker is jumping on the highly profitable bandwagon that, sometimes rightly so, has so generously delivered the goodies in previous cases. It is sad to see "the world’s number two in airfreight" resorting to, what someone recently described to me as "extortion tactics" against its logistics partners.

    Nol van Fenema
    Former editor/publisher
    of air cargo publications