May 12, 2008 4:00 PM

Former Qantas Executive to Plead Guilty to DOJ Price-Fixing Charges

Posted by Brian Baxter

UPDATE: This post has been updated with new information.

Bruce McCaffrey, the former highest-ranking U.S. executive of Qantas Airways Limited, Australia's largest airline, has agreed to plead guilty to a federal conspiracy charge filed on May 8 and will serve eight months in jail and pay a $20,000 fine for participating in a price-fixing scheme.

The deal, which awaits McCaffrey's signature and is subject to approval by the U.S. district court for the District of Columbia, requires McCaffrey to cooperate with an ongoing investigation by the Justice Department's antitrust division into price-fixing within the airline industry.

The former vice president of Qantas's U.S. freight operations, McCaffrey was charged with violating the Sherman Act by engaging in a conspiracy to fix air cargo rates between January 2000 and February 2006. McCaffrey, who is being represented by Jeffrey Udell of Olshan Grundman Frome Rosenzweig & Wolosky in New York, faced a maximum $1 million fine and ten years in prison. (Udell declined to comment.)

"The air transportation of products for both businesses and consumers is a critical piece of the global economy," said assistant U.S. attorney general for antitrust Thomas Barnett in a statement released yesterday by the Justice Department. The former vice-chair of Covington & Burling's antitrust and consumer protection practice group, Barnett said McCaffrey's plea deal demonstrated Justice's commitment to holding both individuals and corporations "responsible for engaging in criminal conduct."

Suburban Sydney-based Qantas agreed in November 2007 to pay a $61 million fine to settle a federal conspiracy charge for its role in the price-fixing scheme. The government claimed that Qantas had reaped more than $600 million by manipulating rates to eliminate competition. (Qantas was represented by W. Todd Miller and Kimberly Shaw from Washington, D.C., antitrust and transportation regulation firm Baker & Miller.)

According to Australian daily The Sydney Morning Herald, former and current Qantas executives Desmond Church, Stephen Cleary, John Cooper, Peter Frampton, Harold Pang, and McCaffrey were excluded from the immunity extended to Qantas after the airline agreed to cooperate with investigators. But with price-fixing not a crime in Australia--a benefit not extended to the Los Angeles-based McCaffrey--those down under are unlikely to face extradition.

In August 2007, British Airways and Korean Air Lines agreed to pay separate $300 million fines to settle similar Justice Department price-fixing charges. And Maurice Blackburn, an Australian plaintiffs firm in Melbourne, is leading a $200 million class action suit against Qantas, British Airways, Air New Zealand, Singapore Airlines, Japan Airlines, Cathay Pacific Airlines, and Lufthansa for their alleged roles in fixing air freight rates.

"The jailing of the Qantas executive clearly demonstrates the seriousness of the price-fixing conduct by the airlines," Maurice Blackburn partner Kim Parker told The Herald. "We hope this will send a signal to Qantas [that] it is time to talk to its customers."

Download the McCaffrey complaint.

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