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authorities in the United States andEU).The Commission said it had identifiedthe following four cartels:• The New Export System (“NES”)cartel - after the introductionof electronic declaration forUK exports in 2003, a groupof forwarders allegedly agreeda fixed surcharge by size ofcustomer on this service.• The Advance Manifest System(“AMS”) cartel - an advanceddeclaration is required whenshipping goods to the US. Agroup of forwarders allegedlyagreed to introduce a surchargefor the service and not to usethe surcharge as a tool forcompetition.• The Currency Adjustment Factor(“CAF”) cartel - when the Chinesecurrency (RMB) appreciatedagainst the US Dollar in 2005,a group of forwarders allegedlyagreed to shift contracts fromUSD to RMB or, if this was notpossible, on the introduction of aCAF surcharge and on its level.• The Peak Season Surcharge(“PSS”) cartel - a group offorwarders allegedly agreed ona surcharge for peak seasonservices offered in the build up toChristmas and also discussed itslevel.The Commission found that thecartels operated on routes from theUK to outside the EEA, from the EEAto the US, from China to the EEAand from Southern China/Hong Kongto the EEA. Some of the forwardersinvolved were said to have usedspecific concealment measures,including the use of private yahooemail accounts and code words(such as the “Gardening Club”).The Commission imposed finesranging from €319,000 to €54million. Kuehne + Nagel faced theheaviest fines, totalling €53.7 million.Deutsche Post (including subsidiariesDHL and Exel) received full immunityfrom fines under the Commission’s2006 Leniency Notice, as it was thefirst company to report the issuesto the Commission. Deutsche Bahn(including Schenker and BAX),Ceva, Agility and Yusen receivedreductions of fines ranging from 5%to 50% in exchange for the timelyprovision of additional evidence andin accordance with the EuropeanCommission’s 2006 Guidelines onFines.The appeals processEGL and Kuehne + Nagel were thefirst to challenge the Commission’sdecision (in July 2012). They werefollowed by UTI, then Schenker,Deutsche Bahn and PanalpinaWelttransport in August 2012.Under EU law, any company which isthe subject of a Commission decisioncan bring an appeal against thedecision before the General Courtof the European Union. Companiesthat have not been fined – but towhom a decision is addressed - maybring appeals to limit their exposureto follow-on damages actions(against which they do not enjoy anyimmunity) or to limit their exposureto higher fines in future, if they areinvestigated in other alleged cartels.The appellants submit that theCommission erred both in assessingthe duration and scope of theinfringements and in calculating thefines imposed in March 2012. Theyalso submit that the Commissionhad no power prior to 1 May 2004to impose fines in relation to airtransport between the EU and thirdcountries. In particular, the appellantsallege that:• The Commission erred in lawand/or assessment of the factsby failing to define the relevantmarket affected and failing toestablish that the arrangementshad an appreciable effect ontrade between EU MemberStates.• The Commission breached theprinciple of equal treatmentin relation to treatment ofthe immunity applicant,determination of fine reductionsand its refusal to initiate talksunder the Settlement Notice.“Since 2000, 50% of appeals to theGeneral Court have been successful insome part, leading to decisions beingannulled (17%), or a reduction in the levelof the fine imposed (33%).”04 Logistics Bulletin


decided to organise the employeesso that they would be principallyengaged in providing services inrespect of one customer contract.How a company organises itsworkforce is influenced by amultitude of factors. It may bedifficult from an operational and costpoint of view to organise a workforcein a way that is more likely to ensurethat the grouping of employees willfall within the meaning of “organisedgrouping of employees” for thepurposes of TUPE.This means that it is not a giventhat TUPE will apply at the end ofa contract and the services eithertransfer to another service provideror are taken back in-house. This isnot necessarily a bad thing from thepoint of view of the incoming serviceprovider or the customer who istaking the services back in-house,as where TUPE applies it means thatthe employees transfer with theirrights and liabilities. However, fromthe point of view of the outgoinglogistics provider, the one whichlost the contract, it will mean thatit retains the liability for employeesit may no longer require. This issomething buyers and providers oflogistics services need to considercarefully when deciding what shouldhappen on termination of a contractand how the termination costs(including employee terminationcosts) should be apportionedbetween the parties. Careful draftingof relevant contractual provisions isessential to cover potential TUPEissues.For further information, pleasecontact Catherine Emsellem-Rope,Associate, on +44 (0)20 7264 8279 orcatherine.emsellem-rope@hfw.com,or your usual contact at HFW.Freight rate movement incontainer shippingFreight rate movement in containershipping will continue to be animportant issue for logistics providersin the remaining months of 2012.Logistics providers will thereforebe aware of united calls from anumber of container lines to maintainfreight rate levels, despite the recenttraditional peak season being quieterthan expected in the containerisedtrade between Asia and Europe.Container lines have suggested thatlower traffic levels could insteadgenerate a need to increase freightrates in order for container linesto maintain profit levels. This willcome as a surprise to those in thelogistics sector, who are hoping tosee a repeat of the rate erosion thatemerged as competing containerlines flexed for market share in thefirst quarter of 2012.The beginning of 2012 wasdominated by oversupply in themarket following a combination ofnewbuildings entering service anduncertainty amongst importers as aresult of the Eurozone crisis. Thesefactors caused substantial carrierlosses.Rate restoration was notable howeverin the second quarter of 2012 withspot rate increases seen universallyacross container lines. Average ratesincreased around fifteen per cent.between first and second quarters,aided partly by an improvementin demand, but also reflecting aconcerted effort on the part ofcontainer lines to focus strategytoward profits.Those involved in the logistics sectorwill be watching closely to see if therecent fall in spot rates continues inresponse to the dropping utilisationlevels and fall in traffic towards theend of the year.There are a number of measuresthat container lines may employ toensure that freight rates remain bothprofitable and sustainable ratherthan moving toward rate erosion.Rationalisation tools may be used bylines to generate a supply-demandbalance in the medium-term. Somecontainer lines have intimatedthat they may take the decision tosuspend some sailings, keep shipson berth for longer than usual, delaydepartures or slow ships downfurther. Other container lines haveadvocated a shift away from a focuson ship utilisation and the need tosail close to full capacity on everyvoyage, maintaining that freight ratesmay not be cut in the face of reducedutilisation. Of course, container lineswill also continue to push for morefavourable contract terms whenseeking to protect freight rates in thefuture.Potential factors that may causerates to continue to fall remain thesame. New capacity entering thecontainer shipping sector will stillhave an effect but the extent in themedium and long run will depend onthe level of restraint shown by banksand whether they back the projectsof those in the sector promotingfurther newbuildings. Continued flatconsumer demand in Europe and afallout from the Eurozone crisis willalso play their part in causing freightrates to lower.The logistics sector will always seeklower rates, but at the same time, thesector would welcome a strategy thatcreates certainty. Logistics providersLogistics Bulletin 07

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