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Flight Centre appeals price fixing judgment and big fine

April 22, 2014 Corporate, Headline News No Comments Email Email

egtmedia59Flight Centre has appealed the Federal Court’s decision at the end of last month to uphold the Australian Competition and Consumer Commission’s (ACCC’s) competition law test case against it.

The Federal Court fined Flight Centre heavily for trying to fix prices for international flights with three airlines.

Flight Centre’s appeal is not unexpected. The company said at the time it might challenge the ruling, in which it was ordered to pay AUD 11 million for trying to prevent Singapore Airlines, Emirates and Malaysia Airlines from offering cheaper flights than its own airfares between 2005 and 2009. No allegations were made by the ACCC against those three airlines.

The ACCC had sought 10% of Flight Centre’s relevant annual turnover as a penalty, rather than AUD 10 million.

The company has now formally lodged a notice of appeal covering both:

  • The court’s judgment in the ACCC’s favour after the October 2012 hearing; and
  • The AUD 11 million in penalties that were handed down after the subsequent penalty hearing, which concluded in February 2014.

In a statement, the Flight Centre Travel Group (FLT) said it believed the judgment contained errors and inappropriate extensions of the law. It also believed the penalties were excessive.

Flight Centre managing director Graham Turner said that having access to all fares was important because it ensured the company’s customers were not disadvantaged.

Turner pointed out that, “given that travel agents book about 80% of international flights in Australia”, having access to all fares benefitted travellers in general because it meant special offers were available from more than one source.

The ACCC said the Federal Court imposed the AUD 11 million fine against Flight Centre “for repeatedly attempting to enter into anti-competitive arrangements with three international airlines to eliminate differences in the international air fares offered to customers, in proceedings brought by the Australian Competition and Consumer Commission”.

In a judgment handed down on 6 December 2013, the Court found that Flight Centre competed with international airlines for the retail or distribution margin on the sale of international air fares and that, between 2005 and 2009, Flight Centre had sought on six occasions to prevent certain airlines from undercutting it on these air fares.

As a consequence, the Court held that Flight Centre had attempted to induce an anti-competitive arrangement to eliminate differences in air fares so as to maintain Flight Centre’s margins on each of those six occasions.

The Court found that Flight Centre’s conduct, which extended over a period of four years, formed part of:

“…a concerted pattern of reactive corporate conduct by Flight Centre, reactive to a threat it perceived to be presented by the direct retail offering by airlines of air travel at fares it could not offer to retail customers, as opposed to a series of unrelated, isolated, idiosyncratic aberrations”.

and carried with it “the aggravating, adverse consequence of denying a would-be passenger a lower fare for air travel which the airline supplies”.

Justice Logan stated that he considered the emails sent in 2009 by Flight Centre chief executive and managing director Graham Turner evidenced “the most blatant of all the charged attempts to induce.”

In its appeal, Flight Centre will also contend that the penalties are manifestly excessive given the circumstances and the lesser penalties handed down in other cases, where the law was knowingly breached and there was a clear impact on the market.

Written by Peter Needham

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