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Flight Centre loses battle with ACCC over price fixing

December 15, 2016 Headline News 1 Comment Email Email

The lengthy legal battle between the Australian Competition and Consumer Commission (ACCC) and Flight Centre over allegations of price fixing on international flights has ended in a win for the ACCC.

It is approaching five years since the matter first hit the courts. Some of the alleged behaviour the ACCC complained about took place over 10 years ago.

The decision yesterday follows a decision made by the Federal Court in favour of the ACCC in December 2013, which Flight Centre successfully appealed in the Full Court of the Federal Court in July 2015. The ACCC then appealed to the High Court, which yesterday found in the ACCC’s favour.

In a series of emails referred to in the proceedings, Flight Centre asked three international airlines to stop selling tickets at lower prices than those available to travel agents.

The company was said to have threatened to stop selling tickets for the three airlines unless they agreed.

The dispute centred on whether Flight Centre had breached competition laws over its attempt to induce the airlines to enter into price-fixing arrangements between 2005 and 2009 in relation to airfares offered online by the airlines, that were cheaper than those offered by Flight Centre.

The ACCC said yesterday that the High Court had found the relevant market was for the sale of international airline tickets, “and importantly also found that Flight Centre and the airlines competed in that market”. This was found to be the case notwithstanding that Flight Centre was an agent for each of the airlines.

“The ACCC welcomes the High Court’s decision today,” ACCC chairman Rod Sims said.

“The ACCC pursued this matter because we were concerned that Flight Centre’s conduct in this case affected the competitive process. At the core of the matter is the question of whether Flight Centre and the airlines are legally considered competitors. The ACCC has always maintained that they are in competition with one another to sell flights to consumers.

“This decision will provide important guidance for the future application of competition laws in Australia to other situations where competing offers are made directly to consumers by both agents and their principals. It is likely to be particularly relevant when businesses make online sales in competition with their agents.”

Yesterday’s High Court decision follows a decision made by the Federal Court in favour of the ACCC in December 2013, which Flight Centre successfully appealed in the Full Court of the Federal Court in July 2015. The ACCC then appealed to the High Court.

The matter will now return to the Full Federal Court for the determination of the penalty appeal and cross-appeal brought by the parties.


Federal Court proceedings

The ACCC first instituted proceedings against Flight Centre in 2012, alleging that on six occasions between 2005 and 2009, Flight Centre attempted to enter into arrangements with Singapore Airlines, Malaysian Airlines, and Emirates in relation to the price of international airfares offered online that were cheaper than Flight Centre.

Due to Flight Centre’s ‘Price Beat Guarantee’, it had been forced to beat its competitors’ cheaper fares by AUD 1 and offer its customers a AUD 20 voucher.

At first instance, Justice Logan found that Flight Centre had contravened the Act and ordered that Flight Centre pay penalties totalling AUD 11 million. Justice Logan found that Flight Centre and the airlines competed in the market for booking and distribution services for the retail or distribution margin on the sale of airfares, and that Flight Centre had attempted to induce anti-competitive arrangements or understandings with the airlines to prevent them from offering international airfares on their websites which undercut the fares for those flights which were being offered by Flight Centre. 

Full Court of the Federal Court

Flight Centre appealed to the Full Court of the Federal Court from Justice Logan’s liability and penalty decisions, and the ACCC lodged a cross-appeal in relation to the penalties imposed.

The Full Court allowed Flight Centre’s appeal and dismissed the ACCC’s cross-appeal.

In overturning Justice Logan’s decision, the Full Court found that there was no separate market for distribution and booking services to consumers and, as a consequence, Flight Centre and the airlines did not compete with each other in such a market.  Instead, the Full Court found that the supply of booking and distribution services was an ancillary part of the supply of international air travel in which Flight Centre acted as agent for, and not in competition with, the airlines. 

High Court of Australia

The ACCC filed an application seeking special leave to appeal to the High Court. Special Leave was granted on 11 March 2016.

The High Court heard this case on 27 July 2016.

In their judgment delivered yesterday the majority of judges in the High Court rejected the ACCC’s primary case but accepted its secondary case.  For this reason the Court decided that each party should bear its own costs in the High Court and for the Full Federal Court appeal to date.

The court ordered the case return to the Federal Court to determine the penalties.

ABC News reported that four of the five justices hearing yesterday’s case found Flight Centre had breached competition law in asking the airlines to stop issuing cheaper tickets directly to customers.

Chief Justice Robert French offered a dissenting opinion that Flight Centre was not in direct competition with the airlines, and thus had not breached the law.

Edited by Peter Needham

Currently there is "1 comment" on this Article:

  1. AgentGerko says:

    This is clearly rubbish. Have a look at our name ACCC. We are Travel AGENTS. We do not own our own aircraft. We sell seats on the airlines we are AGENTS for. If we are competitors to the airlines, would they pay us commission? If we are competitors to the airlines then surely that means we should also be able to sell them for less than they can sell for. How can we be competitors if they can seel for less than us but we can’t sell for less than them? Even the airlines recognise our value and know that if Travel AGENTS ceased to exist they would not be able to cope with the demands of passengers. This is a move from the same useless bunch of twits who think its perfectly fine to charge an $800 fuel surcharge at a time when fuel is at its lowest price. The same mob who changed the credit card fee rules without stopping to ask whether there were systems available to business to allow them to do so. And as Skroo points out, how can you say Qantas can charge less than an AGENT but Dave’s Dubbo Motel cannot charge less than Expedia?

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