The High Court of Australia has granted the Australian Competition and Consumer Commission special leave to appeal the decision of the Full Court of the Federal Court in relation to allegations that Flight Centre Travel Group Limited (Flight Centre) attempted to induce three international airlines to enter into price fixing arrangements in breach of the Trade Practices Act 1974 (now called the Competition and Consumer Act 2010) (the Act).
In July 2015, the Full Court allowed an appeal by Flight Centre against the judgment of the trial judge, Justice Logan. Justice Logan had 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 air fares, and that Flight Centre had attempted to induce anti-competitive arrangements or understandings with the airlines to prevent them from offering online fares for international airfares on their websites which undercut the fares for those flights which were being offered by Flight Centre.
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.
“The ACCC is pleased that this matter will be considered by the High Court,” ACCC Chairman Rod Sims said.
“This case raises important issues for the application of competition laws in Australia in the future, as online offers are increasingly being made directly to consumers by both agents and their principals.”
Background
The ACCC instituted proceedings against Flight Centre in March 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 international air fares offered by the airlines on their websites.
Flight Centre has traditionally offered a ‘Price Beat Guarantee’, where Flight Centre would beat a cheaper airfare offered by its competitors by $1 plus a $20 voucher. As a result of the Price Beat Guarantee, Flight Centre was obliged to match the cheaper web fares offered by the airlines, which reduced the margin obtained by Flight Centre.
At first instance, Justice Logan found that Flight Centre had contravened the Act and ordered that Flight Centre pay penalties totalling $11 million.
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 July 2015.