The Australian Competition and Consumer Commission has today won a High Court appeal in relation to Flight Centre’s attempt to induce three international airlines to enter into price-fixing arrangements between 2005 and 2009 in relation to air fares offered online by the airlines that were cheaper than those offered by Flight Centre.
The High Court has found the relevant market is 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.”
The decision today 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.
Background
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 air fares 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 $1 and offer its customers a $20 voucher.
At first instance, Justice Logan found that Flight Centre had contravened the Act and ordered that Flight Centre pay penalties totalling $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 air fares, and that Flight Centre had attempted to induce anti-competitive arrangements or understandings with the airlines to prevent them from offering international air fares 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 today 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.