The Australian Competition and Consumer Commission today issued its Draft Determination on the proposed alliance between Ansett Australia, Ansett International, Air New Zealand and Singapore Airlines.
The ACCC proposes to authorise the alliance for five years. Authorisation provides protection from action by the ACCC or any other party for conduct that potentially breaches the Trade Practices Act 1974. Conduct can be authorised if the ACCC is satisfied that there is public benefit in the conduct and it outweighs any detriment, including lessening of competition.
'The Alliance Agreement contains a clause which enables the Alliance Carriers to fix prices and another clause which is an exclusionary provision,' Acting ACCC Chairman, Mr Allan Asher, said today. 'Such actions are deemed to breach the Act. However, the ACCC believes that the alliance is likely to have a number of public benefits'. The ACCC examined a number of market factors to assess the alliance's likely impact on competition, including changed market concentration, the ability to substitute indirect for direct services and price leadership.
In the passenger market, the ACCC found that while the alliance would increase market concentration levels marginally it will enhance the alliance's ability to compete (particularly with the Qantas/British Airways group). In the air freight market, the ACCC considered competition was driven primarily by capacity available on passenger flights. The ACCC also noted the Government's freight charter policy and the current market shares held by the alliance carriers.
To assess the alliance's effect on competition in ticket sales, the ACCC examined confidential market share data and noted the ability of consumers to access different functional levels within the ticket sales market (airline direct, travel agents, wholesalers). The ACCC found that public benefits are likely to arise from increased competition, a stronger Ansett International, more efficient use of resources (e.g. ground handling, information technology), the facilitation of seamless services and enhanced frequent flyer programs.
The ACCC did not conclude that the claimed public benefits associated with new products, employment, trade and tourism will eventuate given the material submitted by the applicants and interested parties. 'The ACCC concluded that the public benefits arising from the alliance will outweigh the public detriment arising from the price fixing and exclusionary provisions of the Alliance Agreement,' he said. The ACCC decision was assisted by submissions from 21 interested parties, all but one of whom either supported or were not opposed to the application.
The decision is subject to further public consultation prior to the ACCC reaching a final decision. The ACCC is inviting the applicants and interested parties to notify it within 14 days if they wish a pre-decision conference on the draft determination to be held. Interested parties are invited to comment,
The ACCC will publish a final determination after taking into account any issues raised in the conference and any submissions made in response to the Draft Determination. The Draft Determination is available from each state and Territory ACCC office or from the ACCC's Internet home page at http://www.accc.gov.au.