The High Court handed down its decision in the case ACCC v Flight Centre Travel Group Limited.1 The decision outlines when organisations are ‘in competition’, clarifying when attempts to ‘price-fix’ contravene the Trade Practices Act 1974 (Cth) (Act).2
Flight Centre is a travel agent. Pursuant to an agreement between Flight Centre and the International Air Transport Association (Agreement), Flight Centre sold airline tickets to customers on behalf of major carriers including Emirates, Singapore Airlines, and Malaysia Airlines (Airlines).
Flight Centre then paid a fixed amount per ticket to the Airlines, minus a commission.3; If Flight Centre sold the ticket at a higher price than the fixed amount, they pocketed the difference on top of the commission.4
The Airlines also sold tickets directly to passengers, bypassing Flight Centre. As Flight Centre ran a “price beat guarantee” promotion, they were vulnerable to the Airlines undercutting them at a price lower than the agreed fixed amount.
Between 2005 and 2009, Flight Centre emailed the Airlines demanding they stop selling tickets directly to passengers at the lower price, and threatened to stop selling tickets for the airlines if they the airlines refused to do so.5 This conduct caught the eye of the ACCC. It prosecuted Flight Centre alleging breaches of the Act for engaging in conduct that attempted to induce the airlines into agreeing they not sell discounted tickets directly to customers, conduct alleged to have the purpose or likely effect of substantially lessening competition.
Section 45(2)(a)(ii) of the Act restricted competing companies from arranging to fix or control prices.
The High Court considered whether Flight Centre and the Airlines were competitors for the purposes of the Act. Despite Flight Centre acting as an agent for the Airlines, the Court found that this did not preclude them from being competitors.6
Flight Centre and the Airlines both sold airline tickets. Where a ticket was sold by Flight Centre, it was unable to be sold by the Airlines;7 customers had the choice of ticket seller.
By a 4 to 1 majority, the High Court found that Flight Centre and the Airlines were rivals in the sale of tickets. Arranging a minimum price threshold would substantially lessen competition, the majority found.
The majority listed two critical factors in their decision. First, Flight Centre could set its own price for the airlines tickets. Secondly, Flight Centre was entitled to prefer its interests over the Airlines despite acting as agent.8
The ACCC was successful with its appeal and Flight Centre was subject to penalties.
Unlike the Airlines, Flight Centre provided the service of airline carriage. However, the High Court labelled Flight Centre and the Airlines as ‘competitors’.
Flight Centre’s selling of airline tickets constituted provision of a contractual right to carriage, identical to the right the Airlines sold direct to customers.
An agent can be in competition with its principal. Contravening consumer legislation carries severe consequences. It is pertinent to seek legal advice to ensure compliance with the myriad of restrictions in the legislation.
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