Agent or Competitor? Flight Centre and ACCC at War Again as Competition Body Appeals Price Fixing Decision

Is Flight Centre an active competitor of, or an agent to the airlines it does business with?

That is the central question the ACCC will ask the High Court of Australia to determine as it appeals a Federal Court ruling handed down in Flight Centre’s favour on July 31 over allegations that the retailer “attempted to induce three international airlines to enter into price fixing arrangements”.

The July 31 ruling was a major victory for Flight Centre, the outcome of an appeal it launched against the original ruling of the trial judge, Justice Logan.

Justice Logan found that Flight Centre and the airlines were competitors in the airfare sales market and that Flight Centre had used its market power to prevent Singapore Airlines, Malaysia Airlines and Emirates from under-cutting it, says the ACCC.

The outcome was a a guilty verdict, an $11 million fine and a stain on Flight Centre’s reputation, which has been built on the mantra – “Lowest Prices Guaranteed”.

Flight Centre appealed and won with the fine revoked and the ACCC ordered to pay its legal costs.

On this occasion, says the ACCC, on July 31, the “Full Court found that there was no separate market for distribution and booking services to consumers and, as a consequence, that 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.”

Which brings us to the ACCC announcement of its intention to appeal this latest ruling on late Friday afternoon, just a couple of days after Flight Centre revealed a strong financial result.

“The ACCC had brought these proceedings because it was concerned that, if successful, Flight Centre’s actions were likely to have meant that consumers would not have seen the benefit of competition through lower ticket prices offered online by the airlines concerned,” ACCC Chairman Rod Sims said.

“This case also 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.”

Flight Centre said it was “disappointed and surprised” by the ACCC appeal and will once again fight the allegations.

“We are disappointed that the ACCC has chosen to continue this action and are surprised that the ACCC has not accepted the clear and unanimous judgement of a full court that included the highly respected Chief Justice of the Federal Court,” said Flight Centre MD Graham Turner.

“We will of course oppose the action and continue to vigorously defend our position.”

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