ACCC v Flight Centre Travel Group Ltd [2016] HCA 49
Wednesday 14 December 2016 @ 12.09 p.m. | Trade & Commerce
The High Court has by majority today (14 December 2016) allowed an appeal from the Full Federal Court in the case of Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd [2016] HCA 49. Contrary to the opinion of the Full Federal Court, the High Court found that Flight Centre was directly in competition with several airlines when it attempted to induce airlines not to discount the price at which they offered international airline tickets directly to customers. As a result of this find, the Court found that Flight Centre had engaged in practice that would likely effect or substantially lessen competition.
Background to the Case
Flight Centre is a travel agency business that engages in the sale of international airline tickets on behalf of the major airlines. The airlines published fares to Flight Centre through an electronic system. Flight Centre was free to sell the tickets at any price and was only obligated to pay the airlines the published fares. Flight Centre employed a marketing strategy that promised they would beat the price of any quoted ticket by $1. However at times, the airlines would offer international tickets directly to customers at prices lower than the published fares. Consequently, between 2005 and 2009, Flight Centre sent a series of emails to the airlines trying to induce the airlines to stop this practice. It went as far as to threaten to stop selling tickets for the airlines if the practice did not stop.
At the Federal Court
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.
The Australian Competition and Consumer Commission alleged that by sending out email inducements, Flight Centre had attempted to induce the airlines into a contract which had the purpose of lessening competition contrary to section 45(2)(a)(ii) of the then Trade Practices Act 1974.
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.
Before the Full Federal Court
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 was therefore not in direct competition with the airlines. As a result, no contravention of s45 occurred.
High Court
The High Court did not agree with the Full Federal Court. The High Court found that the competition at issue was in the market for the supply to customers, of contractual rights to international air carriage via the sale of airline tickets. Despite Flight Centre acting as an agent for the airlines, they nevertheless were in direct competition with the airlines in that market. Consequently, the High Court set aside the Full Court’s decision and restored the trial judge’s declaration of contravention.
ACCC Chairman Rod Sims said of the decision:
“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.”
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Sources:
Australian Competition and Consumer Commission v Flight Centre Travel Group Limited [2016] HCA 49
