Today, the Federal Court of Australia published its reasons in ACCC v Flight Centre Limited (No 2)  FCA 1313, finding that Flight Centre attempted, on six occasions, to induce three airlines (being Singapore Airlines, Emirates and Malaysia Airlines) to make collusive arrangements with it in relation to Flight Centre’s retail or distribution margin for air fares for international air travel in the period August 2005 to March 2009.The Court found that these collusive arrangements would have (if entered into) lessened competition in the market for the retail sale or distribution of airline tickets.
Flight Centre provides a range of travel agent services to its customers. It provides the service of booking international air travel and receiving payment for that travel at direct contact with customers via its shop fronts, telephone dealings and the internet. It was (and remains) also possible to book and pay for international air travel directly with the airlines providing the international air travel services.
The Court noted that there has been a trend towards greater use of the internet to promote the availability of international air travel and to book and pay for that travel. While travel agents offer these services over the internet, airlines also provide these online services through their own websites. As stated by the Court, this case concerned the commercial reaction by Flight Centre to the threat of direct online sales made by airlines:
“Considering the evidence as a whole, what is revealed is a concerted pattern of reactive corporate conduct by Flight Centre, reactive to a threat it perceived to be presented by the direct retail offering by airlines of air travel at fares it could not offer to retail customers”.
The ACCC commenced proceedings alleging that Flight Centre attempted to make an arrangement with the airlines containing a provision that any particular fare that the airlines offered directly to its customers would:
- also be made available to be purchased through Flight Centre (ie, Flight Centre would be able to offer the same price); and
- be sold by the airline at a total price no less than the sum of the net fare (payable to the airlines) plus Flight Centre’s commission.
The ACCC alleged that the effect of the above would be that the price Flight Centre received for its booking and distribution services, being the commission, would be maintained in contravention of the price fixing prohibition.
In finding that Flight Centre’s conduct amounted to attempted price fixing, the Court noted that both Flight Centre and the airlines competed, at the very least, for “the retail or distribution margin” and that the arrangements that Flight Centre attempted to induce had the purpose and likely effect of being anticompetitive by persuading airlines to “stop undercutting or undermining Flight Centre”. The Court stated that “Price neutrality in relation to air fares obtained either directly from an airline or via it [Flight Centre] would neutralise or tend to neutralise the “foe” Flight Centre was encountering in the market for distribution and booking services” . The Court also found that Flight Centre’s communications to the respective airlines contained a threat that if the undercutting or undermining did not stop, Flight Centre may choose not to promote and distribute that airline’s air travel to would-be passengers.
The Court found Flight Centre attempted to engage in anticompetitive conduct despite Flight Centre’s defence that, inter alia, it was attempting to promote, not lessen, competition by having the airlines allow Flight Centre to charge lower prices.
A more detailed analysis of the Court’s findings in this case is to follow shortly.