AUSTRALIAN FEDERAL COURT FINES FLIGHT CENTRE FOR “PRICE-FIXING”

ACCCOn 28 March 2014, the Australian Competition and Consumer Commission (“ACCC”) announced that travel agent, Flight Centre had been ordered by the Autralian Federal Court to pay fines totaling AU$11 million for “repeatedly attempting [between 2005 and 2009] to enter into anti-competitive arrangements with three international airlines to eliminate differences in international air fares offered to customers.”

The judgment dated 28 March 2014 of Logan J, sitting in the Federal Court in Brisbane, names the three airlines as Singapore Airlines, Emirates and Malaysian Airlines. With regard to all three, Flight Centre “attempted to induce, including by threats to withdraw the provision of distribution and booking services” an agreement by which the three airlines would be forced to:

 (i)                  make all their fares for international passenger air travel available for sale by Flight Centre

(ii)                pay to Flight Centre a retail or distribution margin on all sales of international passenger air travel

(iii)               sell international passenger air travel directly to the public at a price not less than the net fare plus Flight Centre’s retail or distribution margin

 Logan J noted that during the period covered by the contraventions, Flight Centre had a  share of at least 20% of the market for the distribution and booking of international air travel from Australia. The judge added  that:

“[Flight Centre] was the principal distributor for each of the airlines in question. It was this market power which it deployed in each of the attempted inducements. The threats which were entailed carried all of the weight associated with that market power. They could not have been more deliberately made.”

He also described 2009 e-mails from Flight Centre Chief Executive Graham Turner, which were sent in reaction to the threat to the travel agent’s business of direct offers by the airlines to the public of international fares, as “the most blatant of all the charged attempts to induce.”

The ACCC welcomed the decision of the Federal Court. However, ACCC Chairman Rod Sims expressed disappointed that Logan J did not apply the maximum fine of 10% of the travel agent’s turnover, as the ACCC had recommended.

This entry was posted in Australia by Michael O'Kane. Bookmark the permalink.

About Michael O'Kane

Michael O’Kane is a partner and Head of the Business Crime team at leading UK firm Peters & Peters. Described as ‘first-rate’ (Legal 500 2012), he “draws glowing praise from commentators” (Chambers 2013) for handling the international aspects of business crime, including sanctions, extradition and mutual legal assistance. Called to the Bar in 1992 and prior to joining Peters & Peters he was a senior specialist prosecutor at the Crown Prosecution Service Headquarters(CPS). At CPS HQ he was a key member of a small specialist unit responsible for the prosecution of serious and high profile fraud, terrorist and special interest criminal matters including the Stansted Airport Afghan hijacking and the prosecution of Paul Burrell (Princess Diana’s butler). Michael joined Peters & Peters in 2002. He became a partner in May 2004, and Head of the Business Crime team in May 2009. Since joining Peters & Peters, Michael has dealt with a wide range of business crime matters. He has particular expertise in international sanctions, criminal cartels, extradition, corruption, mutual legal assistance, and FSA investigations. Described as“ an influential practitioner in fraud and regulatory work, so much so that he is top of the referral lists of many City firms for independent advice for directors” (The Lawyer’s Hot 100 2009), he was recognised as one of the UK’s most innovative lawyers in the 2011 FT Innovative Lawyer Awards and included in the list of the UK's leading lawyers in 'The International Who's Who of Asset Recovery 2012. In 2012 he was the winner of the Global Competition Review Article of the Year. Michael regularly appears on television and radio to discuss his specialist areas and he is the author of the leading textbook on the UK Criminal Cartel Offence “The Law of Criminal Cartels-Practice and Procedure” (Oxford University Press 2009). Recent/Current Sanctions Work • Representing 109 individuals and 12 companies subject to designation by the European Council under targeted measures imposed against Zimbabwe. This is the largest and most complex collective challenge to a sanctions listing ever brought before the European Court. • Acting for a former Egyptian Minister and his UK resident wife, challenging their designation by the European Council of Ministers under targeted measures brought against former members of the Egyptian Government. • Advising a company accused in a UN investigation report to have breached UN sanctions imposed in relation to Somalia. • Advising a UK company in relation to ongoing commercial relationships with an Iranian company listed under both EU and UN sanctions. • Advising an individual in relation to a UK investigation for alleging breaching nuclear export controls.

One thought on “AUSTRALIAN FEDERAL COURT FINES FLIGHT CENTRE FOR “PRICE-FIXING”

  1. There are some real practical problems created by the approach of the Federal Court in the case. The most obvious issue is the finding that an airline competes with its agent for distribution of air tickets. The decision is also apparently inconsistent with another judgment released a few weeks earlier, in which the Federal Court found that a Bank did not compete with mortgage brokers who distributed the Bank’s mortgages. Appeals in both matters should be heard in August 2014.

    There are a number of good articles commenting on the case (which was originally decided in December 2013), including one in the most recent linked ABA International Antritrust Committee newsletter: (http://www.minterellison.com/files/Uploads/Documents/Publications/Articles/Pub_A_20140328_Price_fixing_travel.pdf)

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s