Flight Centre loses its $11 million price fixing High Court appeal

FLIGHT Centre’s High Court smackdown could mean cheaper flights after the travel agency — Australia’s largest — was caught blocking discount fares.

Flight Centre has lost its price fixing appeal in the High Court.

FLIGHT Centre has been caught out blocking Australians from accessing cheap fares directly from airlines.

The High Court has found the nation’s largest retail travel outlet tried to engage in anti-competitive conduct, upholding a Federal Court decision that could see the company fined $11 million — and potentially give us all access to cheaper flights.

The competition watchdog launched the initial case alleging Flight Centre sought to induce Singapore Airlines, Malaysia Airlines and Emirates to stop directly offering international airfares at prices lower than it offered.

The High Court heard Flight Centre acted as an agent to sell international plane tickets on behalf of airlines, receiving a commission for each sale.

It entered preferred airline agreements with Singapore Airlines, Malaysia Airlines and Emirates, with additional incentive commissions. However, these airlines sometimes sold cheaper tickets directly to customers. That caused problems for Flight Centre because it advertised it would undercut any fare.

Between August 2005 and May 2009, Flight Centre sent a series of emails to the airlines telling them to stop directly offering international airfares at the lower prices.

After negotiations with Singapore Airlines broke down, Flight Centre instructed staff to stop selling tickets on that carrier.

A majority of High Court judges held that Flight Centre was in competition with the airlines when it attempted to induce each one not to discount the price of international airline tickets sold directly to customers.

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Welcoming the court’s decision, ACCC chairman Rod Sims said it would set a powerful precedent and help keep the travel industry competitive.

“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,” Mr Sims said.

“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.”

The case now returns to the Federal Court for determination of penalty. The original trial judge Justice John Logan imposed a fine of $11 million, an amount Mr Sims has since argued was inadequate.

The Federal Court initially found for the ACCC but, on appeal, found for Flight Centre, holding that it wasn’t in competition with the airlines for which it sold tickets. The ACCC then appealed to the High Court.

The case was one of the last in which retiring Chief Justice John French delivered the lead judgment. He was in the minority, with four other judges allowing the ACCC appeal.

The ACCC and Flight Centre previously crossed swords in 2005, when the company was forced to scrap its “Lowest Airfares Guaranteed” slogan and take out advertising to inform the public.

Originally published as Flight Centre loses its $11 million price fixing High Court appeal