Federal Court fines Flight Centre for price-fixing

THE Federal Court has fined Flight Centre $12.5 million for price-fixing the costs of some international flights, with the CEO and senior managers involved in the breaches.

Flight Centre fined for price-fixing. Picture: Peter Wallis

AUSTRALIA’s biggest travel agency was fined $12.5 million over a price-fixing plot

​yesterday, after the Australian Competition and Consumer Commission (ACCC) won a six-year legal battle.

Flight Centre tried to stop three international airlines offering cheaper fares through their own websites between 2005 and 2009, the full Federal Court said in a judgment

​yesterday.

The travel company repeatedly asked Singapore Airlines, Malaysia Airlines and Emirates to stop undercutting Flight Centre’s prices.

Flight Centre criticised Singapore Airlines for directly selling flights online that were $150 to $200 cheaper than the travel company’s own offers.

“It is difficult to be both friend and foe,’’ a Flight Centre executive wrote in an email in 2005, published in the court judgment ​yesterday.

“Why would you go out of your way to undercut travel agents in general by such a large amount?

“The main problem with these initiatives is the inquiry they generate to our stores – more and more consumers use the internet to shop then bring to us to match.

“The losses we are incurring matching this offer are significant’’.

The executive told Malaysia Airlines in 2009 that Flight Centre was “not a charity’’ and complained that the airline’s online fares were “significantly cheaper’’ than those it was offering.

“The offers (are) continuing to cause us great pain financially with literally dozens of requests coming in each day for differences of between AUD400-500 per person,’’ he wrote.

“I can assure that if this practice continues (Malaysia Airlines) will not be invited to participate in any future events.

“This situation is clearly hurting our brand.

“I must again impress on you that we are not a charity and need a margin to operate.’’

The Federal Court today fined Flight Centre $12.5 million for five breaches of the Trade Practices Act.

“The conduct concerned large volumes of commercial business and, if successful, could have affected consumers in not insignificant amounts of money,’’ the judgment states.

“Although the conduct was serious and sustained, it was neither covert, nor arrogant.’’

The judgment ends a six-year legal marathon that began when the ACCC took Flight Centre to court in 2012, seeking fines as high as $20 million.

ACCC chairman Rod Sims said recent legislative changes meant that companies flouting Australian consumer law will now face fines as high as $10 million – or 10 per cent of turnover – for each offence.

“Flight Centre is a $2.6 billion company,’’

​he said yesterday.

“The ACCC wants to ensure that penalties for breaches of competition laws are not seen as an acceptable cost of doing business.’’

In a statement to the Australian Stock Exchange

​yesterday, Flight Centre said the penalty would not affect its forecast of a $360 million to $385 million pre-tax profit.

Managing director Graham Turner said the company would “consider whether there are grounds for appeal’’ against the fine.

“The company is not in the business of attempting to make airfares more expensive,’’ he said.

“In fact, Flight centre often suggests to airlines that they lower prices to stimulate demand.’’

Originally published as Federal Court fines Flight Centre for price-fixing