Flight Centre hit with $11 million fine for attempted price fixing

[whatmeworry]

Flight Centre appeals fine.

Flight Centre appeals price fixing ruling | theage.com.au

 

[cove]

If they lose the appeal this could go very badly for Flight Centre. On the other hand if they beat the charges they do save a bunch and improve their reputation. Great stuff for lawyers is what I am thinking.

 

[hossein_au]

The consumer loses out whenever companies collude on price. A truly free market says that company A and company B will battle it out by dropping prices or by giving better service. They are both vying for your $. Now if company A comes to an agreement with company B over pricing, both company A and company B can increase the price, and give ordinary service safe in the knowledge that the consumer has no choice. This means that instead of company A saying "our product is $1,000" and then company B saying "well our product is now only $900". Both company A and company B come to an agreement and sell the same products for $2,500, knowing that neither of them will undercut the other. Yes it does mean that company A is giving a free hand to company B and vice versa, but since they are now both selling the product at 2.5 times what they would have otherwise been able to, that extra profit more than makes up for it.

Isn't this PRECISELY why we, as Australian consumers, have been paying through the nose for everything? Compare our international air fares, or the cost of white goods, or black goods, or electronics, computer gear, and worst of all, software... We are but a captive market at the mercy of a few providers.

 

[admin]

Given recent developments and at the request of some members, this thread has now been reopened

 

[whatmeworry]

So this has taken a while but Flight Centre has lost a battle with the ACCC in the high court over pressuring airlines who had undercut them.

between 2005 and 2009, Flight Centre made approaches to three airlines, Singapore Airlines, Malaysia Airlines, and Emirates, over discount fares.The agency was accused of trying to induce the airlines into contracts on fare prices, after it became concerned they were selling tickets directly to customers at lower rates than Flight Centre could offer.

The court ordered the case return to the Federal Court to determine the penalties.

Flight Centre loses High Court battle with ACCC over airfare price fixing - ABC News (Australian Broadcasting Corporation)

 

[Strategic Aviation]

Fine finally finalised?

Flight Centre fined $12.5 million over international flight price fixing - ABC News

The court case started in the Federal Court six years ago, before a Full Court appeal, a trip to the High Court and finally back to Full Court of the Federal Court.

The penalty the Full Court meted out was higher than the original $11 million imposed by the trial judge in March 2014, which was appealed by both Flight Centre and the ACCC.

However, it was well short of the $17 million to $22 million range being sought by the regulator.

"The ACCC appealed from the initial $11 million penalty orders because it considered that this level of penalty was inadequate to achieve a strong deterrence message for Flight Centre and other businesses," ACCC Chairman Rod Sims said.

"Flight Centre is Australia's largest travel agency, with $2.6 billion in annual revenue," Mr Sims said.

"We will continue to argue for stronger penalties which we consider better reflect the size of the company, as well as the economic impact and seriousness of the conduct."

Mr Sims noted the Full Court's penalty decision came just a week after the OECD released a report which found penalties for breaches of competition law are significantly lower in Australia than other comparable OECD jurisdictions.

 

[DalyWaters]

I think Flight Centre need to sack their lawyers. They didn't argue the case well enough.

Flight Centre wanted to have access to the fares that EK, MH and SQ were putting up on their own websites. You might say it is similar to Harvey Norman asking Miele to give them access to the same price as Miele offers on their own website. Well, that is what happens. The wholesalers in this country set recommended retail prices and don't undercut their retailers. In the case of Flight Centre, they asked the three airlines to give all travel agents, not just FLT, access to the website fares. They did not want higher fares, they wanted to be able to sell the lower fares.

So the ACCC went after an Australian company that pays taxes here and employs Australians to sell the fares.

Meanwhile, Expedia and Priceline control most of the online travel agencies selling airfares and hotel rooms. They visit hotels and demand access to the lowest room rate the hotel has. If a hotel should offer a lower rate on its own website, Expedia and Priceline threaten them and will move that hotel to a back page so that customers do not get upfront access.

So, how did the ACCC go when hotels complained about this abuse of market share? They sat down with the two foreign companies that funnel all sales overseas, depriving Austalia of tax revenue. At the conclusion of their discussions, they agreed that Expedia and Priceline can demand that hotels offer no lower room rates on their own websites or in advertising. The customer is able to phone to the hotel and only then can the hotel offer a lower rate.

Hypocritical much?

 

[CMA222]

Let's not let the facts get in the way of a preferred interpretation. FC wanted to fix prices, which was not in the interest of consumers.

Flight Centre Limited v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53 (4 April 2018)

 

[Quickstatus]

The Chief Justice Robert French wrote a dissenting (minority) judgement. I’ll try to find it.

I believe the High Court has mischaracterised the relationship which French J alluded to

 

[DalyWaters]

Let's not let the facts get in the way of a preferred interpretation. FC wanted to fix prices, which was not in the interest of consumers.

Flight Centre Limited v Australian Competition and Consumer Commission (No 2) [2018] FCAFC 53 (4 April 2018)

Reading the case, I reckon I would have done exactly the same if I was in the position of Flight Centre.

Flight Centre executives pointed out to EK, MH and SQ that the Flight Centre consultant's salary is 50% commission. Whilst the airline held preferred status from Flight Centre head office, the agency consultant was unlikely to want to sell that airline's product if there was no commission or even a loss on selling the flight. Flight Centre did not threaten the airlines, they merely pointed out the obvious.

There was no attempt to fix a fare. It was simply a case of wanting access to a fare. Access that would then be available to all travel agents, not just Flight Centre.

I am curious as to what is the current situation. Flight Centre adjusted their procedures to comply with the ACCC's interpretation of the law. Yet the business continues to soar. Did Expedia and Priceline make the airlines toe the line from overseas, beyond the reach of the ACCC? Did that give the effect that Flight Centre was after without Flight Centre having to do anything further?