Flight Centre will appeal $11 million penalty for attempted price fixing

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Flight Centre will appeal the $11 million in penalties ordered by the Federal Court last week after the chain repeatedly tried to enter into price fixing arrangements with three airlines. 

In the proceedings brought by the Australian Competition and Consumer Commission, the Federal Court found Flight Centre guilty of six counts of attempting to induce competitors to enter into price-fixing arrangements with it.

The competition watchdog argued that on six occasions between 2005 and 2009, Flight Centre attempted to induce Singapore Airlines, Malaysian Airlines and Emirates to agree to stop offering prices cheaper than those offered by Flight Centre (all three airlines rejected the advances).

Justice Logan found in imposing the penalties “there is no doubt in the present case that commercial profit was the “driver” in Flight Centre’s contravening conduct.

“Further, it is the nature of such conduct that it is not engaged in in public. Its detection is almost invariably difficult and its investigation and related litigation involves the allocation of considerable public resources”.

Flight Centre says it will appeal the judgment and may appeal the penalties.

Flight Centre managing director Graham Turner said in a statement the outcome was “disappointing” and the travel agency chain had already made changes to its business which the judgment required.

“While we are comfortable that we comply with the law, we consider it appropriate to test the decision at appeal,” he says.

Sally Scott, partner at law firm Hall & Wilcox told SmartCompany this is an area of the law where there are huge penalties such as the $36 million penalty imposed on Visy in 2007. 

“The reason we see large penalties in this area is that they can be linked to the size of the company and the size of the transaction involved,” she says.  

Scott says this allows the ACCC and the court to ensure the penalty sufficiently hurts the company that has done the wrong thing and sufficiently deters others from doing the same thing.

“Given the huge penalties, and also the potential for the case to affect the way it does business, I believe that Flight Centre has no choice but to appeal.”

Scott says the lesson for businesses is to be wary of any dealings with competitors, whether they are about price, restricting supply or other matters.

She is seeing this issue arise more and more in business as there is a tendency for suppliers, franchisors and dealers to want to control price.

“Most suppliers are aware that you can’t force businesses to sell at a certain price,” Scott says.

“However, there is less awareness of the fact that you can’t tell businesses not to sell or advertise below a certain price, such as below the recommended retail price.”

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Cara Waters is the former editor of SmartCompany. Previously, Cara was a senior reporter at the Financial Times website FT Adviser in London and she also worked for The Sunday Times in London.

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