“Novel” ACCC case against Flight Centre has potential to shake up retail and wholesale pricing arrangements, expert warns

The case between the Australian Competition and Consumer Commission and Flight Centre is set to kick off today, and experts are warning that if successful, a win for the competition regulator could flow through into other industries – including retail.

The Brisbane Federal Court case will begin today with the ACCC alleging Flight Centre attempted to get six airlines, including Singapore, Malaysia and Emirates, to agree to stop booking their own airfares at prices cheaper than those offered by Flight Centre.

Flight Centre chief executive Graeme Turner has previously said he is not interested in reaching a settlement with the competition regulator, increasing the chances of a full trial.

And such a trial would have drastic ramifications for not only the aviation industry, but any industries with wholesalers and suppliers including retail, one expert warns.

“This is a pretty novel case,” says legal consultant and former ACCC lawyer Michael Terceiro.

“Ordinarily what would have to happen is that a company would threaten its retailers to put their prices up, and of course that relates to resale price maintenance,” he told SmartCompany this morning.

“But here, it’s the opposite, and that’s what’s strange.”

The ACCC alleges that on six separate occasions between 2005 and 2009, Flight Centre attempted to induce airlines to stop offering prices cheaper than Flight Centre offers. It also claims these prices included both the commission, and the cost of the flight.

Earlier this year, Graeme Turner said he wouldn’t settle with the regulator.

“We’ll fight this to the end. There’s no way we’d contemplate a settlement. We need to look after our customers and ensure they have the best fares. We make no apology for that.”

But Terceiro says the full trial will ripple through to other industries if the ACCC is successful.

“When a supplier is also involved in retail sales, then this case will have implications there. The good example is when you have manufacturers also operating direct factory outlet type stores.”

The key to the case lies in the fact the ACCC alleges in court documents that Flight Centre was acting as a competitor, not as an agent for the airlines.

Terceiro says that if the case is successful, the ACCC will have a precedent with which to judge these types of situations.

“Any sort of customer who comes to an agreement with a supplier to put prices up could be attacked.”

“The fact you may operate a direct factory outlet as a manufacturer could put you in competition, and that could result in some cross over here.”

“This is going to be quite a significant case.”

Terceiro also says it’s more relevant given anecdotal evidence the ACCC has a strong case against the company.

“The case will most likely have some application to a lot of bricks and mortar sellers,” he says.

“Anybody in that situation with a wholesale and retail component could be seen as potentially in competition with their retail customers.”


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