Flight Centre fined for price-fixing
FLIGHT Centre's attempts to fix the value of tickets with three airlines so its "price beat guarantee" didn't reduce the company's profits has ended up costing it $12.5 million.
Following a long-running legal battle with the Australian Competition and Consumer Commission, the company was today fined over five breaches of the Trade Practices Act between 2005 and 2009.
It resulted from approaches Flight Centre made to Malaysia Airlines, Singapore Airlines and Emirates asking the airlines to commit to "allowing us a margin to operate", the Federal Court found.
"The three airlines in question, on websites run by them, sold tickets directly to the public at a price lower than the fare published to travel agents, including Flight Centre," Justices James Allsop, Jennifer Davies and Michael Wigney said.
"This required Flight Centre, if it were to beat that price, to sell the ticket, on behalf of the airline, at a price which either reduced or eliminated its commission or margin." Flight Centre complained about the airlines offering cheaper fares in a series of emails.
It indicated they wouldn't push tickets unless the airlines agreed not to undercut the company online.
"I can assure you if this practice continues MH (Malaysia Airlines) will not be invited to participate in any future events," an email from March 2009 read.
"This situation is clearly now hurting our brand."
The case against Flight Centre focused on whether it and the airlines were in competition with each other in any market.
The ACCC won that argument and Flight Centre was initially fined $11 million for the breaches.
However, a series of appeals were then launched, with the matter going to the High Court.
It was referred to the Federal Court, where the $12.5 million penalty was imposed.
In the years in which the price-fixing attempts occurred, Flight Centre's revenue grew from $900 million to $1.7 billion.
The CEO and managing directors of Flight Centre were involved in the breaches, which the Federal Court said elevated the seriousness of the attempts.
"The conduct involved here was said to be egregious," the justices said. Wednesday's judgment draws the matter towards an end, with costs still to be decided.