Flight Centre fined $12.5m over price fixing claims

Flight Centre fined $12.5m over price fixing claims

The Full Federal Court has fined Flight Centre (FLT) $12.5 million after the travel agency lost its long-running legal battle against the Australian consumer watchdog.

The case, which started six years ago, concerns the agency’s efforts to convince Singapore, Malaysia and Emirates airlines to enter into price fixing arrangements between 2005 and 2009.

The arrangement would have meant the airlines could not offer airfares on their own websites that were cheaper than those offered by Flight Centre.

According to an ASX release from FLT, the case has been argued in three courts, with the travel agency losing the initial judgement, winning unanimously on appeal and then losing a subsequent appeal by the ACCC before the High Court.

A release from the ACCC notes the $12.5 million penalty is an increase from the original $11 million initially imposed on FLT but the ABC reports the sum is much smaller than the $17 million to $22 million range the regulator sought out.

“The ACCC appealed from the initial $11m 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 in the release.

“Flight Centre is Australia’s largest travel agency, with $2.6b in annual revenue.”

“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.”

“Significant, large penalties act also as a general deterrent to other businesses that may be considering such conduct themselves.”

FLT managing director Graham Turner said in the ASX release the company is currently considering whether there would be grounds for seeking leave to appeal against the latest penalty judgement.

“This was a complex test case as evidenced by the contrasting judgments during the past six years,” he said.

“Flight Centre at all relevant times believed that it was acting lawfully and that its conduct did not contravene the Trade Practices Act, given that its interactions took place within the context of commercial negotiations as to agency arrangements with its principals.”

“It is pleasing that the court also accepted this point in its decision.”

“The company respects the court’s ultimate decision and will continue to adhere to the policies and practices that it put in place when the ACCC’s possible concerns first became evident.”

“As we said when the ACCC initiated this test case, for more than 30 years Flight Centre has sought to deliver cheaper airfares to the travelling public.”

“The company is not in the business of attempting to make airfares more expensive.”

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

“As an agent that provides considerable free advice and help to the travelling public, and extensive marketing for airlines, FLT asks for appropriate commissions from suppliers and also reasonable access to all deals that they release to the market.”

“This is a logical and natural business request for an agent to make to ensure the customers it serves on behalf of airlines are not disadvantaged.”

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