Travel agency fined for trying to fix prices

A Brisbane-based global travel agency has been fined A$11 million (S$12.8 million) for trying to muscle Singapore Airlines and two other airlines into not undercutting airfares to below its own fares.

Australia's anti-competition watchdog took Flight Centre to court for trying to induce anti-competitive arrangements with the three airlines, which would have denied travellers lower fares.

The Federal Court found that on six occasions between 2005 and 2009, the publicly listed Flight Centre had sought to prevent these airlines from undercutting its air fares.

By doing so, Flight Centre had tried to induce an anti-competitive deal to eliminate differences in air fares so as to maintain its own profit margins.

The fines were imposed for five of the six breaches, as the first occurred more than six years after proceedings started.

Flight Centre, one of the world's largest travel agency groups, grossed revenues of A$1.98 billion for its financial year 2012/2013, Justice John Logan observed in judgment grounds.

During the period in question, it drew a 20 per cent market share of the distribution and booking of international air travel from Australia.

"It was this market power which it deployed in each of the inducements. The threats which were entailed carried all of the weight associated with that market power. They could not have been more deliberately made," the judge said. There was a "strong public interest" in the case with the "potential to affect very many consumers".

Three of the six claims brought by the Australian Competition and Consumer Commission (ACCC) in the civil proceedings against Flight Centre involved SIA, with the others targeted at Malaysia Airlines and Emirates.

Typically, the company sought to induce "by threats" to withdraw its distribution and booking services, among other things, in a bid to ensure SIA did not offer cheaper air fares.

It also wanted SIA to make all its fares for international passenger air travel available for sale by Flight Centre. These practices contravened Australia's anti-price-fixing laws.

The court found its conduct was part of a "concerted pattern of reactive corporate conduct" which carried with it " the aggravating, adverse consequence of denying a would-be passenger a lower fare for air travel which the airline supplies".

It was a response to the perceived threat of direct retailing by airlines at lower rates and was not "a series of unrelated, isolated and idiosyncratic aberrations", said Justice Logan.

ACCC chairman Rod Sims said in a press release that it had been driven to take action out of concern about the potential effect of Flight Centre's conduct on prices available to consumers.

Justice Logan added that such conduct is " almost invariably difficult to detect" as it is not done in public and would require considerable public resources to probe and litigate.

The involvement of senior management was also a significant factor. The judge noted that Flight Centre's chief executive officer Graham Turner was directly and personally involved in the sixth contravention.

Flight Centre is understood to have changed and aligned its practices based on the law since the ACCC first began the price-fixing probe in 2009.

It is appealing against the court judgment.

"While we are comfortable that we comply with the law, we consider it appropriate to test the decision at an appeal," Mr Turner told the Sydney Morning Herald newspaper on Friday.

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