ACCC v Flight Centre (High Court)

High Court of Australia

[2016] HCA 49 (14 December 2016)

Chief Justice French
Justices Kiefel, Gageler, Nettle and Gordon

See also

• Flight Centre Limited v ACCC [2015] FCAFC 104 (31 July 2015)

• ACCC v Flight Centre Limited (No 2) [2013] FCA 1313 (6 December 2013)

Key issue

Were Flight Centre (agent) and the airlines 'in competition' in a relevant market?

Contravention alleged

Price fixing

Summary

The ACCC alleged that Flight Centre attempted to induce three airlines (Singapore Airlines, Malaysia Airlines and Emirates) to enter into a contract, arrangement or understanding to fix, control or maintain prices for air travel in contravention of the Act.

The issue in dispute was whether or not Flight Centre, who acted as agent for the airlines, were 'in competition' with those airlines. The High Court by majority (French CJ dissenting) held that they were. The market in which both airlines and Flight Centre competed was found to be in a market for the supply of contractual rights to international air carriage via the sale of tickets.

Importantly, the Court determined that it was possible for an agent and principal to be found to be in competition with each other in appropriate circumstances.

Majority

Justices Kiefel and Gageler: observed that under the agency agreement Flight Centre had authority to determine whether to sell and also had authority to set the prices for those tickets. As a result, it was 'free in law to act in its own interests' when selling the tickets (para 90). The market was a 'market for international airline tickets' and both the airlines and Flight Centre competed in that market.

Their Honours further observed that it was not inconsistent with the Act for agent and principle to both supply contractual rights against the principal and for them to do so in competition with each other (para 82); consequently any legal agency that existed did not preclude a finding that the parties competed with each other.

Justice Nettle: agreed parties were in competition for the sale of airline tickets and that Flight Centre had attempted to fix prices in that market.

Justice Gordon: agreed parties were in competition for the sale of airline tickets. Rejected any suggestion that the existence of an agency agreement precluded a finding that parties were in competition with each other. On the facts of this case her Honour considered that describing Flight Centre as a legal 'agent' was factually wrong (para's 152-153); in any event her Honour considered the characterisation as agent irrelevant for purposes of the price fixing provision.

Although a finding of actual effect on competition was not necessary (price fixing being per se prohibited), her Honour also considered that Flight Centre's proposal to the airlines that they increase their prices was 'necessarily to propose a lessening of downward competitive pressure on prices and, consequently, a reduction in the level of competition between Flight Centre and the airlines for the sale of airline tickets.' (para 132)

Dissenting view

French CJ dissented, observing that Flight Centre had no proprietary right to the air tickets and couldn't modify or vary terms; it could only determine the price at which the tickets were sold. His Honour was uncomfortable with the suggestion that agents could be found to be in competition with their principals, observing that the ‘proposition that an agent and a principal, both selling the services of the principal, compete with each other in a market for the sale of those services does not command ready assent’ (para 15).

His Honour concluded that Flight Centre's act in selling air tickets ‘was properly regarded as an action of the airline itself’ and that there was no market ‘for the supply of the tickets of a particular carrier’ (para 21). It followed that Flight Centre was 'not in competition, in any relevant market, with the airlines for which it sold tickets' (para 24).

Relevant provisions

Trade Practices Act 1974, s 4E, s 45, s 45A
(s 45A now repealed but principles equally applicable to new cartel laws)

Catchwords (from decision)

Trade practices – Restrictive trade practices – Substantially lessening competition – Price fixing – Where travel agent sold international airline tickets on behalf of airlines – Where travel agent attempted to induce airlines to agree not to discount price at which international airline tickets offered directly to customers – Whether travel agent acting as agent for airlines – Whether travel agent and airlines "in competition" notwithstanding travel agent supplied as agent for airlines – Trade Practices Act 1974 (Cth), ss 45(2)(a)(ii), 45(3), 45A.

Trade practices – Restrictive trade practices – Market definition – Relevance of "functional approach" to market definition.

Words and phrases – "agency agreement", "agent", "competition", "functional approach to market definition", "international air carriage", "market", "price fixing", "substantially lessening competition".