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Principal and Agent Competition Confusion
The Federal Court has recently found that Flight Centre, on six occasions, attempted to induce airlines into price fixing arrangements.
When creating a contract, or in dealing or suggesting arrangements to other businesses, it is important to be aware of competition laws that are in place. The recent Flight Centre case has particular importance to scenarios where a business distributes its goods directly and through the use of separate agents.
Flight Centre sells the air travel services of many large airlines and does so as an agent for those companies. Each of the airlines sells their air travel services through Flight Centre, other agents, and directly to consumers through internal sales divisions (company websites and shop fronts).
The Illegal Actions
Flight Centre became concerned about the fares being offered by various airlines through their internal sales divisions. Some airlines were offering airfares at a lower rate than what Flight Centre could offer through the Global Distribution System whilst still receiving their regular commission. The Global Distribution System is a system that allows agents such as Flight Centre to book a flight with an airline on behalf of one of their customers.
Between 2005 and 2009 Flight Centre sent various emails to airlines essentially requesting that the airlines make available to Flight Centre the same deals that they offer online, and that airlines would not offer deals at a lower total price than what Flight Centre could offer.
The ACCC Allegations
The ACCC successfully argued that the due to Flight Centre being in competition with the internal sales divisions of the airlines, their conduct was an attempt at price fixing.
Flight Centre unsuccessfully argued that the communications between Flight Centre and the various airlines were in the context of their principal/agent relationship. Flight Centre contended that the communications sought to ensure that Flight Centre had access to the same offers and prices as other travel agents and the airline’s internal sales division.
This judgment highlights how important it is to consider competition laws when dealing with competitors. A substantial body of evidence came from emails sent by Flight Centre, which Flight Centre maintain were viewed by the Court in the wrong context. It is also important to ensure that your communications with competitors are clear and unambiguous and that you properly identify who your competitors are.
The main lesson to be learned here is that competitors can sometimes be found in the most unlikely of places. In this case, Flight Centre was both in a principal/agent relationship with airlines for the sale of airfares and in competition with the airline’s internal sales divisions.