Recent Changes to Restrictive Trade Practices and Price Fixing

The recent decision of the High Court in Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd [2016] HCA 49 has qualified restrictive trade practices as they apply to agency arrangements and confirmed that a principal and agent can be considered competitors depending on the nature of their agency relationship.

Background

Flight Centre sought to influence the pricing decisions of three airlines by proposing an agreement under which the airlines would not offer international airline tickets directly to customers at prices lower than the fare prices published by Flight Centre for the same flight.

As an agent for the airlines, Flight Centre threatened to discontinue selling the airlines’ tickets if the airlines did not raise their prices to be in line with what Flight Centre was offering.

The key issues for consideration were:

  • whether or not price fixing was occurring; and
  • whether or not Flight Centre was in competition with the airlines even though it was an agent for the airline.

Decision

The High Court held by a 4-1 majority that Flight Centre was in competition with the airlines for the supply of international airline tickets as it was not required to prefer the interests of the airlines above its own and was free to sell any tickets at any price it chose. Further, as the airlines also sold their fares directly to customers, the proposed agreement represented an attempt to fix the prices of international flights by imposing an agreed price floor which was a contravention of the Competition and Consumer Act 2010 (Cth).

The High Court held that the mere existence of an agency relationship at law does not preclude a principal and agent from being characterised as competitors for the purposes of the Act.

Impact of Decision

Whilst the facts of this case were specific to the airline industry, the High Court could potentially affect agency relationships across industries where a principal engages an agent to conduct sales and business on its behalf.

Suppliers should apply caution in the management of their distribution and sales arrangements in light of the decision and consider circumstances where they might compete with their agents.

For further information on how this decision may apply to you or your business or if you have any questions in relation to agency arrangements or restrictive trade practices, please contact DSS Law’s Corporate Law team.

Kaye Griffiths Kaye Griffiths & Robert Carter Robert Carter 17/01/2017

Disclaimer

DSS Law insight articles are intended to provide commentary and general information. They should not be relied upon as formal legal advice. If you would like specific advice relating to this topic, please contact DSS Law on epost@dsslaw.com.au.