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Flight centre gets major fine

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Inside Franchise Business: Franchise gets big fineFlight Centre has received a $12.5 million dollar fine for its attempt to fix pricing with international airlines between 2005 and 2009.

The Full Federal Court of Australia handed down the penalty on Wednesday morning, following a successful high court appeal by the ACCC against an earlier court decision in 2016.

The decision is the latest turning point in six-years between the competition watchdog and Flight Centre, which has seen the travel agent lose an initial court case before winning an appeal and then subsequently losing another ACCC appeal to the High Court.

The ACCC alleged that Flight Centre sought to enter into price fixing arrangements with three airlines where they would agree not to offer airfares on their own website that were cheaper than those offered by Flight Centre.

Flight Centre is now considering whether there are legal grounds to seek leave for another appeal against today’s judgement.

“This was a complex test case as evidenced by the contrasting judgements during the past six years,” Flight Centre managing director Graham Turner said in an ASX release on Wednesday.

“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.”

Flight Centre said the fine would not impact its FY18 market guidance of an underlying profit before tax of between $360 million and $385 million.

Flight Centre was initially fined $11 million but after it won its initial appeal a refund was issued.

Today’s $12.5 million fine was higher than the original penalty, which ACCC chairman Rod Sims said reflected the size of Flight Centre.

“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,” Rod Sims said in a statement on Wednesday.

“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.”

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