Flight Centre case highlights “serious compliance risk”

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Parties in a vertical supply chain are being encouraged to take greater care when communicating with one another about pricing to end consumers as any suggestion that retail prices should be equalised could lead to significant compliance risks according to lawyers.

Flight Centre have been ordered to pay $11 million in penalties by the Federal Court for repeatedly attempting to enter into anti-competitive arrangements with three international airlines to eliminate differences in the international air fares offered to customers.

The Court found between 2005 and 2009 on six occasions - largely based on Flight Centre's emails with the airlines - that Flight Centre's aim was to remove air fare differentiation between direct airline sales and there travel agency sales in order to prevent certain airlines from undercutting it on these air fares.

In a legal commentary on the case Corrs Chambers Westgate lawyers Ayman Guirguis, Alistair Newton and Sarah Godden advised: “The decision confirms that parties in a vertical supply chain should take great care when communicating with one another in respect of pricing to end consumers – any suggestion that retail prices should be equalised may give rise to significant compliance risks.  Further, the case demonstrates that, if there is frequent contact (such as the routine exchange of emails), multiple potential contraventions can accumulate relatively quickly.”

Clayton Utz lawyers Michael Corrigan, Ian Reynolds and Shameela Karunakaran added in another legal commentary that if a complaint or challenge was made, a review of internal documents, emails and other correspondence with suppliers will be critical to assess competition law risk.

“Particular attention should be paid to perceptions (both within the company and in the industry) of the boundaries of the markets in which competition takes place, and the "purpose" underpinning dealings on customer prices with agents and distributors,” they wrote.

Additionally, they recommend prinicipals who sell in direct competition with agents should review their distribution arrangements for potential breaches of the Competition and Consumer Act 2010.

Flight Centre have said they will consider appealing the fine.

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