- The Federal Court upped Flight Centre’s airfare price fixing penalty to $12.5 million from $11 million.
- Flight Centre says the full year market guidance of an underlying profit before tax of between $360 million and $385 million still stands.
- The company is examining today’s judgment and will consider whether there were grounds for an appeal.
Australia’s largest travel agency, Flight Centre, has been fined $12.5 million for attempting to induce three international airlines to enter into price fixing between 2005 and 2009.
The Full Federal Court penalty imposed today is an increase from the original $11 million ordered by a judge in March 2014. The case has been heard in three courts since 2012.
Both the consumer watchdog ACCC (Australian Competition and Consumer Commission) and Flight Centre appealed those orders.
Flight Centre was accused of trying to have airlines agree not to offer airfares on their own websites that were less than those offered by Flight Centre.
A short time ago, Flight Centre shares were down 1.2% to $56.57.
“The ACCC appealed from the initial $11 million penalty orders because it considered that this level of penalty was inadequate to achieve a strong deterrence message,” says ACCC chairman Rod Sims.
“The ACCC wants to ensure that penalties for breaches of competition laws are not seen as an acceptable cost of doing business.
“To achieve deterrence, we need penalties that are large enough to be noticed by senior management, company boards, and also shareholders.”
Flight Centre says today’s penalty will not affect the company’s full year market guidance of an underlying profit before tax of between $360 million and $385 million.
Graham Turner, Flight Centre co-founder and managing director, says the company is examining today’s judgment and will consider whether there are grounds for an appeal.
“This was a complex test case as evidenced by the contrasting judgments during the past six years,” says Turner.
“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.
“It is pleasing that the court also accepted this point in its decision.
“As we said when the ACCC initiated this test case, for more than 30 years Flight Centre has sought to deliver cheaper airfares to the travelling public.
“The company is not in the business of attempting to make airfares more expensive.
“In fact, Flight Centre often suggests to airlines that they lower prices to stimulate demand.”
In February, Flight Centre posted a 37% rise in after tax profit to $102.16 million for the six months to December.