Federal Court sets penalty in Flight Centre case

The Full Federal Court has handed down its decision on penalty in relation to the long-running Flight Centre case. The Court has ordered Flight Centre to pay a total penalty of $12.5 million in relation to five contraventions of the Trade Practices Act (TPA) that occurred between 2005 and 2009.

In setting this penalty, the Court took into account factors including:

• Flight Centre had not deliberately contravened the TPA, and the court concluded it is unlikely to engage in similar conduct in the future;
• Although the conduct was described as ‘serious and sustained’, the Court concluded it was not covert or arrogant. It occurred in the context of ‘robust engagement between commercial counterparties’;
• If Flight Centre’s conduct had succeeded, commercial transactions of a significant value could have been affected. In addition, consumers could have been financially affected;
• Australian businesses need to understand that price fixing is serious, even if it could be argued that the relevant businesses are not technically competitors. This case raised the question of whether agents could be viewed as competing against their principals in some circumstances, which the judge at first instance described as having a ‘degree of novelty’; and
• In this case, the maximum penalty for each of the contraventions was $10 million.

The Court emphasised that penalty decisions require evaluating the individual circumstances of the particular case in question. Although maximum penalties are specified for contraventions of the competition laws, Australian courts do not set penalties by making mathematical calculations or applying a specific formula.

The penalty in this case was not as high as the ACCC had sought – it had submitted that a penalty in the range of $17 to $22 million was appropriate in the circumstances. The ACCC has indicated it will continue to seek strong penalties to deter businesses from contravening the TPA, and to avoid companies viewing TPA penalties as a ‘cost of doing business’.

This decision is also interesting in light of the recent OECD report on penalties for competition law infringements. The OECD concluded that although substantial penalties are imposed for breaches of Australia’s competition laws, these penalties are lower than those imposed for competition law breaches in comparable jurisdictions.

This article was written by Anthony Haly, Partner.