04 Apr 2014

The lesser of two evils for Flight Centre - Court hands down penalties

by Aman Saxena, Kirsten Webb

We can expect the ACCC to set out in its pleading document details of how it alleges a company has received a benefit as a result of the relevant conduct.

The Federal Court has ordered Flight Centre to pay a hefty fine of $11 million for attempts to induce three airlines into price-fixing arrangements, but if the ACCC had its way, it could have been much higher.

Background to the case against Flight Centre

On 6 December 2013, the Federal Court found that Flight Centre engaged in conduct that amounted to attempted price fixing in contravention of section 45 of the Trade Practices Act 1974 (Cth) (TPA) (now the Competition and Consumer Act 2010 (Cth).

On 19, 20 December 2013 and 7 February 2014, the Court heard submissions as to penalties and delivered its decision on 28 March 2014.

The penalty decision

A key issue for the Court to determine in the penalty hearing was the maximum penalty that the Court could order for the contraventions which occurred after amendments were made to section 76(1A).

Section 76(1A) relevantly provided that the maximum penalty payable for each contravention was the greatest of the following:

  • $10 million;
  • if the Court can determine the value of the benefit, three times the value of the benefit obtained; or
  • if the Court cannot determine the value of the benefit, 10% of the corporation's annual turnover for the 12 months prior to the contravention occurring.

The alternative maximum amounts therefore depend on whether there was a benefit which was obtained because of the contravention. The ACCC did not make any allegation about a benefit arising in its pleading. It was an issue first raised after the findings of liability had been made by Justice Logan in submissions by the ACCC about the quantum of penalty sought by it.

Flight Centre successfully argued that the ACCC could not make such an allegation so late in the proceedings. The Court agreed. The Court found that if the ACCC wished to argue for a penalty based on the alternative maximum amounts it had to put the other party on notice and should have pleaded the facts on which it relied to establish that a benefit had been obtained. The Court held that if the ACCC had done so in this case it may have affected the material which the parties put before the Court at the hearing and it would be unfair to allow the ACCC to put that argument forward now.

The outcome

The penalties that were imposed (in total $11 million for five contraventions) were determined by reference to a maximum of $10 million.

In the future we can expect the ACCC to set out in its pleading document details of how it alleges a company has received a benefit as a result of the relevant conduct. The ACCC will then need to lead evidence to prove that a benefit was obtained even if it cannot be quantified. This will add another dimension to competition law matters.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.