Price fixing. It’s an emotive phrase. It conjures up shady meetings in anonymous cafes in the dead of night with protagonists’ drawing deeply on cigarettes and knocking back strong black coffee.
And price fixing – or at least attempting to price fix – is precisely what Flight Centre has been accused of.
To briefly recap, the Australian Competition and Consumer Commission allege that on six occasions between 2005 and 2009 the retailer encouraged three airlines – Singapore, Emirates and Malaysia – not to sell fares cheaper direct to the public than those available through Flight Centre shops.
Well blow me down.
Six times? I’d be amazed if it wasn’t 106.
The sometimes fragile relationship between supplier and distributor is tested on many fronts, and never more so than on issues relating to price.
I have sat through countless conferences and presentations where agents have told suppliers to stop undercutting them if they want their full sales support.
These appeals weren’t via shifty conversations in dark alleyways but rather appeals in front of anyone who cared to listen.
Does this constitute price fixing?
No one batted an eyelid. It was regarded as the normal cut and thrust of negotiation, albeit crude negotiation in an open forum.
Emails emerged this week – “confidential” emails, no less, which heighten the dastardly nature of Flight Centre’s alleged crime – in the form of correspondence from Flight Centre managing director Graham Turner and a Flight Centre manager, Darren Burgess.
Let’s look at the content of those emails.
Turner tells Singapore Airlines local boss Subhas Menon that he wants to “stitch up a mutually agreed arrangement or go our separate ways”. Clearly nothing wrong with that (never mind that “stitch up” can carry nefarious connotations).
Turner then says Flight Centre is seeking “total guaranteed margin on SQ and an agreement we will not be undercut on the web”.
As mentioned, agents have, quite naturally in my opinion, been seeking such reassurances for ever and a day. Quite simply, they want the cheapest rate from their business partner.
Two days later – and we can assume this followed conversations between Turner and Menon – the Flight Centre boss tells SQ “the web is an issue and may be the clincher why it may be best to go our separate ways”.
Again, that hardly smacks of scandal, at least not in my book. SQ and Flight Centre differed on the terms of an agreement resulting in the inability of strike a commercial deal. Does this mean Flight Centre demanded that SQ increase its prices?
Now to Burgess, who takes the dispute further and expresses Flight Centre’s opposition to being undercut on the web.
“At a time when we are going out of our way to sell SQ, we are faced with being uncompetitive to the effect of some $150-$200 per person to a wide range of destinations,” he wrote.
This is precisely the argument I have listened to time and again. Agents become riled when they are selling and supporting a particular supplier, only to find that supplier is not giving them the cheapest rate.
What is clear is that should the ACCC win its case, and Flight Centre is deemed guilty of attempting to fix prices, it will have wide ranging ramifications for the entire retail sector. Flight Centre is not the only company to have wanted the cheapest possible rate from suppliers.
Furthermore, the ACCC needs to prove that under the Competition and Consumer Act, the practice substantially lessened competition.
In an age when airfares are, generally speaking, competitively priced, that could be a hard one to stand up.
