Flight Centre verdict spurs agency agreements review

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By Daisy Melwani

A South Australian-based law firm has urged businesses to review its agency agreements following December’s court ruling against Flight Centre saying it leaves it “up in the air”.

Kain Lawyers, based in Adelaide, has urged businesses who use distributors or agents to sell products or services to “urgently” review their existing arrangements “noting that they could be in breach of Australian competition laws and face prosecution,” per a report on Lawyer’s Weekly.

The advice comes to head after the Australian Competition and Consumer Commission’s (ACCC) won its longstanding case in the High Court against Flight Centre in December, with the court ruling the agency group had breached competition laws regarding possible price fixing on international airfares between 2005-2009.

It is argued Flight Centre made approaches to Singapore Airlines, Malaysia Airlines and Emirates during that period, with the agency accused of trying to induce the airlines into contracts on airfare prices.

According to a post on the firm’s website and referring to the case against Flight Centre, it advises “Businesses who use agents to sell their products or services are now at risk of prosecution for breaching competition law. A recent High Court decision has confirmed that an agreement on price restrictions between agents and principals will breach Australia’s restrictive trade practices laws”.

“In vertical distribution arrangements, a business engages an agent to sell the products or services of that business often for a commission on sales or some other agency fee for their services. Depending on the agreement reached with the agent, the business may also sell directly to customers.”

“Australia prohibits restrictive trade practices between competitors in a market. This prohibition includes bid-rigging, cartel conduct, price fixing, private disclosure of pricing and collective boycotts.”

“Until now, many principals and agents in vertical distribution arrangements have operated on the assumption that the prohibitions do not apply to them because they are not in competition with each other. The main reason for this assumption is that the agent is acting on behalf of the business. The High Court has called this assumption into serious doubt.”

Kain Lawyers Director Rebecca Halkett told Lawyer’s Weekly “the key question facing the High Court was whether the airlines and Flight Centre were competing against each other in the same market”.

“The Court found that principals and agents can be taken to be competing with each other in the same market, meaning that many vertical distribution arrangements could now potentially be in breach of competition laws.”

“Until now, many principals and agents in vertical distribution arrangements have operated on the assumption that the prohibitions around price fixing and cartel conduct do not apply to their arrangements because they are not in competition with each other,” the paper reports.

“The main reason for this assumption is that the agent is acting on behalf of the business – but with this ruling, the High Court has said that principals and agents can be taken to be competing with each other, putting them at risk of serious criminal penalties if their arrangements amount to prohibited anti-competitive provisions.”

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accc australian competition and consumer commission flight centre graham turner High Court Kain Lawyers skroo The Australian Competition and Consumer Commission