ACCC aviation industry activities and enforcement for 2016-17

    Australian Competition and Consumer Commission (ACCC) reported the following aviation sector activities for FY2016-17:

    • Australian High Court found in Jun-2017 that price fixing agreements between Air New ZealandGaruda Indonesia and other international airlines between 2002 and 2006 breached Australia‘s competition law. Action commenced against Air New Zealand in 2009 and Garuda in 2010. The ACCC alleged they colluded with other airlines on charges for fuel, security, insurance surcharges and a customs fee for the carriage of air freight from origin ports in Hong Kong (both airlines), Singapore (Air NZ) and Indonesia(Garuda) to destination ports in Australia. The ACCC was required to establish that the conduct occurred in a ‘market in Australia’. The High Court unanimously dismissed appeals by each airline and held that all aspects of the market, including the presence of customers in Australia, need to be considered in deciding whether a market is ‘in Australia’. At time of publication, penalties had yet to be decided by the Federal Court;
    • ACCC won a High Court appeal in Dec-2016 regarding Flight Centre‘s attempt to induce three international airlines to enter into price-fixing arrangements between 2005 and 2009 in relation to airfares offered online by the airlines that were cheaper than those offered by Flight Centre. The ACCC argued that Flight Centre and the airlines are competitors, a position the High Court endorsed. The ramifications of this case are “large” as it provides important guidance for the future application of competition laws in Australia to other situations where competing offers are made directly to consumers by both agents and their principals. It is likely to be particularly relevant when businesses make online sales in competition with their agents;
    • ACCC’s Compliance and Enforcement Policy prioritised consumer guarantees and representations made by large companies about express and extended warranties, including in the airline industry;
    • ACCC’s drip pricing project concluded in early 2017 with two penalty decisions in the airline industry. In Mar-2017 the Federal Court ordered Jetstar Airways and Virgin Australia to pay penalties for breaches of competition legislation in respect of drip pricing. The ACCC commenced proceedings against Jetstar and Virgin in 2015 alleging that, for specific advertised airfares, Jetstar and Virgin did not adequately disclose that consumers would be charged additional booking and service fees for bookings paid for using most credit cards or PayPal (Virgin also applied the fees to payments by debit card). In Nov-2015 the Federal Court found that Jetstar had made false or misleading representations about specific advertised airfares on its website in 2013 and on its mobile site in 2014. The Court found that Virgin had made false or misleading representations about specific advertised airfares on its mobile site in 2014. In 2017, when imposing the penalty against Jetstar, Justice Foster commented upon the importance of the use of penalties as a deterrent and noted that the penalty imposed on Jetstar was designed to discourage similar behaviour by others;
    • In Jun-2016 the ACCC received numerous complaints that airlines operating in Australia were pre selecting one or more optional extras during the online booking process. Where an option is pre selected, the cost of that option is automatically added to the fare unless a customer notices the option is pre selected and actively unticks it. This ongoing consumer issue in the online marketplace was addressed through an administrative resolution with Virgin Australia, Jetstar Airways and Tigerair Australia airlines;
    • ACCC released its airport monitoring report for 2015–16 on in Mar-2017. All four airports monitored – Sydney, Melbourne, Perth and Brisbane – received an overall weighted rating of ‘good’ for their quality of service. The report noted that the airports are collecting substantially more aeronautical revenue per passenger than a decade ago. The ACCC estimated that, over the past decade, these airports have collected USD1570 million (USD1213 million) more in revenue from airlines than they would have collected if average prices were held constant in real terms. The higher aeronautical charges have been used both to cover increasing costs per passenger and to grow airports’ profit margins. The report also noted that profit margins for both car parking and aeronautical services remain very high. The report also commented on developments in relation to the proposed new airport in Western Sydney. It noted that a second international airport competing with Sydney Airport would yield significant benefits to both consumers and airlines. [more – original PR]