Australia’s legal system has transformed significantly in recent times, and with increasingly regulated working environments it’s essential that business owners are aware of potential legal risks. Competition law is defined as “a law that is intended to make sure there is fair competition between businesses, for example by making rules to control monopolies”. One of the largest lawsuits in Australian history amounted to a colossal AUD$37 million against packaging giant Visy who engaged in a four-year price-fixing scheme with Australian packaging rival Amcor.
There have been several high-profile examples of price fixing in Australia and worldwide in recent times, but how will this affect businesses across Australia going forward?
What are the potential consequences of price fixing?
The Australian Competition and Consumer Commission (ACCC) was founded in 1995 to ‘promote competition and fair trading and regulate national infrastructure to make markets work for everyone’.Failure to understand or comply with business law can have severe consequences, and competition law is no exception. Not only can breaches involve severe fines, but in extreme cases, it can also mean a prison sentence for those involved.
The Competition and Consumer Act 2010 was passed to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection. The Australian government, the ACCC and the Australian watchdog have cracked down on price fixing and competition law in recent times, however its apparent that in some cases there is a very fine line between what constitutes a breach of the act and what doesn’t, often resulting in lengthy court cases.
Case in point – Flight Centre Australia
In April travel giant Flight centre faced a fine of $12.5 million from the ACCC for price-fixing after approaching; Malaysia Airlines, Singapore Airlines and Emirates and requesting them to commit to ‘allowing them a margin to operate’. The airlines sold tickets on their own websites respectively at a lower rate than advertised on flight centre, which led to the Flight centre approaching the airlines to ask them to cooperate in price-fixing agreements.
They were officially fined over five separate breaches of the Trade Practices Act between 2005 and 2009 with the ACCC releasing the statement following the court settlement; “Flight Centre is Australia’s largest travel agency, with $2.6b in annual revenue. We will continue to argue for stronger penalties which we consider better reflect the size of the company, as well as the economic impact and seriousness of the conduct’.
The OECD recently released a report that showed Australia offered significantly lower penalties for price fixing under competition law compared to other member states. It’s clear Australia still has further to progress regarding price fixing and the penalties associated with breaching competition law, with the OECD calculating that Australia needs to increase penalties by 12.6 times to be in line with the average of the other member states.
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