Australia: Competition law spotlight shines on shipping and logistics sectors

Last Updated: 7 February 2017
Article by Nathan Cecil and Stephanie Triefus

The ACCC has turned its attention on the shipping and logistics sectors and it is not pulling any punches. The ACCC has recently commenced the first Australian prosecutions for criminal cartel conduct against NYK Line (see our earlier article here) and K-Line and commenced consideration of removing the anti-competition exemptions available for liner shipping services. In this climate, Carriers and freight forwarders should be particularly wary of behaviour that may constitute anti-competitive conduct, such as price fixing and market sharing, as these activities are now squarely in the ACCC's sights.

A recent price fixing prosecution in the aviation industry provides up-to-date guidance on what conduct will fall foul of competition laws in the shipping and logistics sectors.

What you need to know about ACCC v Flight Centre1

Between 2005 and 2009, Flight Centre offered international passenger air travel services to consumers pursuant to an agency agreement between itself and various airlines. It received payment from customers for air travel booked through it and remitted the amounts less commission to the airlines. The airlines also offered tickets directly to prospective passengers.

During this time, Flight Centre wrote to a number of airlines threatening to stop selling the tickets of the airlines if they did not agree to stop offering tickets directly to customers at prices lower than the fares offered to Flight Centre. In 2012, the ACCC commenced proceedings against Flight Centre for breach of price fixing provisions under Australian competition law.

At first instance the Federal Court held that Flight Centre was in competition with the airlines for air travel distribution and booking services and fined Flight Centre $11 million for price fixing. On appeal, the Full Federal Court overturned this decision, holding that there was no relevant competition between the two, with Flight Centre merely acting as a sales agent for the airlines. Given that the two weren't in competition, there couldn't be any anti-competitive behaviour.

The ACCC appealed to the High Court, which unanimously held that despite the fact that Flight Centre was a sales agent for the airlines, it also acted independently for its own benefit and that "Flight Centre was acting in competition with the airlines which had appointed it as their agent." The matter has been remitted to the Federal Court for determination of the penalty.

How ACCC v Flight Centre will affect the shipping and logistics sectors

Carriers and freight forwarders typically compete for business in the same market where they offer the same or substantially similar sea carriage services to customers.

In some limited circumstances, freight forwarders may act as agent for Carriers (for example, the in-house forwarding arm of a Carrier) in offering these services. However, the impact of ACCC v Flight Centre is that the mere existence of such an agency relationship will not preclude the Carrier and freight forwarder from being in competition with each other, in particular where the freight forwarder agent has unconstrained authority to set its own price and act in its own interests in the sale of shipping services.

The more typical situation will be that the Carrier and freight forwarder are in direct competition in offering shipping services to ultimate customers. This will likely be the case regardless of the fact that in many instances, freight forwarders may contract as customer to a Carrier (and then on-sell the shipping services).

So, the impact of ACCC v Flight Centre on the shipping and logistics sectors is to make it relatively clear that, in almost all instances, Carriers and freight forwarders are likely to be held to be in competition with each other and therefore subject to the anti-competitive conduct prohibitions.

What conduct is prohibited between competitors?

Australian competition law prohibits corporations from making a contract or arrangement, or entering into an understanding, that has the purpose, or has or is likely to have the effect, of substantially lessening competition. Examples of this include price fixing, market sharing and limiting outputs to control prices as between competitors in a market.

Price fixing is when competitors agree on a pricing structure that they will offer to the market, rather than competing against each other for business.

Market sharing is when competitors agree to divide a market between them. That is, they agree not to compete for certain customers or classes of customer.

Attempting to engage in this conduct is also prohibited, whether or not the conduct actually occurs. In ACCC v Flight Centre, Flight Centre's emails to the airlines were in breach of the competition laws, regardless of whether they resulted in a prohibited arrangement.

Agreements, arrangements or understandings do not have to be formal to be prohibited. As the ACCC website puts it, "they can be a 'wink and a nod', made over a drink in the local pub".

Carriers and freight forwarders should be wary of any verbal or written discussions that might be perceived to be for the purpose or have the effect of lessening competition. Examples include (but are not limited to):

  • a freight forwarder telling a Carrier that it will only contract with that Carrier if it agrees not to offer the same low rate to other freight forwarders or ultimate customers;
  • a Carrier telling a freight forwarder not to undercut the Carrier's rates; or
  • a Carrier and a freight forwarder (or indeed two Carriers or two freight forwarders) agreeing to split a market between them so as to not compete with each other.

Even if a freight forwarder is acting as an agent for a Carrier in selling the Carrier's shipping services, fixing or attempting to fix prices or share markets etc with that Carrier will likely constitute anti-competitive conduct, particularly where that freight forwarder is free to determine its own freight price.

The maximum fine for each cartel offence for corporations is the greater of:

  • AU$10,000,000;
  • three times the total value of the benefits obtained by one of more persons and that are reasonable attributable to the offence of contravention; or
  • where benefits cannot be fully determined, 10 percent of the annual turnover of the company (including related corporate bodies) in the preceding 12 months.

How our Transport team can help

We routinely advise Carriers, freight forwarders and other participants in the shipping and logistics sectors on competition law compliance issues. Given the substantial penalties that can apply for illegal cartel conduct, we recommend that any organisation considering any form of cooperation or relationship with any potential competitor first seeks legal advice in order to ensure that this does not result in liability for anti-competitive conduct.

Footnote

1ACCC v Flight Centre Travel Group Limited [2016] HCA 49 (14 December 2016).

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Nathan Cecil
Stephanie Triefus
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.