Australia: Air Carriers And The Trade Practices Act

Last Updated: 29 October 2008
Article by Andrew Tulloch

In recent years, a number of high profile international airfreight carriers have come under increased scrutiny from competition regulators and private litigants, both in Australia and abroad, over allegations that the carriers have conspired to increase prices through the imposition of excessive fuel surcharges. A recent decision by the Federal Court of Australia, in which the respondent airlines were successful in having an applicant's statement of claim struck out, signals that the airlines won't be going down without a fight.


In February last year, a class action, led by Auskay International Manufacturing and Trade Pty Ltd (the applicant), was brought against seven international airlines, Qantas, Lufthansa, Singapore Airlines, Cathay Pacific, Air New Zealand, JAL and British Airways. In Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd [2008] FCA 1458 (Auskay), the applicant alleged that, in about January 2000, the airlines entered into a secret agreement that each of them would fix fuel, security and war-risk surcharges against freight users. The applicant, a Melbourne-based importer and exporter of ducted vacuum cleaner systems, submitted that the airlines had contravened section 45 of the Trade Practices Act 1974 (Cth) (Act). In doing so, the applicant placed significant reliance on the deeming provision in section 45A(1) of the Act.

Statutory framework

The relevant provisions of the Act state:

45(2) A corporation shall not:
(a) make a contract or arrangement, or arrive at an understanding if:
(ii) a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition;
(3) For the purposes of this section and section 45A, competition, in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services.
45A(1) Without limiting the generality of section 45, a provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, as the case may be, of fixing, controlling or maintaining, or providing for the fixing, controlling or maintaining of, the price for, or a discount, allowance, rebate or credit in relation to, goods or services supplied or acquired or to be supplied or acquired by the parties to the contract, arrangement or understanding or the proposed parties to the proposed contract, arrangement or understanding, or by any of them, or by any bodies corporate that are related to any of them, in competition with each other.

The term 'market' is also defined in the Act under section 4E to mean 'a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services.'


The respondent airlines sought to have the applicant's statement of claim struck out on the basis that the applicant had failed to identify the relevant market or markets in which it alleged that any two or more of the airlines were 'in competition with each other'.

In determining whether the applicant's statement of claim identified the necessary material facts, which need to be pleaded in order to establish a cause of action under section 45 of the Act, Justice Tracey referred to Sammy Russo Supplies Pty Ltd v Australian Safeway Stores Pty Ltd [1998] ATPR 41-641 at 41,094. In that case, Justice Goldberg identified that when pleading a cause of action under section 45(2)(a)(ii) of the Act, it is necessary to identify and plead material facts in relation to:

  • The making of a contract or arrangement or the arriving at an understanding.
  • The identification of a provision in that contract, arrangement or understanding.
  • An allegation that the provision has the purpose, or would have, or be likely to have the effect, of substantially lessening competition.
  • An allegation identifying the relevant market in which competition would be lessened and the manner in which competition would be lessened.

In Sammy Russo, Justice Goldberg also noted that if section 45A is to be relied upon, applicants must still establish that the parties to the contract, arrangement or understanding are in competition with each other. His Honour concluded:

'It is not sufficient simply to allege that a provision of a contract had the purpose of substantially lessening competition. It is necessary to allege material facts identifying a relevant market. This is made clear by s 45(3) ...'

In striking out the statement of claim in Auskay, Justice Tracey held that the applicant had failed to set out the precise markets in which the alleged cartel operated. His Honour said:

'In my view an applicant, in a proceeding such as the present in which exclusive reliance is placed on s 45A of the Act, must, in its statement of claim, identify the markets in which it is said that the anti-competitive conduct has taken place. The pleadings must identify (at least) the relevant goods or services and the geographic boundaries of the market.'

In addition, Justice Tracey observed that a party which commences representative proceedings must clearly identify the group to which the procedure relates so that members of that group, who do not want to be bound by the outcome of the proceeding have the opportunity to opt out. His Honour held, in the present case, that the applicant had failed to identify in its pleading the group to whom the proceeding relates and that there were 'insufficient material facts pleaded to establish that the applicant is a member of the defined group which it seeks to represent'.


Justice Tracey ordered the applicant to pay the respondent airlines' costs and granted the applicant leave until 31 October 2008 to replead its case to the court. The court granted leave because it was the first occasion on which there had been an adjudication on the airlines' complaints as to the alleged shortcomings of the applicant's pleaded case. Accordingly, while the airlines may have won this battle, the war appears far from over with the applicant confirming that it intends to resubmit its case.

DLA Phillips Fox acted for Cathay Pacific in this matter.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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