Market definition in
ACCC v Flight Centre
Alice Muhlebach
8 March 2017
1
Overview
• The role of market definition in this case – key statutory provisions
• The market definitions adopted at first instance, by the Full Court, and by the High Court
• Some observations on the High Court’s decision, and its possible implications for future cases
2
The role of market definition in this case - key statutory provisions
Section 45 - Contracts, arrangements or understandings that restrict dealings or affect competition
... (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; or
(b) give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was
made, or the understanding was arrived at, before or after the commencement of this section, if that provision:
… (ii) has the purpose, or has or is 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.
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The role of market definition in this case - key statutory provisions
Section 45A – Contracts, arrangements or understandings in relation to prices
(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.
Section 4E – Market
For the purposes of this Act, unless the contrary intention appears, market means 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.
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ACCC v Flight Centre Travel Group Ltd
[2016] HCA 49
• Was Flight Centre supplying distribution
services to the airlines? Were the airlines
supplying those services to themselves?
Airlines
Supply of distribution
services?
Activities included
operating flights
and selling tickets
directly
Agency
agreement
• If so, were those booking and distribution
services supplied in a market(s) other than
the market in which the ticket was sold?
Flight Centre
Agent for the airlines in
selling tickets (including
making availability of
tickets known to
customers)
Customers purchasing airline tickets
• Were Flight Centre and the airlines
supplying “booking services” to customers?
Supply of booking
services?
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The market definitions adopted at first instance, by the Full Court, and by the High Court
Markets identified by parties
Decision at first
instance
Decision on appeal
(Full Court)
High Court
Booking and distribution services
ACCC (primary case)
Two separate markets for booking and distribution services
(Dr Vince FitzGerald: single downstream market in which
booking and distribution services are supplied.)
Single market for
distribution and
booking services
in respect of
No separate booking and No separate booking and distribution market
available
(Kiefel and Gageler JJ (French CJ, Nettle and
distribution market
international air
Gordon JJ agreeing))
travel
Supply of international air travel services
Flight Centre
• Market for supply of international air passenger services
Flight Centre
does not supply
services, or
ACCC (alternative case)
compete with
• Market for supply of international passenger air travel
the airlines, in
services (also identified separate alternative “wholesale” relation to the
market for supply of international passenger air travel
supply of
services, sitting above a “retail” market for supply of those international
services to consumers).
passenger air
travel services
Market for the supply of
international passenger
air travel services
Single market for the supply of contractual rights
to international air carriage (ie, tickets), in which
airlines and travel agents compete to supply
tickets to customers (Kiefel and Gageler JJ
(Nettle and Gordon JJ agreeing))
Single market in which international airlines
compete for the sale of air travel services, and in
which Flight Centre participates as an agent (and
not a competitor) of the airlines (French CJ)
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Some observations
• Well settled principles, but some salutary reminders:
• Commercially realistic markets
• Cautionary notes for economists (and those retaining them)
• Resolving a question about the “functional” dimension with an answer about the “product” dimension
• Testing for a commercially realistic market definition: essentiality, artificiality, and single manufacturer/brand markets
• Some questions for the future
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For (vastly simplified) reference
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In the matter of Fortescue Metals Group Limited
[2010] ACompT 2
BHP Billiton,
Rio Tinto
Fortescue
Integrated mining,
rail and port
facilities for
production of iron
ore
?
Other miners
May purchase rail
haulage from
Fortescue, possibly
BHP Billiton/ Rio
Tinto
Customers purchasing iron ore
As for BHP
Billiton, Rio
Tinto, but also
potentially a
supplier of third
party haulage
services on BHP
Billiton’s and Rio
Tinto’s railways
• Tribunal identified four markets for rail
haulage, separate from the markets for
supply of iron ore, and the supply of rail
track services
• Geographic dimension: vicinity of the
relevant railway line
• Functional dimension: observed
separability, negotiations, demand,
power to withhold, feasible
transaction costs
• Customer perception, separate
business units not addressed
• Post Flight Centre, query whether concerns
arise re single supplier/brand product
market?
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ACCC v Metcash [2011] FCAFC 151
Major supermarket
chains (solely selfsuppliers)
Purchased groceries
from suppliers,
wholesaled them to
company owned retail
stores, and sold
groceries to customers
from those stores
Franklins
Metcash and SPAR
Purchased groceries
from suppliers,
wholesaled them to
third party stores
As at left, but
also provided
wholesale
supply to third
party owned
retail stores
Retail customers
Third party retailers
Sold groceries to
customers from
retail stores
• Metcash and Franklins competed to supply
wholesale grocery services to independent
supermarkets; this competition occurred in
a market which was held to include both
wholesale supply and the supply of
groceries to retail customers by integrated,
self-supplying supermarket chains
• Constraints on standalone wholesalers
posed by the retail activities of selfsupplying supermarket chains was key to
this functional market definition
• Outcome unlikely to be different postFlight Centre, but would a constraints
analysis have reached the same outcome
in Flight Centre?
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ACCC v ANZ [2015] FCAFC 103
ANZ
Supplied loans and
certain associated
services (advice,
assistance etc) re
ANZ loans to retail
customers
Retail customers
BROKERS
Supplied loan
arrangement services for
a range of banks’
products, including
comparison, advice,
assistance etc; paid
commission by banks
• Held that ANZ did not compete with brokers in the
market for the supply of “loan arrangement services”,
because ANZ did not supply “loan arrangement
services” (although it did engage in a subset of those
activities as part of its supply of loans)
• Characterisation of service; substitution analysis
• Single supplier/product markets
• Limited significance of consumer perception,
existence of separate business units
• Not a case about vertical integration …
• Following Flight Centre, query outcome if different
market had been considered?
Supply of loan
arrangement services?
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