|Price Fixing or Good Business Practice at Flight Centre?|
By Martin Kelly
Friday, 16th March 2012
So the Australian Competition and Consumer Commission – which has no problem with seemingly synchronised petrol price rises among all major brands – has accused Flight Centre of airfare price fixing because it asked Singapore Airlines, Malaysia Airlines and Emirates to give it access to their cheapest fares: a standard travel business practice that provides price parity across the different sales channels.
If proved, these charges, to be heard in the Federal Court of Australia, have the capacity to tear the whole travel distribution chain apart. Not just in Australia but globally.
There's not a section of the travel industry that doesn't engage in uniform pricing. Just look at travel wholesaling. The whole unsustainable premise of that particular business model is that wholesalers and tour operators do not undercut or directly compete with the retailers who sell their product. In other words, they sell product for the same price. Price fixing?
Now let's have a look at hotels and Online Travel Agents, who are engaging in this kind of behaviour every single day. They agree not to beat each other on price. It is in their distribution contracts and is a significant reason major hotel brands like Accor, IHG, Westin etc are not pushing product through the Daily Deals sites.
These contractual arrangements with the likes of Expedia, Wotif, Orbitz and Priceline gives each side marketing certainty, allowing the hotels to offer a "Best Rate Guarantee" while ensuring the agents can embark on marketing campaigns knowing they are nor being undercut by suppliers.
If either side breaks this agreement, then inventory is pulled and there's some corporate push and shove. We've seen it happen a number of times. A good example is Expedia refusing to sell Accor product during a sale of heavily discounted product at rates not available to retailers.