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Are you in competition with your suppliers?

10 May 2017

Topics

  • Business Law

If you sell the products or services of another business, do the anti-competitive laws found in the Australian Consumer Law (ACL) apply to your relationship with that supplier business?

Recently, the High Court in Australian Competition and Consumer Commission v Flight Centre Travel Group Limited [2016] found that a retailer can be in competition with its supplier, and that the relationship is bound by the ACL.

The history

In this case, Flight Centre guaranteed that it would offer to better the price of any other travel agent or airline. However, several airlines began heavily discounting tickets directly to customers. In response, Flight Centre sent a series of emails to the airlines urging them to not offer ticket prices lower than the fares posted by travel agents.

The case

The ACCC discovered the emails and claimed that sending the emails was anti-competitive conduct. Flight Centre argued that the conduct could not be anti-competitive because they were agents of the airlines and therefore not in competition with the airlines (its suppliers).

The outcome

The High Court held that the existence of an agency relationship, where one business sells a product on behalf of another business, does not preclude the agent or retailer from competing with the supplier. In determining whether a supplier is competing with its agent, the High Court looked at whether the retailer was free to set its own prices, act in its own commercial interests and compete for sales. Because Flight Centre is a separate company that is able to set its own prices, has separate commercial interests and competes for the sales of airline tickets, it was in competition with the airlines.

The implications for this are that agents, retailers or intermediaries may be considered to be in competition with their principal suppliers.

An example of how this case applies to other industries

A retailer sells shoes from a supplier. That supplier also sells the same shoes online directly to customers. In this instance the supplier and retailer would be considered in competition, and the ACL would apply to the relationship. The reason is that the retailer is free to set prices, act in its own commercial interests and they compete for the sale of the shoes against the supplier.

How can Snedden Hall & Gallop assist?

If you or your company are worried about whether you are engaging in anti-competitive behaviour with your suppliers, please contact our experienced Business Team for advice on Australian Consumer Law. You can email or call us today on (02) 6285 8000.