Flight Centre Limited v Australian Competition and Consumer Commission

Counsel for the Respondent: Mr K N Wilson QC with Mr M R Hodge

Solicitor for the Respondent: Australian Government Solicitor

Counsel for the Intervener: Mr M H O'Bryan QC with Mr N De Young for the International Airline Transport Association (Intervening)

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 150 of 2014

AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

JUDGES: ALLSOP CJ, DAVIES J AND WIGNEY J DATE OF ORDER: 31 July 2015 WHERE MADE: SYDNEY (heard in brisbane)

1. The appeal be allowed.
2. The orders made by the Court on 28 March 2014 be set aside and in lieu thereof there be an order that the application be dismissed with costs.
3. The respondent pay the appellant's costs of the appeal.
4. The cross-appeal be dismissed.
5. The respondent (cross-appellant) pay the appellant's (cross-respondent's) costs of the cross-appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 150 of 2014

AND: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

JUDGES: ALLSOP CJ, DAVIES J AND WIGNEY J DATE: 31 july 2015 PLACE: sydney (heard in brisbane)

the court 1 The main issue raised by this appeal is whether the primary judge correctly characterised, for competition law purposes, supplies made by participants in the market for international air passenger transportation. International airlines, such as Singapore Airlines, Malaysia Airlines and Emirates operate aircraft to meet the demand for air travel to and from Australia. They sell tickets and accept bookings for flights both directly, mainly via their own websites, and through travel agents who are authorised to contract with customers on the airlines' behalf. When airlines sell flights directly to customers, are they simply supplying international air passenger transport in a market for such services? Or are they also separately and distinctly supplying distribution and booking services in respect of international air travel? And when travel agents sell flights to customers on behalf of airlines, are they also supplying distribution and booking services to their customers and the airlines? Do airlines compete with travel agents in a market (or markets) for the supply of distribution and booking services? 2 The Australian Competition and Consumer Commission (ACCC) commenced proceedings against Flight Centre Limited (Flight Centre) alleging that it contravened s 45(2)(a)(ii) of the Trade Practices Act 1974 (Cth) (the Act) as in force at the relevant time. The ACCC alleged that at various times between August 2005 and May 2009, Flight Centre attempted to induce Singapore Airlines, Malaysia Airlines and Emirates to make a contract or arrangement, or arrive at an understanding, which contained a provision which had the purpose or effect of substantially lessening competition in a market. 3 The alleged provision concerned the price at which the airlines would sell flights when directly selling to customers. The ACCC alleged that the provision had the purpose or effect of stopping the airlines from offering flights to customers at prices that were less than the nett fare that the airlines made the flights available to Flight Centre, plus Flight Centres' commission or margin. It was contended that such a provision would, if proved, be deemed to have the purpose or effect of substantially lessening competition by operation of s 45A of the Act. 4 But in what market did this alleged anti-competitive conduct occur? The ACCC alleged a number of alternatives which included, in summary, the market for the supply of international air travel services, the market for the supply of distribution services to airlines by internal sales divisions of airlines and travel agents, and the market for the supply of booking services to customers by internal sales divisions of airlines and travel agents. The ACCC contended that Flight Centre competed with the airlines and other travel agents in respect of the supply of services in one or more of those markets. 5 The primary judge found that Flight Centre engaged in the alleged anti-competitive conduct and that the conduct occurred in a market in which Flight Centre and the airlines competed. That market was the market for the supply of distribution and booking services in relation to available international passenger air travel. His Honour accordingly found that Flight Centre contravened s 45(2)(a)(ii) of the Act and ordered, amongst other things, that Flight Centre pay pecuniary penalties totalling $11 million. 6 Flight Centre appeals from the judgment of the primary judge both in relation to liability and penalty. Flight Centre's notice of appeal raises a number of grounds in relation to the liability findings, however they all relate, in one way or another, to the primary judge's characterisation of the services supplied by the airlines and Flight Centre, and the finding that the airlines and Flight Centre competed in a market for the supply of distribution and booking services. In relation to penalty, Flight Centre's sole appeal ground is that the pecuniary penalty imposed by the primary judge is manifestly excessive. 7 The ACCC cross-appeals against the penalty judgment. It challenges the penalty judgment on two grounds: first, that the primary judge erred by refusing to entertain the parties' submissions as to the applicable range of penalties; and second, that the penalty imposed by the primary judge is manifestly inadequate. 8 For the reasons that follow, Flight Centre's appeal should be allowed and the ACCC's cross-appeal should be dismissed. The primary judge erred in finding that Flight Centre and the airlines competed in a market for distribution and booking services. The impugned conduct in fact took place in the market for the supply of international passenger air travel, a market in which (as the primary judge found, and the ACCC does not dispute on appeal) Flight Centre acted as agent for, and not in competition with, the airlines.

Uncontroversial facts 9 The relevant primary facts were largely not in dispute at trial and were not contested on appeal. 10 Flight Centre (including its subsidiaries and associated companies) is involved in the travel and leisure industry. Flight Centre operates a well-known travel agency business in Australia and overseas. As its name suggests, one of the main areas of its business involves the sale of international passenger air travel services to consumers. For convenience, international passenger air travel services will sometimes be referred to simply as "flights". 11 Flight Centre conducts its business, both in relation to the sale of flights and generally, via direct contact with customers at various "shop-front" locations, via call centres and telephone, and via the internet. During the relevant period, however, Flight Centre's internet sale of flights was limited to flights to and from New Zealand. 12 Flight Centre does not own or operate its own aircraft. When it sells flights to consumers, it does so on behalf of, and as agent for, international airlines. 13 Flight Centre was a party to a standard form agreement entered into between individual travel agents and the International Airline Transport Association (IATA) on behalf of its members. That agreement was called a Passenger Sales Agency Agreement (PSAA). Each of Singapore Airlines, Malaysia Airlines and Emirates was a member of IATA, and accordingly was a party to the PSAA with Flight Centre. 14 Clause 3 of the PSAA related to sales of an airline's air passenger transportation services by the travel agent. Clauses 3.1 and 3.2 were in the following terms: 3. SELLING CARRIER'S SERVICES 3.1 the Agent is authorised to sell air passenger transportation on the services of the Carrier and on the services of other air carriers as authorised by the Carrier. The sale of air passenger transportation means all activities necessary to provide a passenger with a valid contract of carriage including but not limited to the issuance of a valid Traffic Document and the collection of monies therefor. The Agent is also authorised to sell such ancillary and other services as the Carrier may authorise; 3.2 all services sold pursuant to this Agreement shall be sold on behalf of the Carrier and in compliance with Carrier's tariffs, conditions of carriage and the written instructions of the Carrier as provided to the Agent. The Agent shall not in any way vary or modify the terms and conditions set forth in any Traffic Document used for services provided by the Carrier, and the Agent shall complete these documents in the manner prescribed by the Carrier … 15 Under the PSAA, Flight Centre received "at-source commission" from an airline when air passenger transport was sold on behalf of the airline. At-source commission was calculated as a percentage of the published fare for the relevant seat on the particular flight. The published fare was determined by the airline. Published fares were made available by airlines to travel agents, such as Flight Centre, through an electronic reservation system known as a Global Distribution System (GDS). 16 Flight Centre was responsible for collecting the fare from a passenger to whom it had sold the airline's transportation services. When it did so, it held the money it received on trust for the airline (clause 7 of the PSAA). The nett amount (the published fare less the at-source commission) was then remitted by Flight Centre to the airline. Flight Centre retained the balance as its commission or margin. 17 It is of some particular relevance that Flight Centre was not obliged to sell an airline's flights at the published fare. It was at liberty to determine the price at which it sold to the consumer. If it sold the flight for more than the published fare, it retained more commission or a greater margin. If it sold the flight for less than the published fare, it retained less commission or a smaller margin. It could potentially sell the flight for less than the nett amount it was obliged to remit to the airline. If it did so, it would make a loss in respect of that sale. 18 Flight Centre also derived additional commission (so-called "back-end commission") and other payments from airlines by entering into agreements called, in industry jargon, "preferred airline agreements". Flight Centre entered into such agreements with each of Singapore Airlines, Malaysia Airlines and Emirates during the relevant periods. The additional commissions and payments provided for under the preferred airline agreements were generally incentive-based and calculated on total "flown revenue" or growth targets. The preferred airline agreements also provided for promotional activity by Flight Centre on behalf of the airlines, as well as payments referable thereto. 19 When selling flights on behalf of airlines, Flight Centre undoubtedly carried out activities that were beneficial to both the airlines and to the customers. It made the availability of flights to particular locations at particular times known to customers, both as part of its promotional activities on behalf of the airlines and in response to specific enquiries by customers. When a customer bought a ticket for a flight, Flight Centre looked after the ticketing and made a booking on the selected flight. It also collected the ticket price from the customer and remitted the nett fare to the airline. 20 The proper characterisation of those activities or services lies at the heart of this appeal. 21 It should also be noted that Flight Centre and other travel agents also on occasion provided other travel-related services to customers. For example, travel agents may give advice to customers about particular destinations abroad, may make bookings for ground tours and accommodation, arrange ground transport and organise travel insurance. These activities may be offered and provided to a customer at the same time, and as part of the same overall package, as the sale of an international airline flight. For present purposes, however, they are separate and distinct from the supply of flights and activities associated with that supply. The characterisation of this broader range of services offered by travel agents is not in issue. 22 International airlines, including Singapore Airlines, Malaysia Airlines, and Emirates, did not only sell flights through authorised travel agents such as Flight Centre. They also dealt directly with prospective passengers. Some, but not all, had sales centres or otherwise sold tickets across the counter at particular locations. Most, including the airlines relevant to this appeal, sold flights directly to customers via their own telephone call centres or via their own internet websites. Sales via the internet were on the increase during the relevant period. 23 The evidence at trial was that Singapore Airlines, Malaysia Airlines, and Emirates sold somewhere in the vicinity of 80-85 percent of their flights through travel agents. The balance of their flights were sold directly to customers. 24 Importantly, the airlines did not make all seats on all their flights available for sale by travel agents via the GDS. Rather, they held some seats or fares back for direct sale to customers, in particular by way of special promotions. Even more importantly, the airlines could and often did offer flights for sale directly to customers at prices less than those made available or published to their agents via the GDS. It would appear that it was this circumstance that precipitated the actions of Flight Centre that were the subject of the alleged contraventions.

The impugned conduct 25 The fact that the airlines could, and did, offer fares directly to customers that were at times less than the published fares that Flight Centre could access via the GDS was a problem for Flight Centre. That was primarily because, during the relevant period, Flight Centre promoted and gave effect to what it called a "price beat guarantee". Flight Centre advertised that it would better the price for a flight quoted by any other Australian travel agent or website. If a customer was able to present to Flight Centre a quote from another agent or from an airline for a particular flight by the airline that was available and able to be booked, Flight Centre would better that fare by $1.00 and give the would-be passenger a voucher for $20.00. 26 The problem for Flight Centre was that if airlines offered fares to customers that were less than the fares made available to it (and other agents) via a GDS, Flight Centre would almost inevitably make a loss if required to better that fare by reason of the price beat guarantee. It would have to sell the flight to the customer on behalf of the airline at the price beat price, but would still be required to remit the nett fare (which may be more than the price beat price) to the airline. 27 Even putting aside the price beat guarantee, the discounted direct offerings by the airlines presented another problem for Flight Centre. It was effectively unable to sell any of those flights to customers on behalf of the airlines. It was therefore unable to earn any commission or margin in respect of those fares. It was also less likely to meet sales targets which would result in it receiving incentive-based payments under the preferred airline agreements. 28 The impugned conduct involved, in general terms, Flight Centre's attempts to deal with the problems posed by the airlines' discounted direct sales. Those attempts were evidenced by six emails, or series of emails, from Flight Centre to Singapore Airlines, Malaysia Airlines, and Emirates: an email to Singapore Airlines sent on 19 August 2005 (the August 2005 Singapore Airlines Conduct); an email sent to Singapore Airlines on 17 March 2006 (the March 2006 Singapore Airlines Conduct); an email sent to Emirates on 30 May 2008 (the May 2008 Emirates Conduct); an email sent to Emirates on 31 December 2008 (the December 2008 Emirates Conduct); a series of emails sent to Malaysia Airlines in February and March 2009 (the March 2009 Malaysia Airlines Conduct); and a series of emails sent to Singapore Airlines on 12 May 2009 (the May 2009 Singapore Airlines Conduct). 29 Each of these emails, or series of emails, was alleged by the ACCC to constitute attempts by Flight Centre to induce the relevant airline to make a contract or arrangement, or arrive at an understanding, that fell within the terms of s 45A of the Act. Each was therefore said to give rise to a contravention of s 45(2)(a)(ii) of the Act. 30 Before considering the emails said to give rise to these contraventions, two points should be emphasised. 31 First, whilst each of the emails, or series of emails, had to be considered separately, the primary judge found that they were not unrelated, isolated, idiosyncratic aberrations. Rather, considered as a whole, they revealed a "concerted pattern of reactive corporate conduct by Flight Centre", being conduct "reactive to a threat it perceived to be presented by the direct retail offering by airlines of air travel at fares it could not offer to retail customers" (at [82] of the judgment). This finding was not directly challenged on appeal. 32 Second, the primary judge made a number of other findings concerning the purpose and effect of the agreements or arrangements proposed in the emails. Those findings, which are considered later, were not directly challenged on appeal by Flight Centre. It is, however, nonetheless important to give close consideration to the emails, and his Honour's findings in relation to them. That is because they are relevant to the central issue in this appeal. To fall within the terms of s 45A of the Act, it was necessary for the proposed agreements evidenced by the emails to relate to services supplied by both the airlines and Flight Centre in competition with each other.

August 2005 Singapore Airlines Conduct 33 It would appear that in 2005 Singapore Airlines advertised discounted fares on flights to various destinations. The fares were only available directly from Singapore Airlines' website. Flight Centre had been required to match these fares in accordance with its price beat guarantee. This apparently caused some consternation. On 16 August 2005, an employee of Flight Centre sent an email to an officer of Singapore Airlines asking if he could "help us with price beats". The Singapore Airlines officer replied the next day, saying "these online fares are a short term initiative associated with our major sponsorship of the City to Surf in Sydney and the launch of our new website." Following on from this email exchange, on 19 August 2005, a senior employee of Flight Centre, Mr Darren Burgess, sent an email to Singapore Airlines in the following terms: I would like to formally express our opposition & concern at the recent Singapore Airlines internet initiative. At a time where we are going out of our way to sell SQ [Singapore Airlines], we are faced with being uncompetitive to the effect of some AUD150-200 per person to a wide range of destinations. Whilst you may not be seeing a significant increase in web sales the main problem with these initiatives is the enquiry they generate to our stores - more and more consumers use the internet to shop then bring to us to match. The losses we are incurring matching this offer are significant. As I am sure you are aware a carrier of SQ's [Singapore Airlines'] size commands significant market power and the precedent this sets for other carriers is of great concern. We have already seen MH [Malaysia Airlines] come out with something similar using SQ [Singapore Airlines] as their justification. If these initiatives continue no doubt all major carriers would follow. Whilst our current initiatives have not met our sales expectations to date, they should be seen in the light of an overall slowing in the outbound international market. We have both committed significant money to these initiatives and I am frankly at a loss as to why SQ [Singapore Airlines] would want to undermine these initiatives not to mention alienate our front-line consultants at a time of significant SQ [Singapore Airlines] focus and when we are about to begin a major campaign. The other question is why you would go out of your way to undercut travel agents in general by such a large amount - is a nett nett [sic] not enough? As you know we are not growing at the same rate as we have historically and therefore need to be more strategic in our control of distribution so it is important for us to know SQ's [Singapore Airlines'] future intentions here and be assured of your commitment to the agency distribution network. It is difficult to be both friend and foe. I look forward to your response. 34 The ACCC's case, and the primary judge's findings, concerning the purpose and effect (or likely effect) of this email are considered in detail later. Suffice it to say at this stage that the primary judge found that Flight Centre was seeking to stop Singapore Airlines undercutting it by directly offering fares that were lower than the published fares made available to it (and other agents) on the GDS. Similar findings were made in relation to the other emails or series of emails.

March 2006 Singapore Airlines Conduct 35 This conduct occurred in the context of negotiations between Singapore Airlines and Flight Centre in relation to a preferred airline agreement for 2006-2007. On 17 March 2006, Mr Burgess of Flight Centre sent an email to Singapore Airlines in the followings terms: Thank you, Dale and Jonathan for taking the time to see us last week and to outlining [sic] your plans for the coming year. Following please find a few comments we have in relation to the proposed agreement as well as a few other issues we would like to table as part of this year's discussions. … The Internet A commitment to allowing us a margin to operate. Last year there were many instances where SQ [Singapore Airlines] either undercut or allowed us an insignificant margin. Whilst you have every right to expore [sic] different distribution channels, there must be acknowledgment that these excursions eat into the available market, not too [sic] mention alienate our consultants. As you know, our consultants are paid 50% based on commission on profit. The less margin, the less likely a consultant will want to sell it, it stands to reason. These reduced margins this year have made it difficult at times for us to push the agreement from a head office perspective and recognition of this issue will help us to achieve our collective goals. … As already expressed, we are committed to meeting your deadline of 31 March to sign-off. I await a reply in relation to whether Wednesday at 1430 is convenient to meet again at your office. I look forward to your reply.

May 2008 Emirates Conduct 36 This conduct occurred in the context of negotiations between Flight Centre and Emirates in relation to a preferred airline agreement for 2008-2009. On 30 May 2008, Mr Burgess of Flight Centre sent an email to Emirates in the following terms: Following please find a brief summary (as brief as possible!) of our recent discussions. Let me know if there is anything I have misunderstood. … Bonus points through the website As discussed, this is becoming a major issue with our guys in the frontline as they are not able to match the offer. Whilst I agree that travel agents offer far more than what a consumer gets from an airline online, if a customer only wants a ticket it is a difficult sell. As I am sure you are aware, points are a very powerful tool with some consumers willing to pay more just to get points. As explained, some of our consultants have lost long term clients to this offer and obviously feel aggrieved that they cannot at least match the offer from the airline direct. These consultants will also be much less likely to offer EK to future clients as a consequence, for fear the same thing will happen again. This must have an effect on the business that we are able to give to EK and is effectively working against what we are collectively trying to achieve. In the absence of allowing customers to receive the same bonus through travel agents that is offered online, are we able to purchase points? Website specials Like the frequent flyer issue above, these specials serve to undermine our ability to drive the agreement. As explained in our meeting, no other airline does this. Where there is a need to put a special in place presumably this is also where your load factors are a bit soft. Surely widening your distribution would have the effect of selling more seats? … I look forward to your reply.

December 2008 Emirates Conduct 37 This conduct occurred in the context of Flight Centre preparing to negotiate a preferred airline agreement with Emirates for the 2009-2010 year. On 31 December 2008, Mr Burgess sent an email to Emirates as follows: I wanted to see if you would be available to meet on either the 19th or 20th of January for a catch up? There are a number of issues I wanted to discuss, below is a brief summary. Commission Given our front-end commission was reduced solely due to oil prices being at record levels, when can we expect our commission to be reinstated from 7 to 9% given fuel is now back to mid-2004 levels? Additional mileage offers/offers online This issue is largely related to the above. Even though EK [Emirates] have reduced commission from 9 to 7%, you are still discounting 4% on the web. This leaves our consultants a margin of 3%, not a lot I am sure you agree. With the additional rewards you give to book online why is it necessary to also discount the fare? You say we earn 7% but in fact in many instances now we are only able to earn 3% because of this offer. For your information, we are currently paying out some AUD50K per month to consultants in order for them to make a margin on fares that are matched from the EK [Emirates] website. Additional mileage offers online are also continuing to cause great difficulties for us in retaining customers. As I have said before, even QF make the same offers available to us as they do direct to the consumer. Why would a consumer book through us if you can earn more points online AND receive a 4% discount if booked online (direct) AND receive a discount of 10% on their accom in DXB by paying with mastercard (direct)? I know I have said it before, but the above does nothing to help us to achieve our collective goals - consultants who have lost clients to EK [Emirates] direct will do everything they can to steer future clients away from EK [Emirates], no matter what we do from a head office level, for fear that they will lose the client direct. EK Dubai Stopover brochure EK [Emirates] can't really be serious putting an area on the brochure for a travel agents stamp when inside there is an offer to save 10% if you pay by mastercard, AND direct! Obviously we will not be distributing this brochure to our customers. … Stephen, I would very much like to get to a situation next year (2009) where we are working proactively together to drive the EK [Emirates] product. The issues above must be addressed before this can happen. I look forward to your reply.

March 2009 Malaysia Airlines Conduct 38 This conduct occurred in the context of Flight Centre's negotiations concerning the terms of a proposed preferred airline agreement with Malaysia Airlines for 2009. It would appear that during February and March 2009 there were a number of meetings between Mr Burgess and an officer of Malaysia Airlines. In this context, Mr Burgess sent a number of emails to the Malaysia Airlines officer either foreshadowing what he would like to discuss, or recording what had been discussed. Ignoring salutations and pleasantries, the emails included the following relevant statements: Following please find another example of online fares being significantly cheaper than we have available, see attached - and this time it is against your so called expo special. I can assure you that if this practice continues MH [Malaysian Airlines] will not be invited to participate in any future events as I am sure you will understand - this situation is clearly now hurting our brand. … Online fears Whilst I appreciate that MH [Malaysia Airlines] is finally looking at giving us acess [sic] to these fares, we do require a margin in order to be able to operate. As I am sure you can appreciate, we do what we do to make money. As you are aware, half of our consultants [sic] wage is based on commission, so if they are continually being put in a situation wh[ere] they are not able to make money they will stop offering the product which again will effect [sic] the amount of business we can gi[ve] you this year. … As discussed, I have no doubt that if you (MH) [Malaysian Airlines] change your pricing policies as discussed, 2009 could be a relatively good year for you in Australia. I do however fear that unless this happens now, the damage that will be done to the MH [Malaysian Airlines] brand, certainly within Flight Centre, will take some time to repair. Continuing offers online such as the one outlined below only serve to alienate MH [Malaysian Airlines] with our consultants. … I will send a summary in more detail about our meeting shortly. Prior to that however I do need to get a commitment from you in relation to your current online offers. These offers a [sic] continuing to cause us great pain financially with literally dozens of requests coming in each day for differences of between AUD400-500 per person. As discussed with you these offers are also doing you a great deal of harm when it comes to our front line consultants. A few questions: Will these offers contunue [sic]? When will your fares be the same online as through the GDS? When will your fuel be the same online as through the GDS? What do we do with the current bookings we are holding - there is some AUD500 difference between our fare to LON and the fare online at present for example and we have a number of bookings that we are holding off on ticketeing [sic]. [J]ulia, if you really want us to help you with the various promotions you have planned in the coming months, i.e. the 2 for 1 offer, swithching [sic] groups, "Preferred Rewards" etc. then this activity MUST stop. Until this happens we will not be able to commit to any activity. I look forward to your urgent reply. … Online fears Whilst it is great that you will commonrate [sic] fares on the internet with GDS fares from 17 March I must again impress on you that we are not a charity and need a margin to operate. I would like to suggest a margin of AUD30 on your cheapest (internet) fares. This will ensure that you (MH) [Malaysia Airlines] do not alienate our frontline consultants by not providing any margin and therefore no earn for them personally. As explained, if our consultants are consistently not earning money by selling any given product, they will stop offering it as an option to potential clients. It is then very difficult to break this habit and get them selling the product again.

May 2009 Singapore Airlines Conduct 39 In May 2009, Flight Centre was negotiating a potential preferred airline agreement with Singapore Airlines. In the course of the negotiations, Mr Graham Turner, the Chief Executive Officer and Managing Director of Flight Centre, sent three emails to an officer of Singapore Airlines. The emails were lengthy and in some cases dealt with a number of different topics. It is unnecessary to set them out in full. The tenor of them was that Mr Turner was identifying a number of matters of concern to Flight Centre and making it plain that, if agreement could not be reached in relation to those matters, Flight Centre and Singapore Airlines would "go our separate ways". 40 The matters of concern that Mr Turner required to be dealt with in the agreement included the following: An agreement that we will not be undercut on the web. (This works against you and means we cannot get any even indicative volume targets as consultants cross sell when they feel they cant [sic] compete.) … The web is an issue and may be the clincher why may be best to go our separate ways. In this case we may allow consultants to book anything they have to through the SQ [Singapore Airlines] web site. … These are the rates and conditions we will need to have SQ [Singapore Airlines] as a preferred carrier … 1. FULL PREFERRED CARRIER STATUS … f. Web Fares-the same conditions in the GDS as in the SQ [Singapore Airlines] web.

Relevant Statutory provisions 41 At all times relevant to this matter, s 45(2) and (3) of the Act provided as follows: (2) A corporation shall not: (a) make a contract or arrangement, or arrive at an understanding, if: (i) … (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: (i) is an exclusionary provision; or (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 s 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. 42 Section 45A(1) of the Act contained a deeming provision for the purposes of s 45. It provided as follows: (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. 43 As clearly spelt out in s 45(3), "competition" for the purposes of ss 45 and 45A means competition "in any market". Section 4E of the Act provided a limited inclusive definition of "market" in the following terms: 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.

ACCC'S Case at Trial 44 Before turning to the primary judge's findings relevant to the appeal, it is important to consider exactly how the ACCC put its case at trial. In particular, it is necessary to consider exactly how the ACCC defined the relevant market or markets and the services that were the subject of the alleged proposed price fixing agreements. 45 The ACCC's pleading (Amended Statement of Claim - ASC) was complex and convoluted in the definition of the relevant market. Three, or perhaps four, alternatives were alleged. 46 The first alleged market was the market for the supply of "distribution services" in Australia to international airlines by internal sales divisions of international airlines operating in Australia and travel agents (ASC [26]). Distribution services included the distribution of an airline's international air transportation services, including the solicitation of customers, reservation, booking and ticketing services, and the collection of payment from customers (ASC [5]). 47 The ACCC alleged that travel agents, including Flight Centre, competed with internal sales divisions of international airlines, including Singapore Airlines, Malaysia Airlines, and Emirates, in relation of the provision of such distribution services to international airlines (ASC [28.2]). 48 Implicit in this market definition is the notion that an internal sales division of an airline provided such distribution services to the airline itself. Thus, it was alleged that Flight Centre competed with the internal sales division of, for example, Malaysia Airlines, for the provision of services related to the distribution of Malaysia Airlines' flights. 49 But it would also seem to follow from this broad market definition, if accepted, that Flight Centre might also compete with the internal sales division of, for example, Malaysia Airlines, in relation to the distribution of other airlines' flights. Though there is some ambiguity in the ACCC's pleading in this respect, it would also seem to follow that internal sales divisions of, for example, Malaysia Airlines and Singapore Airlines, competed with each other in relation to the supply of distribution services in relation to not only their own airlines' flights, but also flights offered by other airlines. 50 The second market alleged by the ACCC was a market for the supply of "booking services" to customers by internal services divisions of international airlines and travel agents (ASC [27]). Booking services included advice to customers in relation to various aspects of international air transportation services, such as the availability and terms upon which such services could or would be provided by various airlines to various destinations, the preparation of itineraries and, perhaps most importantly, the reservation and booking of flights and the issuing of tickets (ASC [6]). 51 The ACCC alleged that the internal sales divisions of airlines competed with travel agents, including Flight Centre, in relation to the provision to customers of such booking services (ASC [28.1]). Thus, it was alleged that Flight Centre competed with the internal sales division of Singapore Airlines in relation to the provision of booking services in relation to Singapore Airlines' flights. But it would also seem to follow from this broad market definition, if accepted, that Flight Centre competed with the internal sales division of Singapore Airlines in relation to the provision of booking services generally, which could involve booking services relating to other airlines' flights. Though there is again some ambiguity in the ACCC's pleading, it would also seem to follow from this market definition that the internal sales divisions of different international airlines competed with each other in relation to the supply of booking services, both in relation to their own airlines' flights and generally. 52 It should perhaps be noted at this stage that the primary judge essentially accepted that both travel agents and the relevant international airlines provided distribution and booking services in relation to international flights. His Honour, however, characterised the provision of these services as occurring in a single market where intermediaries, such as Flight Centre and other travel agents, competed with international airlines in relation to the provision of such distribution and booking services. His Honour did not appear to accept that the competition was between travel agents and the internal sales divisions of the airlines (see [88] of the judgment). 53 The third alleged market, pleaded in the alternative to the alleged distribution services and booking services markets, was the market for international passenger air travel services: in short, the market for international flights. The ACCC alleged that travel agents, including Flight Centre, sold international passenger air travel services of international airlines to customers (ASC [28A.3]). It also alleged that some international airlines, including Singapore Airlines, Malaysia Airlines and Emirates, sold such services directly to customers (ASC [28A.4]). Travel agents, including Flight Centre, were alleged to compete with international airlines, including Singapore Airlines, Malaysia Airlines and Emirates, in either the market for the supply of international passenger air travel services, or the market for the sale of such services (ASC [28A.10]). 54 For reasons that will be explained later, the primary judge rejected the ACCC's allegation that Flight Centre competed with the relevant airlines in the market for the supply of international passenger air travel services, or the market for the sale of such services. 55 The fourth alleged market, again pleaded in the alternative, was very similar to the third. The ACCC alleged that there was a wholesale market in which international airlines supplied international passenger air travel services to travel agents (ASC [28B.1]). Travel agents then supplied international passenger air travel services to customers in a retail market for travel services (ASC [28B.2] and [28B.3]). In cases where international airlines, including Singapore Airlines, Malaysia Airlines and Emirates, also supplied international passenger air travel services directly to customers in a retail travel services market, they competed with travel agents, including Flight Centre, in that market (ASC [28B.5]). 56 The ACCC's pleaded case as to how the impugned conduct (the various proposed agreements with Singapore Airlines, Malaysia Airlines and Emirates), lessened or had the purpose or effect of lessening, competition in these alternative markets was equally complex and convoluted. 57 The ACCC alleged that the agreements proposed in the relevant emails had the purpose, effect or likely effect of stopping the airlines from offering fares at a price less than the total of the nett fare (being the gross fare entered on GDS less the commission payable to an agent if the fare was sold at the gross fare) and the commission that Flight Centre would be entitled to be paid for its services if it sold the fare to a customer (see for example ASC [38], [39] and [40] in relation to the August 2005 Singapore Airlines Conduct). It was alleged that this would stop the airlines putting competitive pressure on, or enable Flight Centre to avoid having to discount, the price it charged for either its distribution and booking services or, in the alternative, the price it charged in respect of its supply or sale of international passenger air travel services. The ACCC alleged that in this way, the alleged agreements had the purpose or effect of either maintaining the price charged by Flight Centre for its distribution and booking services (in the alleged distribution and booking services market or markets) or fixing, controlling or maintaining the price charged by Flight Centre and the relevant airlines for the supply or sale of international passenger air travel services (in the alleged alternative markets).

Flight Centre's Defence 58 Flight Centre denied that there was a market for distribution and booking services as alleged by the ACCC. Rather, Flight Centre contended that there was a market for the supply of international passenger air travel services by airlines to customers. In that market, Flight Centre, together with other travel agents, acted as agents for international airlines, including Singapore Airlines, Malaysia Airlines and Emirates. Importantly, Flight Centre's case was that the sale of international passenger air travel services included incidental tasks, such as booking flights, issuing tickets and collecting payments from customers. 59 Thus, Flight Centre contended that, whilst it did book flights, issue tickets and collect payments from customers, those services were part and parcel of its sale of flights as agent for the airlines. Its provision of these services was not the supply of services in a separate market for the supply of distribution and booking services to the airlines or their internal sales divisions. 60 Flight Centre accepted that when a travel agent sold international passenger air travel services to a customer on behalf of its principal, the airline, it supplied services to the airline which were properly characterised as agency or sales services. Flight Centre contended, however, that it did not supply such services in competition with the internal sales divisions of the airlines. Flight Centre's case was that the so-called internal sales divisions were not entities separate from the airlines. And when an airline sold international passenger air travel services directly to a customer, neither the airline itself, nor any internal sales division of the airline, supplied any services to the airline that were in any way comparable to the sales and agency services that Flight Centre supplied. In short, the airlines did not self-supply distribution services in competition with Flight Centre. 61 Flight Centre also denied the existence of a market in which travel agents and airlines competed in relation to the supply of booking services to customers. Flight Centre appeared to accept that there may have been a market for the provision of travel advisory services, including, for example, the provision of advice about possible travel destinations and the respective features of different airlines. Travel agents competed with each other in the market for such travel advisory services. But airlines did not provide such a broad range of services and did not compete in the market for such services. In relation to booking services, Flight Centre contended that there was no separate market for services involving the booking of flights, the issuing of tickets and the collection of money. Flight Centre's case was that when a travel agent provided those services to a customer, this was simply an aspect of the sale of the international passenger air travel services to the customer on behalf of the airline. 62 Flight Centre also contended that, even if the act of selling international passenger air travel services to customers involved the separate provision of booking services, travel agents did not compete with airlines in respect of the provision of such services. That is because when the agent supplied such services to a customer, it did so for and on behalf of the airline, not in competition with it. Flight Centre also relied on the fact that neither the agent nor the airline charged the customer for the provision of such services. 63 In relation to the alternative markets pleaded by the ACCC, Flight Centre did not dispute that there was a market for the supply of international passenger air travel services to customers. But it contended that the only suppliers in that market were the international airlines themselves. Travel agents, including Flight Centre, did not own or operate aircraft and therefore did not (because they could not) supply international passenger air travel services. When a customer purchased international passenger air travel services through Flight Centre, it was the airline, not Flight Centre, that supplied the services to the customer. 64 Flight Centre's case was that, when it (or any other travel agent) sold international passenger air travel services to a customer as agent for and on behalf of an airline, it was simply providing agency or selling services to the airline, for which it received commission and other payments from the airline. It was not, in any sense, competing with the airline in a market for the supply of international passenger air travel services to customers. Nor was it competing with airlines in relation to the provision of agency or selling services. It was providing such services to the airline, not in competition with it. 65 In relation to the impugned conduct, Flight Centre admitted that the various emails that were alleged to contain or evidence the proposed agreements were sent. It denied, however, that the emails had the purpose or effect contended by the ACCC.

The judgment of the primary judge 66 The judgment of the primary judge is detailed and lengthy. Given that Flight Centre's challenge to the judgment is directed essentially at his Honour's finding concerning the existence of competition between Flight Centre and the airlines in a relevant market (or markets), it is necessary to focus only on that aspect of the primary judge's reasons. 67 The primary judge noted, (at [8] and [17]), that the relevant background facts were largely uncontroversial. His Honour made the following factual findings material to the characterisation of the relevant market and the question of competition: There is a demand in Australia for international passenger air travel services or international air travel (at [18]). Singapore Airlines, Malaysia Airlines and Emirates each operate aircraft to meet the demand for air travel to and from Australia (at [20]). Flight Centre does not operate aircraft to meet the demand for international air travel. It is not an international passenger air carrier in its own right (at [20]). Singapore Airlines, Malaysia Airlines and Emirates relied on travel agents to promote their flights and deal with members of the public in relation to the booking of air travel and the receipt and remittal of payments for that air travel by those would-be passengers (at [21]). The relationship between the respective airlines and Flight Centre was that of principal and agent (at [21]). Flight Centre was a party to the PSAA, a standard form agreement entered into between individual travel agents and members of the IATA. Singapore Airlines, Malaysia Airlines and Emirates were members of the IATA (at [36]). Flight Centre performed the role of an international air travel intermediary. The air travel it provided to its customers was provided not by Flight Centre, but by others, including Singapore Airlines, Malaysia Airlines and Emirates (at [23]). In offering a particular flight, Flight Centre did so on behalf of the airline concerned. In booking that air travel, Flight Centre did so on behalf of the customer concerned (at [23]). There were two avenues by which a would-be international air travel passenger (customer) might book a flight. The customer could deal with an international airline directly, or the customer could book a flight via a travel agent (at [27]). When an airline sold air travel directly to the public, it was the airline itself as a legal entity which was selling air travel, not its "Internal Sales Division" (at [88]). International airlines made some (but not necessarily all) of their international flights available for sale by travel agents via a GDS. International airlines loaded fares (for available seats on particular flights to given destinations) onto a GDS which was able to be accessed by travel agents (at [31]-[32]). Most of the fares loaded onto a GDS were so-called "published fares". Published fares, which were determined by an airline, included an amount of commission ("at-source commission") for a travel agent. When a travel agent sold a published fare, the agent was required to remit the nett amount (the price of the published fare less the at-source commission) to the airline, in addition to the applicable taxes and surcharges (at [33]). An agent was not required to sell a published fare at any particular price (at [34]). The agent's margin or commission was not limited to the at-source commission component of the published fare. The agent retained any amount above the nett amount. 68 The primary judge also made a number of findings concerning the purpose and effect of the emails sent by Flight Centre to the three relevant airlines that were alleged to constitute attempts to fix, control or maintain prices for the purpose of s 45A of the Act. These findings were not challenged on appeal. It is therefore unnecessary to consider them in any detail. Nevertheless, some of the findings are relevant to the market and competition issues and shed some light on the primary judge's findings in that regard. 69 The primary judge found that each of the emails was prompted by Flight Centre's concern that at various times the three relevant airlines were offering flights directly to members of the public at fares that were less than the published fares for the flights that were loaded onto a GDS. This presented a problem for Flight Centre because of its "price beat" policy or guarantee. 70 Flight Centre led evidence from its officers who authored the emails (Messrs Burgess and Turner) to the effect that the purpose of the emails was simply to demand that Flight Centre have access to the discounted fares that the airlines were offering direct to the public. The primary judge rejected that evidence. He concluded that Flight Centre did not just want access to these fares. It wanted the airlines to stop undercutting the published fare on the GDS that was available to Flight Centre. 71 In relation to the email sent by Mr Turner of Flight Centre to Singapore Airlines on 6 April 2009, for example, the primary judge concluded as follows (at [101]): … two factors were at large in Flight Centre's dealings with Singapore Airlines. Flight Centre did not just want access to the same fare as the airline sold the air travel directly to the public; it wanted that fare to be made available to the GDS as a "published fare" on which it would earn commission. In short, it wanted Singapore Airlines to stop undercutting, by the fares it offered directly via its website, the published fare on the GDS for the same flight … Flight Centre wanted Singapore Airlines to cease offering directly to the world at large via its website fares that were lower than the published fares it made available to Flight Centre via the GDS. 72 Similar findings were made in relation to the other relevant emails: see [164], [170], [177], [187]-[188], [196]-[197]. 73 The primary judge found, as a result, that the emails amounted to an attempt by Flight Centre to induce the airlines to enter into a contract, arrangement or understanding which would fix, control or maintain the fare or price for international air travel by the airlines. Because Flight Centre's commission or margin depended on the price it was able to obtain from a customer for the flight, the purpose and effect of the proposed agreements was therefore also to fix, control or maintain Flight Centre's retail or distribution margin: see [146], [151], [152], [157]-[158]. 74 But the critical question remained: in what market or markets did this conduct occur? Exactly what service or services did Flight Centre and the airlines supply in competition with each other? Was Flight Centre's retail or distribution margin relevantly a price for a service that Flight Centre and the airlines supplied in competition with each other as required by s 45A? 75 The primary judge found that the answer to the critical question was that the relevant conduct occurred in the market for "distribution and booking services in respect of available international air travel" (at [137]). Flight Centre competed not only with other travel agents, but also with international airlines, including, materially, Singapore Airlines, Malaysia Airlines and Emirates "in relation to the distribution to and booking of available flights for would-be passengers" the reward for which was the "retail or distribution margin" (at [112]). 76 It is necessary to consider closely some of the primary judge's reasoning that led him to this conclusion. 77 The starting point is that the primary judge appeared to accept that there was a market for the supply of international passenger air travel services - flights - by international airlines to consumers. This was one of the alternative markets pleaded by the ACCC. 78 The difficulty for the ACCC, however, was that the primary judge found that Flight Centre did not, itself, supply international passenger air travel services to consumers. His Honour found (at [135]): The long and the short of it is that, giving full voice to the breadth of meaning which the word "supply" carries, it is the airline, the operator of the aircraft which supplies air travel, not an agent such as Flight Centre. Flight Centre neither operates nor charters aircraft. 79 It followed that Flight Centre did not compete with the airlines in the market for the supply of international passenger air travel services. 80 Importantly, the ACCC did not appeal from the primary judge's finding that only the airlines supply international passenger air travel services and that Flight Centre accordingly did not compete in the market for the supply of those services. 81 That was not, however, the end of the inquiry as far as the primary judge was concerned. It simply raised the question what, if anything, did Flight Centre supply and in what market (at [136])? According to the primary judge, the answer to that question lay in Flight Centre's role as an intermediary between the airlines and consumers in the market for international passenger air travel services. His Honour reasoned as follows (at [138]): The consumers in that market reflect the travel intermediary role undertaken by travel agents such as Flight Centre. Thus, at one end of the distribution chain are the airlines who supply international air travel, which seek to have the existence, availability and related fares for the flights they operate made known to consolidators such as the operators of GDS and to travel agents so that they, in turn, can advise would-be passengers on these subjects. It is the airlines who seek the services of large travel agents such as Flight Centre and the operators of GDS such as "Galileo", "Amadeus" and "Sabre" to bring the availability of flights on aircraft which they operate to the attention of would-be passengers or, as the case may be, other travel agents (via a GDS) and then, in turn, to book flights with them and to collect the fare for those flights. At the other end of the distribution chain are the would-be passengers, who seek from travel agents details of available flights or the best fare for a particular flight and the booking of that flight, whether alone or in conjunction with other services provided or made known to them by the travel agent. In this sense, both airlines and would-be passengers are consumers of the services of travel agents such as Flight Centre. The travel agent is placed, Janus-like, in the distribution chain supplying intermediary services to each group of consumers. 82 The primary judge found that, as a "travel intermediary", Flight Centre provided distribution and booking services in respect of available international air travel to the airlines and, it seems, to consumers. 83 The primary judge's finding in this respect appeared to have been heavily influenced by the opinion evidence given by Dr Vincent FitzGerald, an expert economist called by the ACCC. In answer to the question whether "travel agents, including Flight Centre Limited, compete[d] with international airlines, including Singapore Airlines, Malaysia Airlines and Emirates, for the supply of any services to consumers" (emphasis added), Dr FitzGerald provided the following response at [17]-[18] of his report of 17 August 2012 (extracted at [110] of the judgment): Thus my answer to Question 1 is that travel agents do compete - horizontally - with international airlines at the retail level of the international travel market. This is very clearly so, since if one makes the sale, the other does not. What they are competing for at this level, of course, is the retail or distribution margin - since whichever does make the sale, an airline provides the flight (i.e. the actual core travel service) and the airline receives either: (a) if a travel agent makes the sale, the nett fare - i.e. the gross fare inclusive of all taxes, surcharges and fees less the commission and fees that are retained by the agent. The nett fare is in the nature of a wholesale price, although the travel agent is indeed an agent in a narrow sense - that is, does not actually purchase the flight and re-sell it, but rather, sells it on the airline's behalf; or (b) if the airline makes the sale through one of its own channels, the gross fare, inclusive of all taxes, surcharges and any fees of its own (e.g. credit card fees and any other service fees), i.e. in this case it retains the full retail or distribution margin itself. Thus, in my opinion, by competing at the retail level of the international travel market, travel agents are competing not only with each other but with airlines' ISDs [internal sales divisions] to provide the distribution services that airlines require in order to sell their travel products (as well as competing with those ISDs to provide travel arrangement services to customers). (Footnotes omitted.) (Emphasis in original.) 84 There is, it must be said, a certain lack of clarity, if not ambiguity, in this answer. The first paragraph of the answer seems to simply involve the assertion that airlines compete with travel agents in relation to the "sale" of flights. The competition in that regard was said to be in respect of who was to receive or retain the retail or distribution margin arising from the sale. If the agent made the sale, it remitted the nett fare (which was said to be akin to a wholesale price) to the airline and kept the balance of the price for which it sold the flight. If the airline made the sale, on the other hand, the airline was said to receive the gross fare and therefore retained the full retail or distribution margin itself. 85 Even if that be so, this part of Dr FitzGerald's answer said nothing about any service provided to consumers by travel agents and airlines. That was the question that Dr FitzGerald was asked to address. 86 The second paragraph of Dr FitzGerald's answer then introduced, without any apparent explanation, the notion that travel agents and "airlines' ISDs" provided "distribution services" to the airlines. 87 Exactly what distribution services were provided by internal sales divisions was left largely unexplained in Dr FitzGerald's answer. In any event, this again did not appear to answer the question posed, which concerned the provision of services to customers. The apparent answer to that question, which was provided parenthetically in the last sentence of Dr FitzGerald's answer, was "travel arrangement services". Exactly what was included in or encompassed by "travel arrangement services" was left unclear by Dr FitzGerald. 88 Dr FitzGerald also characterised the relevant market in the following terms at [23]-[24] of his 17 August 2012 report (extracted at [113] of the judgment): The Market In my opinion it is best to identify only a single market in which travel agents compete for the supply of both of the services specified at (i) and (ii) in para 21 of sub-section 3.2.1 above [booking services and distribution services]. That market is the downstream or distribution functional level of the overarching market for international travel and ancillary products and is distinct from, but obviously intimately linked to, the market for the supply of those products themselves, which is essentially the upstream or wholesale level of the overarching market for international travel and ancillary products. I note that the ASoC (paras 26 and 28) states both that there is a market in Australia for the supply of distribution services in Australia to international airlines and a market in Australia for the supply of booking services in Australia, to customers. In my opinion, while these are distinct services provided 'upwards' to airlines and 'downwards' to customers, respectively, they are best regarded as being inherently provided simultaneously in a single market. (Emphasis in original.) 89 Put simply, Dr FitzGerald's opinion was that when travel agents and airlines sold flights to consumers in the retail market for international travel, they also simultaneously provided distribution and booking services to both the airlines and the customers. And those services were supplied in a market separate and distinct from the market for international travel itself. 90 The primary judge accepted this characterisation (see [137]-[139] and [142]). 91 The primary judge also found that the services provided to the airlines by travel agents, including Flight Centre, were substitutable for the services the airlines provided to themselves. Because an airline could, if it chose to do so, "make the knowledge of the availability of its flights known directly to would-be passengers and undertake directly with them the booking of those flights" (at [142]), the primary judge concluded that those services were substitutable for those provided by travel agents such as Flight Centre. It followed that travel agents competed with the airlines in relation to the supply of those services. 92 The primary judge characterised or described this substitutability as amounting to "disintermediation" or "cutting out the middle man" (at [142]). His Honour considered that it mattered not that the services that were substitutable for those provided by the travel agents were provided "in-house" (at [143], [144]). His Honour provided the following analogy to illustrate the point (at [145]): A like source of competition arises in an example which I put to Dr Fitzgerald in the course of his oral evidence, which he accepted was another way of illustrating this same economic reality. If a propagator of nursery stock chooses to sell some of its product directly to retail customers, instead of placing that stock with garden centres for sale to that same class of customer, that propagator and those garden centres are in competition one with the other. And that would remain true even if those garden centres sold plants only as agent for the propagator, taking as their profit a retail or distribution margin. This type of competition as between members at different stages in a distribution chain is hardly novel. It is present whenever a manufacturer of goods or the supplier of a service chooses to deal directly by retail with a consumer instead of its goods or services being made available to consumers via a third party distribution chain. 93 What is not entirely clear from the garden centre analogy used by the primary judge is whether the primary judge considered that the competition between the propagator and the garden centre was in the market for the supply of nursery stock, or in the market for sales or distribution services in respect of nursery stock. If the former, this would appear to be somewhat inconsistent with his Honour's conclusion that Flight Centre and the airlines did not compete in the market for the supply of international passenger air travel services because Flight Centre only supplied such services as agent for the airlines. More will be said about this analogy later. 94 The primary judge concluded that the price that Flight Centre received for its provision of the distribution and booking services was the retail or distribution margin Flight Centre retained after remitting the nett fare to the airlines. His Honour did not expressly deal with the "price" that the airlines paid when they performed these services "in-house". It would seem, however, that his Honour accepted the opinion of Dr FitzGerald that, because the airlines retained the gross fare if they sold a flight directly, they effectively retained the margin they would otherwise have ceded to the travel agent. This was presumably the "price" for providing the distribution and booking services in-house. 95 It should perhaps also be noted in this context that the primary judge did not accept the ACCC's case (and Dr FitzGerald's apparent opinion) that it was internal sales divisions of the airlines that supplied distribution and booking services in competition with travel agents. His Honour concluded (at [88]) that the reference to internal sales divisions was a "distraction" because the airlines were the only legal entities that supplied air travel. 96 It is perhaps not surprising that the primary judge appeared to reject this aspect of the ACCC's pleaded markets. It is not readily apparent that there was any evidence that any of the relevant airlines arranged or organised themselves in such a way that they had economically discrete or independent internal sales divisions. Nor is it apparent that there was any direct evidence that any internal divisions of the relevant airlines provided services, distribution or otherwise, to the airlines themselves. The evidence appeared to be limited to the fact that the airlines were increasingly using the internet to sell their flights direct to the public. There also does not appear to have been any evidence that the airlines accounted for direct sales in such a way as to indicate that commission otherwise payable to travel agents was accounted for as the price for the in-house provision of those services. 97 Finally, the primary judge rejected Flight Centre's characterisation of the relevant supply when a customer purchased an airline ticket. Flight Centre contended that there was only one supply involved when a customer purchased a flight, whether or not the flight was purchased directly from the airline or from the airline's agents. That supply was the supply of air travel by the airline. It was artificial, in Flight Centre's submission, to break that supply down into the provision of distribution and booking services, as well as the flight itself, when the former services were no more than essential and inseparable concomitants of the supply of the flight itself. 98 The primary judge rejected that contention, it seems, on the basis that Flight Centre made the availability of the air travel known to the consumer. His Honour concluded (at [141]): Here, though there is a supply of international air travel by the airlines, that conclusion says nothing about how the existence of the availability of that supply is made known to the consumer, the would-be passenger. To recognise that is to appreciate that, in the different circumstances and context of this case, there is no artificial splitting from what is truly to be characterised only as the supply of a service namely, the air travel (the flight), by separately identifying booking and distribution services. Those are services which a travel agent such as Flight Centre does supply. (Emphasis in original.)

Appeal grounds and submissions 99 Flight Centre's notice of appeal contains ten grounds of appeal. They may be summarised (omitting some particulars) as follows:

1. The primary judge erred in holding that Flight Centre was in competition with Singapore Airlines, Emirates and Malaysia Airlines for the purposes of s 45A of the Act.
2. The primary judge erred in holding that the selling by the airlines of their international air travel services by means of a direct sales distribution channel constituted competition with an agency sales distribution channel for the purposes of s 45A of the Act.
3. The primary judge should have held that the "competition" necessary to engage s 45A of the Act must be competition between the parties to a contract, arrangement or understanding for the supply of the particular service the price of which is said to have been fixed, controlled or maintained.
4. The primary judge erred in holding that there was a market for distribution and booking services in respect of available international air travel, in which Flight Centre was supplying services to both airlines and passengers.
5. The primary judge erred in holding that distribution services were supplied by Flight Centre and the airlines in competition with each other for the purposes of s 45A of the Act.
6. The primary judge erred in holding that booking services were supplied by Flight Centre and the airlines in competition with each other for the purposes of s 45A of the Act.
7. The primary judge erred in holding that it would be sufficient to engage s 45A of the Act if a contract, arrangement or understanding had the purpose, effect or likely effect of fixing, controlling or maintaining the price paid by an airline for the distribution and booking service held to have been provided by Flight Centre.
8. The primary judge erred in holding that the conduct of Flight Centre attempting to retain its margin or commission by continuing to sell as intermediary or agent for the airlines was conduct of Flight Centre attempting to control or maintain the level of the margin or commission it might charge as the price for the purposes of s 45A of the Act.
9. The primary judge erred in holding that Flight Centre attempted to induce the making of a contract, arrangement or understanding containing a provision with the purpose or likely effect of controlling or maintaining its retail or distribution margin for distribution and booking services with Singapore Airlines in or about August 2005, March 2006 and May 2009, with Emirates in or about May and December 2008 and with Malaysia Airlines in or about March 2009.
10. The primary judge erred in holding that Flight Centre pay pecuniary penalties totalling $11 million which, for the conduct constituted by the attempts to induce the making of a contract, arrangement or understanding containing a proscribed provision, were so excessive as to manifest error. 100 It can be seen that grounds 1 to 3 relate to the primary judge's finding to the effect that Flight Centre relevantly competed with the three relevant airlines for the purposes of s 45A of the Act. 101 The essence of Flight Centre's submissions in relation to these grounds was that the rivalrous conduct or competition that the primary judge found to exist between Flight Centre and the airlines could not be competition for the purposes of s 45A of the Act. In Flight Centre's submission, the competition that the primary judge found to exist was, in reality, competition in relation to the sale of international passenger air travel services. Competition existed, according to the primary judge, because the airlines could either sell the flights through agents, such as Flight Centre, or by "cutting out the middle man", and selling directly to the consumer. 102 In Flight Centre's submission, such competition (if it existed) could not be competition for the purposes of s 45A of the Act. That is because s 45A requires that the competition be competition between the parties to a contract, arrangement or understanding in respect of the particular supply of the services the price of which is said to have been fixed, controlled or maintained. But the primary judge found that Flight Centre and the airlines did not compete in relation to the supply of international passenger air travel services because only the airlines supplied those services. Flight Centre only supplied international passenger air travel services as agent for the airlines. 103 The real issue exposed by these grounds, and Flight Centre's submissions in relation to them, is whether there is a tension, if not an inconsistency, between the primary judge's finding that Flight Centre and the airlines competed with each other for the purposes of s 45A of the Act, and his finding that Flight Centre did not supply international passenger air travel services in competition with the airline. 104 Grounds 4, 5 and 6 relate to the primary judge's finding that there existed a market for distribution and booking services, and the finding that Flight Centre and the airlines supplied such services in competition with each other in that market. 105 The essence of Flight Centre's submissions in relation to these grounds was that such a market did not exist. The only relevant market that existed was the market for the supply of international passenger air travel services. It was and is artificial to split that single market into separate markets for the supply not only of that service, but also the supply of distribution and booking services. The booking of flights was simply an essential and inseparable incident of the supply of international passenger air travel services. Whilst travel agents, such as Flight Centre, provided agency selling services to the airlines, it was and is, in Flight Centre's submission, artificial to conceive of the airline competing with their agents in supplying distribution services to the airlines themselves. 106 Additionally, or perhaps alternatively, Flight Centre submitted that even if it was possible to consider that distribution and booking services were separable from the supply of international passenger air travel services, the distribution and booking services supplied by agents, such as Flight Centre, were significantly different to such services supplied by the airlines. There was therefore no substitutability. 107 Grounds 7, 8 and 9 appear to relate to the primary judge's findings concerning the impugned conduct and the fixing, controlling or maintaining of the price for the supply of distribution and booking services. Flight Centre did not advance any separate submissions, either in writing or orally, in relation to these grounds. 108 Ground 10 concerns the pecuniary penalties imposed by the primary judge. Flight Centre's submission was that in all the circumstances a total penalty of $11 million is manifestly excessive. 109 The IATA was given leave to make submissions in support of Flight Centre's appeal. Its submissions were directed essentially at ground 1 of Flight Centre's grounds of appeal. In short, the IATA submitted that Flight Centre was not in competition with the relevant airlines because an agent is legally incapable of being a competitor of its principal in respect of the supply of goods and services that are the subject of the agency. To the extent that services were supplied to consumers, including services that could be characterised as booking services, they were supplied by the airlines through the agency of Flight Centre. To the extent that Flight Centre supplied services to the airlines, they were provided pursuant to the agency agreement and therefore were not supplied in any relevant sense in competition with the airline. 110 It is unnecessary at this stage to summarise the ACCC's submissions in response to the contentions advanced by Flight Centre and the IATA. Suffice it to say that the essence of the ACCC's submissions was that the primary judge was correct to find that Flight Centre and the relevant airlines competed in the market for the supply of distribution and booking services. In the ACCC's submission, the act of selling or supplying international passenger air travel services involved the "upstream" supply of distribution services to the airlines (in the airlines' case, a self-supply) and the "downstream" supply of booking services to consumers. The ACCC submitted that the primary judge was correct to find that these "functional levels" were different markets in which Flight Centre competed with the airlines. 111 The ACCC's cross-appeal concerned the pecuniary penalty imposed by the primary judge. The ACCC contended that the primary judge erred in not taking into account the parties' submissions in relation to the "applicable range" on the basis of the reasoning in Barbaro v The Queen (2014) 253 CLR 58. The ACCC also contended that the penalties imposed were manifestly inadequate.

Consideration of appeal grounds 112 The resolution of the main issues raised in this appeal hinges on the proper characterisation of the service or services supplied by airlines and travel agents when an international "flight" (international passenger air travel service) is sold or supplied to a customer, either directly by the airline or through the airline's agent. It is only when the relevant service or services are properly identified that it is possible to determine or define the relevant market or markets in which the airlines and travel agents operate. It is necessary to identify the relevant market in order to determine whether a provision of a proposed contract, arrangement or understanding between Flight Centre and the airlines had the purpose or effect of substantially lessening competition for the purposes of s 45 of the Act. And it is necessary to identify the relevant services, and the relevant market, to determine whether the deeming provision in s 45A of the Act is engaged, giving s 45 a per se operation. 113 The relevant principles involved in identifying or defining the relevant market or markets for the purposes of ss 45 and 45A of the Act are not in dispute. The primary judge identified some of the relevant principles at [108] to [111] of the judgment. None of the parties submitted that there was any error in his Honour's recitation of the principles. 114 The Court also recently identified a number of the relevant principles in Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Limited [2015] FCAFC 103 at [133]-[138], a matter involving not dissimilar facts and considerations. 115 In the circumstances of this matter, the critical points may be summarised in the following five propositions. 116 First, the parameters or boundaries of a market are generally described by reference to product (the nature and characteristics of the relevant goods or services), function (wholesale, retail or both) and geography (for example, national, state or local): Australian Gas Light Company v Australian Competition and Consumer Commission (No 3) (2003) 137 FCR 317 at [378]. Section 4E of the Act makes it plain that in relation to the product dimension, substitutability is critical. In simple terms, substitutability means that buyers and sellers will substitute one product for another in response to changes in prices. If the products are not substitutes in this respect, they are not in the same market. 117 Second, market identification is not an exact science. It is rooted in the analysis of commerce as an aspect of human behaviour: ACCC v ANZ at [135]. It "involves value judgments about which there is some room for legitimate differences of opinion": Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Ltd (1989) 167 CLR 177 at 195-196. 118 Third, a market is "not a feature of the real world" but rather "an analytical tool devised by economists": Seven Network Ltd v News Ltd (2009) 182 FCR 160 at [827]. It is an instrumental concept which, in the context of Part IV of the Act, is adapted to analyse the asserted anti-competitive conduct in the commercial context the subject of analysis: Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd (2006) ATPR 42-123; FCA 826 at [429]. It follows that the identification of a market in any given case is generally therefore purposive and directed to the problem or issue at hand: ACCC v ANZ at [136]. 119 In the present context, the process of identifying or defining the relevant market or markets is undertaken in order to analyse and determine whether the asserted anti-competitive conduct (the proposed agreements between Flight Centre and the airlines) had the purpose or effect of fixing or controlling the price of any services that both Flight Centre and the airlines supplied in competition with each other in a market. 120 Fourth, whilst a market is an economic analytical tool, it must nonetheless have economic and commercial reality. It must therefore be based on findings of fact: Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158 at 174. It must accurately and realistically describe and reflect the interactions between, and perceptions and actions of, the relevant commercial community: ACCC v ANZ at [138]. This was recognised by the primary judge, who said the following concerning the identification of a market (at [108]): Thus, a market is not an artificial economic construct but rather a place, actual or nominal but recognisable not just by economists but also by its participants, be they suppliers or consumers, in which forces of supply and demand interact in the conduct of trade, a profession or commerce. 121 This statement is correct insofar as it recognises that a market cannot be defined in artificial terms. A market serves little purpose as an economic analytical tool if it is contrived and does not reflect commercial reality. It is, however, an overstatement to suggest, at least in the present context, that a market must be an actual "place" or is something more than an economic concept. 122 Fifth, it is not always useful to describe the relationships and arrangements in a market by reference to economic jargon that is not reflected in the language of the Act. That includes descriptions of arrangements or relationships as "horizontal" or "vertical": Visy Paper Pty Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 1 at [23]-[26]. It might equally include expressions such as "upstream" and "downstream". As has been seen, Dr FitzGerald, perhaps understandably given that he is an economist, employed such terminology. The primary judge accepted that the use of such terminology must be approached with caution (at [111]). It may obscure, rather than illuminate. 123 Having regard to these principles, it is convenient to first address those appeal grounds (grounds 4, 5 and 6) that directly relate to the primary judge's findings concerning the proper characterisation of the services supplied by Flight Centre and the airlines, and the question whether Flight Centre and the airlines competed in a market in respect of the supply of such services.

Did Flight Centre and the airlines compete in a market for the supply of distribution and booking services? 124 The primary judge ultimately characterised the relevant market in which Flight Centre and the airlines competed as the "market for distribution and booking services in respect of available international air travel" (at [137]). His Honour also adopted Dr FitzGerald's definition of the relevant market as "the downstream or distribution functional level of the overarching market for international travel and ancillary products" (at [139]). 125 Two points may immediately be noted about this market definition. 126 First, it does not correspond with any of the markets pleaded by the ACCC. The distribution and booking services market the primary judge found to exist appeared to be a single market in which both Flight Centre and the airline supplied distribution and booking services to the airlines (in the case of the airlines, a self-supply) and to consumers. The ACCC's pleading relevantly alleged separate markets in which Flight Centre and internal sales divisions of the airlines supplied distribution services to the airlines and booking services to consumers. 127 Second, the market definition lacks precision and clarity. Exactly what distribution and booking services are supplied by both Flight Centre and the airlines to the airlines and at what price or prices? Exactly what distribution and booking services are supplied by both Flight Centre and the airlines to consumers and at what price or prices? The answer to these questions is critical to whether such services as were provided by Flight Centre were in fact substitutable for the services provided by the airlines and vice versa. 128 The primary judge characterised the services provided by travel agents such as Flight Centre as "intermediary services" provided to "each group of consumers" (at [137], [138]); meaning the airlines, on the one hand, and the retail customer, on the other. But it is difficult to see how the airlines could be said to supply "intermediary services", particularly given the absence of any finding that the airlines had separate internal economic units or divisions that supplied such services. And plainly there were some differences between the services that were supplied to the airlines and the consumers and differences between the services that were supplied by Flight Centre and the airlines. 129 The affixation of labels such as "intermediary services" or "booking and distribution services", tends to obscure, or at least does not significantly assist in, the proper consideration and characterisation of the relevant supplies and the relevant market or markets. The primary judge recognised (at [35]) the capacity of the description "distribution services" to divert attention from the agency relationship between Flight Centre and the airlines. The same could be said of the description "booking service". It is necessary to consider closely and separately exactly what was said to have been supplied to the airlines and what was said to have been supplied to consumers.

What services were supplied to the airlines? 130 Much of the primary judge's reasoning concerned the services that agents, such as Flight Centre, supplied to the airlines. In particular, his Honour's analysis of substitutability and price focused almost exclusively on services supplied to the airline. Those services were relevantly described by the primary judge as bringing the availability of the airlines' flights to the attention of the consumers, and booking and collecting the fares on the airlines' behalf (at [137], [138]). The price for this service was said to be the margin that Flight Centre was able to retain; being the difference between the price Flight Centre was able to sell the flight for and the nett amount it was obliged to remit to the airline. 131 There is no doubt that Flight Centre was authorised to sell international passenger air travel services to customers as agent for and on behalf of airlines. It entered into an agency agreement (the PSAA) with each of the airlines in that regard. This agreement also provided that Flight Centre was authorised to perform such incidental tasks as booking the relevant flight, issuing a ticket and collecting money, again as agent for and on behalf of the airline. When Flight Centre sold flights to consumers on behalf of the airlines, it is no doubt correct to say that it supplied agency services to the airlines pursuant to the agency agreement. Flight Centre's remuneration for the provision of those agency services was commission and other payments calculated in accordance with the agency agreement. 132 Putting aside, for the moment, the question whether services provided by Flight Centre pursuant to its various agency agreements coincided with the "distribution services" the primary judge found it supplied, the critical question is whether the airlines provided the same or similar (that is substitutable) services in competition with Flight Centre. The primary judge found that they did. That is because, in his Honour's view, the airlines could, if they chose, make the availability of their flights directly known to would-be passengers and undertake directly with the passengers the booking of those flights. The airlines could, in the words of the primary judge, "cut out the middle man". 133 There are, however, a number of difficulties with this conclusion and this reasoning. 134 First, and most significantly, it is artificial to characterise the activities of an airline in selling a flight directly to a consumer (including ancillary activities such as making the flight known to the consumer, via its website or otherwise, and booking the flight) as the provision, by the airline, of a service to itself. There are three aspects to this artificiality. First, it is artificial to disaggregate or split the direct supply of a flight by an airline into two supplies: the supply of the flight to the consumer and the supply to the airline, by the airline, of a selling or distribution service. Second, the very notion of self-supply in these particular circumstances is artificial and lacks commercial reality. That is particularly so given the absence of any finding that the airlines had separate or discrete internal divisions that supplied such services. And third, it is artificial to regard the offer, or provision, by an airline to itself, of any services as being rivalrous or competitive with the agency services that the airlines had retained its agents, such as Flight Centre, to provide. 135 The artificiality of the disaggregation of the direct offer and sale of air travel by the airlines may be illustrated this way. If an airline sold all its flights direct to the public via call centres or the internet, it is almost inconceivable that the direct sale of air travel by the airline would be characterised as comprising both a sale of air travel to the consumer and a supply by the airline, to itself, of selling or distribution services. If the airline then chose to sell some of its flights via different distribution channels, including through the use of agents, why would this necessarily compel a change in characterisation of the direct supply of flights by the airline? Why would the availability of a different or alternative distribution channel mean that the airline self-supplied a distribution services when it sold directly? 136 The ACCC sought to deal with the artificiality of the notion of self-supply in these circumstances by alleging in its pleadings that distribution and booking services were supplied to the airlines by the airlines' internal sales divisions. As already indicated, it is unclear whether this allegation had any evidentiary foundation. There does not appear to have been any evidence to suggest that the relevant airlines in fact organised themselves in such a way that they had separate divisions that, at least in an economic sense, could be considered as independent suppliers of services to other divisions or sections of the airlines. In any event, the primary judge rejected the suggestion that the existence of any such internal sales divisions was relevant to the characterisation of the services or the definition of the relevant market or markets. Given the apparent absence of any evidence that the airlines were organised in this way, he was correct to do so. The ACCC did not appeal from the primary judge's rejection of this aspect of its case. 137 There may be some circumstances or contexts where it is open and relevant to view a single legal entity as comprising separate economic units that are responsible for different stages in the production process. The supply of a product by one separate economic unit to another unit in such a firm might have significant relevance to market analysis. The in-house producer might be included in the relevant market for that particular product, even though it only supplies to a separate unit of the same firm: Re Fortescue Metals Group Ltd (2010) 271 ALR 256; (2010) 242 FLR 136 at [1035]-[1039]. But this was not such a case. The internal sales divisions contrived by the ACCC were artificial constructs that did not accurately reflect the commercial reality. 138 The second problem with the primary judge's characterisation of distribution services relates to the finding that the airlines competed with their agents, including Flight Centre, in supplying distribution services to themselves. This involved a finding that the distribution services supplied "in-house" were substitutable for the agency services supplied by Flight Centre and the other agents. The primary judge based his finding of substitutability entirely on the fact that the airlines could, if they chose to do so, supply flights direct to the consumer rather than through its agents. Yet the mere fact that the airlines could choose to sell their flights directly rather than through agents says nothing about whether any "in-house" distribution services were similar to, or close substitutes for, the services provided by agents. A decision by an airline to sell flights directly to the public may have nothing whatsoever to do with the similarity or substitutability of Flight Centre's agency services. 139 The substitutability of different products is usually analysed by reference to the actions of consumers in response to price movements. Yet the primary judge did not approach the question of substitutability by reference to price. His Honour based his findings concerning substitutability on the fact that airlines could choose to "cut out the middle man", but gave no consideration to whether that choice was in any way driven or motivated by considerations relating to the "price" charged by the agents as opposed to the actual or notional price of the self-supply of distribution services. The primary judge found that the price for the agents' supply of distribution services was the margin or commission retained by the agents after remitting the nett fare to the airlines. There was, however, no evidence that the airlines chose to self-supply (sell their flights directly) because of movements in the margin or commission earned by agents, such as Flight Centre. Nor was there any evidence or analysis of the price, if any, attributed by the airlines to their self-supply of distribution services. It seems simply to have been assumed by the primary judge that airlines chose to sell directly because they would then be able to retain the gross fare. It is at best unclear whether that assumption had any evidentiary foundation. 140 A third problem with the primary judge's characterisation involving the supply of distribution services concerns the market in which such services were offered and provided. In what market or markets did the airlines offer and supply such distribution services? 141 The primary judge found that there was a single market in which all relevant airlines and travel agents competed for the supply of distribution services to the airlines. On close analysis, no such single market could exist. 142 The fundamental difficulty with this broad market definition is that, whereas Flight Centre, by reason of its agency agreements with the different airlines, could and did sell or supply flights offered by multiple airlines, the airlines could only, and did only, supply (self-supply) distribution services in respect of their own flights. Thus, the airlines could not sensibly be considered to compete with each other in relation to the supply of distribution services generally. For example, Singapore Airlines could not be considered to compete with Malaysia Airlines in relation to the supply of distribution services to Malaysia Airlines. Nor, for that matter, could Singapore Airlines, for example, sensibly be considered to compete with Flight Centre in relation to distribution services relating to Malaysia Airlines flights. If there was any competition between Flight Centre and Singapore Airlines in relation to distribution services, it could only have been in a market for distribution services relating to Singapore Airlines flights. 143 It follows that even if travel agents such as Flight Centre and the airlines supplied distribution services, they did so in a number of separate and distinct markets. In this scenario, there would be separate markets for the supply of Singapore Airlines' flight distribution services, Malaysia Airlines' flight distribution services, Emirates' flight distribution services and so on. There could be no single market for distribution services to airlines. 144 This again reveals the artificiality and inherent lack of commercial reality in the market analysis by the primary judge. To use or adapt the words of the primary judge (at [108]), the existence of a series of such distribution services markets could be no more than an "artificial economic construct". Such markets would not be "place[s], actual or nominal … recognisable not just by economists but also by [their] participants, be they suppliers or consumers, in which forces of supply and demand interact in the conduct of trade, a profession or commerce" (at [108]). There is no evidence that Flight Centre or the airlines recognised the existence of separate markets for the distribution of each airline's flights. 145 There was some evidence that Flight Centre recognised the existence of some competitive or rivalrous aspects to their relationship with the airlines. But such rivalry or competitiveness that did exist was not rivalry in relation to any market for the supply of distribution services supplied by airlines and travel agents. Rather, it was rivalry in the context of the market for the supply of international passenger air travel services. This issue is addressed later in the context of appeal grounds 1, 2 and 3.

What services were supplied to consumers and by whom? 146 It is next necessary to consider whether, when selling international passenger air travel services, Flight Centre and the relevant airlines supplied any services, properly characterised as booking services, to consumers. There is no question that consumers were supplied with international passenger air travel services, but were they separately supplied with booking services? Did Flight Centre and other agents compete with each other and the airlines to provide such services to consumers? 147 The primary judge concluded that agents and airlines did compete for the supply of booking services to consumers, as distinct from the international air travel itself. As has already been observed, there was a certain lack of clarity and precision in the primary judge's reasons concerning what was encompassed by the description "booking services". It would seem, however, that by booking services, the primary judge meant the services by which "details of available flights or the best fare for a particular flight and the booking of that flight" (at [138]) were provided to consumers. 148 There are a number of problems with the analysis and conclusions of the primary judge in this respect. 149 The first problem, again, is artificiality. The services described as booking services were in reality no more than essential and inseparable incidents or actions involved in selling international passenger air travel services. Before a ticket on a flight is sold, the price and availability of the flight would almost of necessity be provided to the would-be purchaser. Equally, when a ticket is sold, the next necessary step is the issue of a ticket and the reservation or booking of the relevant flight, either immediately or in due course. It is entirely artificial to conceive of the airline separately providing a booking and ticketing service in these circumstances. The so-called booking services are simply part and parcel of the supply of the international air travel itself. Exactly the same applies when the flight is sold on the airlines behalf by an agent, such as Flight Centre. There is no separate supply of a booking service. 150 The artificiality of the disaggregation of the sale of an airline ticket into a transaction that also involves the separate supply of a booking service to the consumer may be illustrated by way of a simple analogy. A motor vehicle dealer would ordinarily have all the motor vehicles it offers for sale on display, together with information about the different models. Brochures are made available to consumers and advice concerning the different available models and their suitability for the customers' needs would also no doubt be provided by an eager sales assistant. If the consumer purchases a car, the dealership would also no doubt complete all the necessary paperwork to transfer the registration of the vehicle. It would be artificial to characterise this transaction as including not only the supply of a motor vehicle, but also the supply of availability advice or purchase facilitation services. Such advice and facilitation services as provided by the dealership are simply provided as part of the process of the sale of the motor vehicle. It would be even more artificial to characterise the supply of any such services as taking place in a market separate and distinct from the market for the supply of motor vehicles. 151 Whilst of course the facts and circumstances of each case must be carefully analysed, it is equally artificial and contrived to characterise an airline's supply of flights via its website as including a separate and distinct supply of availability and booking services. It would be even more artificial to characterise the supply of any such services as being in a market separate and distinct from the market for the supply of flights. 152 The second, and perhaps more fundamental problem, is that the services which were described by the primary judge as "booking services" clearly fell within the terms of the standard form of agency agreement, the PSAA, to which Flight Centre and the airlines were parties. Clause 3 of that agreement, extracted earlier, clearly provided that the sale of air passenger transport by the agent (Flight Centre) on behalf of the principal (the airline) included issuing a valid document (ticket) and the collection of money. The agent was also authorised to supply "ancillary services" on behalf of the airline as part of the agency agreement. The booking of a flight that had been purchased could accurately be characterised as an ancillary service. 153 Two points flow from this. First, booking and ticketing were plainly included in and were inseparable from the sale of the international passenger air travel services itself. Second, those services, and any ancillary services, were supplied by agents, such as Flight Centre, for and on behalf of the airline. That means that when Flight Centre supplied booking, ticketing and other ancillary services to consumers, it did so on behalf of the airlines. It did not supply the services itself. 154 As already indicated, the primary judge concluded that Flight Centre did not supply international passenger air travel services to consumers for the purposes of ss 45 and 45A. That was because, when it sold a flight, Flight Centre did so on behalf of the airlines. The ACCC did not contest this finding on appeal. Exactly the same can be said of any services that could realistically be described as booking services. Flight Centre supplied such services on behalf of the airlines. It did not supply the services itself. It follows that there could be no relevant competition between Flight Centre and the airlines in relation to any booking services. 155 Before the primary judge, Flight Centre relied on the decision of the High Court in Castlemaine Tooheys Limited v Williams and Hodgson Transport Pty Ltd (1986) 162 CLR 395. In that case, a brewer, Castlemaine Tooheys, offered to supply beer to publicans. The publicans could either pick the beer up from the brewery, or have it delivered to their premises. If the latter option was chosen, the brewer insisted that the beer be delivered by its preferred carrier, QRX. The brewer contracted with and paid QRX for the transport services. Freight costs were included in the price of the delivered beer. A rival carrier claimed that this arrangement involving QRX contravened the exclusive dealing prohibition in s 47(6) of the Act as then in force. 156 The rival carrier failed. It was held that even though QRX physically transported the beer to the publicans, and the publicans received the benefit of that transportation, QRX did not supply that service to the publicans. The services were supplied to and acquired by the brewer, not the publican. In transporting the goods to the publican, QRX was acting on behalf of the brewer. 157 The position is exactly the same here. When Flight Centre sold a flight on behalf of one of the airlines, and provided ancillary services to the consumer, such as booking and ticketing, the ancillary services were, by reason of the agency relationship, supplied to the consumer by the airlines. Flight Centre may have physically provided the booking services and the consumer may have received the benefit of those services from Flight Centre. But those services were in law supplied by Flight Centre to the airlines under the agency agreement. 158 The primary judge distinguished Castlemaine Tooheys. His Honour said (at [140]): Castlemaine Tooheys … is most emphatically not authority for the propositions that QRX did not supply a transport service to Castlemaine Tooheys (it did) or that QRX and Williams and Hodgson Transport were not competitors (they were) in a market for the supply of freight transport services. It was just that, when the facts of that case were examined through the prism of s 47, it could be seen that Castlemaine Tooheys was not forcing publicans who bought its beer to use the services of QRX. 159 The points of distinction emphasised by the primary judge may have been apposite if the relevant question was whether Flight Centre supplied any relevant services to the airlines. They provided no answer, however, to the applicability of the reasoning in Castlemaine Tooheys to the question whether Flight Centre supplied any relevant services to consumers. 160 Flight Centre did not supply booking services to the consumers. Flight Centre provided all such services that may have constituted booking services to the airlines. Any such services provided to the consumers by Flight Centre were provided on behalf of the airlines. Therefore, there could be no market for the supply of booking services to consumers in which Flight Centre competed with the airlines. There was therefore no booking services market and no competition between Flight Centre and the airlines in relation to the supply of such services to consumers for the purposes of ss 45 and 45A of the Act. 161 The ACCC submitted that the agency agreement between Flight Centre and the airlines did not encompass all travel advice and facilitation services or travel intermediary services that might be provided by travel agents. That may be so. The primary judge found (at [22]) that travel agents, including Flight Centre, provided a broad range of travel services to their customers, including advice about particular destinations abroad, accommodation, tours, travel insurance and ground transport options. No doubt travel agents competed with each other in relation to the supply of this broad range of travel advisory services. It is equally clear that this case has nothing to do with those broader range of services supplied by travel agents. There was and is no issue concerning competition between airlines and agents concerning the broader range of services offered by travel agents. Airlines did not supply this broad range of services. This aspect of the primary judge's reasoning concerned a narrow range of so-called booking services, all of which plainly fell within clause 3 of the PSAA. Contrary to the ACCC's submissions, advice about available flights would also fall within the terms of the agency agreement. Such advice would fall within the meaning of "ancillary and other services" for the purposes of clause 3. 162 The ACCC also relied on the decision of Drummond J in Australian Competition and Consumer Commission v IMB Group Pty Ltd (in liq) [2002] FCA 402 at [83]. It submitted, based on what was said by Drummond J in that case, that "contractual form" is not necessarily determinative and that in some circumstances an agent may be taken to supply services for the purposes of Part IV of the Act. Even if that be so, the facts and issues in IMB were far removed from the facts and issues in this case. There could be no doubt that Flight Centre was an agent of the airlines and provided the services the primary judge characterised as booking services for and on behalf of the airlines in that agency capacity. 163 It is necessary to emphasise, however, that the existence of an agency relationship between two parties does not always mean that those two parties cannot be in competition with each other for the purposes of Part IV of the Act. Each case must be considered on its own facts. The precise nature of the agency relationship will no doubt be important, particularly given the broad range of commercial relationships that are sometimes referred to as involving agency: see Tonto Home Loans Australia Pty Ltd v Tavares (2011) 15 BPR 29,699; NSWCA 389 at [170]. If the so-called agent was in fact no more than a distributor or re-seller of the other party's product, there may well be competition between parties to such an agreement in relation to the supply of the product. But the position is likely to be different where, as here, the agent has the power and authority (and accompanying legal and equitable duties) to contract - sell the product - for and on behalf of the principal. It is less likely that an agent, in that strict or core sense, can relevantly be considered to compete with its principal in relation to the supply of products within the scope of the agency agreement. 164 Even if it could be concluded that Flight Centre relevantly supplied booking services to consumers, there is in any event a further difficulty with the booking services market as defined by the primary judge. It is similar to the problem identified in relation to the so-called distribution services market. Whilst Flight Centre could, by reason of its agency agreements with the airlines, supply booking services in respect of international passenger air travel services offered by numerous airlines, the airlines could only supply booking services in relation to their own flights. It follows, for example, that Singapore Airlines could not provide booking services for Malaysia Airlines or Emirates flights or vice versa. It follows that the airlines did not compete with each other in any single market for the supply of booking services in relation to available flights. Equally, when Flight Centre supplied booking services in respect of, for example, Singapore Airlines flights, it was not in any relevant sense competing with Malaysia Airlines in relation to the supply of booking services. 165 It follows that if there was any competition between Flight Centre and the airlines in relation to the supply of booking services, that competition occurred in a series of separate markets. There was no single booking services market in which all the airlines and all the travel agents relevantly competed. 166 A further and related problem with the analysis and conclusions of the primary judge in relation to the supply of booking services to consumers concerns substitutability. The primary judge gave no consideration to whether any booking services supplied by Flight Centre to consumers were similar to and close substitutes for booking services supplied by the airlines. The primary judge only considered substitutability in relation to the supply of distribution services to the airlines. Flight Centre was able to provide advice concerning the availability of flights from a broad range of airlines. The individual airlines could not. Likewise, Flight Centre could provide booking and ticketing services in relation to the flights offered by many airlines. Individual airlines could not. In these circumstances it is difficult to see how any booking services supplied by Flight Centre were close substitutes for booking services supplied by the airlines. 167 The question of substitutability of any booking services supplied to consumers by Flight Centre with the booking services supplied by the airlines is also complicated by the fact that there was no analysis of whether changes in the price of booking services supplied by Flight Centre would cause consumers to purchase from the airlines. That is not surprising given that neither Flight Centre nor the airlines exacted any price from consumers in respect of so-called booking services. There was no basis for any finding of substitutability and therefore no basis for any finding that Flight Centre competed with the airlines in a market for the supply of booking services.

Conclusion - Flight Centre and the airlines did not compete in a market for booking and distribution services 168 It follows from an analysis of the relevant facts and circumstances that the relevant airlines did not supply any distribution services to themselves in competition with Flight Centre for the purposes of ss 45 and 45A of the Act. Nor did Flight Centre supply any booking services to consumers in competition with the airlines. There was no market for distribution and booking services in respect of available international air travel in which Flight Centre and the relevant airlines competed. The primary judge was wrong to conclude otherwise. Flight Centre has made out appeal grounds 4, 5 and 6. 169 Two points should be emphasised concerning this conclusion. First, in finding that the primary judge erred in finding that Flight Centre and the airlines competed in the market for booking and distribution services, due regard has been given to such advantages as the primary judge may have had in hearing the evidence in its entirety as it unfolded at the hearing: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [24]. Nonetheless, error has been demonstrated on the basis of what were largely undisputed primary facts. Second, it is acknowledged that the conclusion that there was no booking and distribution services market is contrary to the expert evidence of Dr FitzGerald in relation to the relevant market. There was no opposing expert evidence. Nevertheless, the Court is not bound by such expert evidence. 170 The conclusions reached in relation to appeal grounds 4, 5 and 6 are determinative of the appeal. Nevertheless, some consideration should be given to grounds 1, 2 and 3. The issues raised by these grounds overlap to a certain extent with grounds 4, 5 and 6.

Was there relevant competition between Flight Centre and the airlines for the purposes of ss 45 and 45A of the Act? 171 The primary judge found that Flight Centre was competitive or rivalrous with the airlines. This finding was based, in large part, on Flight Centre's own understanding, reflected in various emails or internal Flight Centre documents. His Honour was particularly influenced by a reference in one of Flight Centre's emails to Singapore Airlines which questioned whether Singapore Airlines was both "friend and foe". Also important to his Honour's finding was a reference in a Flight Centre document to "disintermediation", which his Honour found meant "cutting out the middle man". 172 There is no doubt that the views and practices of the relevant commercial community may be relevant to the analysis of competition and market definition: Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [45]. In the circumstances here, however, it was necessary to give close consideration to whether any such rivalrous or competitive sentiment or action existed in a market in which both Flight Centre and the airlines supplied services, as required by ss 45 and 45A of the Act. 173 Upon close consideration of the relevant primary facts, it is readily apparent that any rivalry that existed as between Flight Centre and the airlines was in respect of the market for the supply of international passenger air travel services. In that market, travel agents, such as Flight Centre, plainly wanted to sell as many flights as they could on behalf of the airlines. The more flights they sold, the more commission (and other incentive-based payments under preferred airline agreements) they earned. 174 In this context, disintermediation, or cutting out the middle man, was no doubt a commercial concern, if not a threat, for Flight Centre. The more flights the airlines reserved for direct sale to the public at prices not made available to their agents via a GDS, the fewer agency sales Flight Centre was able to make and the less commission it was able to earn. 175 It is not difficult to see how such commercial concerns or considerations could be construed as giving rise to rivalrous or competitive sentiment or action on the part of Flight Centre. But that rivalry or competition concerned the supply of international passenger air travel services to consumers, not the supply of distribution services to the airlines or booking services to consumers. The rivalry or competition that existed was not in a market in which both Flight Centre and the airlines supplied goods or services in competition with each other. That was because, as the primary judge found, only the airlines supplied international passenger air travel services. Flight Centre operated in the market for such services, but only as an agent for the airlines. 176 The primary judge erred because he transferred or transplanted the rivalry or competition that he found existed, in a broad sense, in the market for the supply of international passenger air travel services, into a non-existent market: a market for distribution and booking services. That supposed market was in fact an artificial construct that did not truly reflect the commercial reality of the relevant commercial relationship and dealings. 177 The primary judge's error is manifest in, or illustrated by, his garden centre analogy. In that example, the primary judge considered that the propagator, who placed nursery stock for sale with the garden centre, competed with the garden centre if the propagator also sold the stock directly to the public. And that was so, according to his Honour, even if the garden centre only sold the propagator's stock as agent for the propagator. 178 Three points should be made concerning this analogy. First, it is readily apparent that the relevant product in this example is the nursery stock or plants. The relevant market is the market for the supply of plants. The primary judge does not suggest that the propagator and the garden centre competed in a market for the supply of plant selling services. That would be wholly artificial for a number of reasons, including that it would involve the illusory notion of the propagator providing such selling services to itself when it sold the stock directly. Nor did the primary judge suggest that the propagator and the garden centre competed in a market involving the supply of plant advisory or facilitation services to consumers. That would be equally artificial. 179 It follows that, if anything, the garden centre analogy illustrates exactly how and why the primary judge erred in finding a market for distribution and booking services in relation to international flights. The only relevant product in the market in question in this case is international passenger air travel services or flights, not some illusory services relating to the distribution or booking of flights. 180 Second, the primary judge's conclusion that the propagator and the garden centre competed in a market was probably correct if the propagator sold stock to the garden centre for resale. In such a case, if the propagator also sold plants directly to the public, the propagator would most likely be in competition with the garden centre in relation to the sale of plants to consumers. If the propagator and the garden centre agreed to fix, control or maintain the prices at which the plants were to be sold, their conduct would contravene s 45 by reason of s 45A of the Act. 181 Third, the primary judge's conclusion that the propagator and the garden centre relevantly competed in the market for the supply of plants even if the garden centre only sold the plants on consignment or otherwise as agent for the propagator is, on those facts alone, incorrect. That is because the only supplier of the plants in that market would be the propagator. The sales by the garden centre, on behalf of and as agent for the propagator, were in law, sales by the propagator. This is entirely consistent with the primary judge's finding that Flight Centre did not supply international passenger air travel services to consumers. It did not supply such services to consumers not only because it did not own or operate aircraft, but because it only relevantly operated in the market as agent for the airlines. 182 The impugned conduct, the agreements proposed in Flight Centre's emails to the airlines, did not occur in a market in which Flight Centre and the airlines both supplied services in competition with each other. It occurred in the market for the supply of international passenger air travel services: a market in which the primary judge correctly found (and the ACCC does not now dispute) Flight Centre was agent for, and did not relevantly compete with, the airlines. To the extent that the conduct involved the fixing of prices, it was not caught by the deeming provision in s 45A because it did not occur in a market in which Flight Centre and the airlines competed in respect of the supply of services, as required by s 45A of the Act. The primary judge erred in concluding otherwise.

Other appeal and cross-appeal grounds 183 It is unnecessary to consider Flight Centre's appeal grounds 7, 8 and 9 which, in any event, did not appear to be pressed in Flight Centre's submissions. 184 Nor is it necessary to consider Flight Centre's appeal ground 10, which concerns the pecuniary penalties imposed, or the ACCC's cross-appeal.

Conclusion and disposition 185 For the forgoing reasons, Flight Centre has made good appeal grounds 1 to 6. The appeal should be allowed with costs, the orders made by the primary judge on 28 March 2014 should be set aside and in lieu thereof the application should be dismissed with costs. The cross-appeal should accordingly, be dismissed with costs. I certify that the preceding one hundred and eighty-five (185) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop, and Justices Davies and Wigney .