Tuesday, April 1, 2014

Flight Centre: Fixed Prices (2014)

Flight Centre logo

At the end of march, 2014, Flight Centre was fined over $11 million by Justice John Logan of the Federal Court of Australia. This fine was imposed as part of an ongoing case by the Australian Competition and Consumer Commission (ACCC). The ACCC contended in the case that Flight Centre had persuaded Singapore Airlines, Malaysia Airlines and Emirates to stop offering prices lower than what Flight Centre had listed for international flights. This is a form of price fixing, and is in violation of the Australian Trade Practices Act. Flight Centre had attempted this type of price fixing on six different occasions between 2005 and 2009. This type of price fixing and underhanded tactics has a significant effect on any other airline ticket agencies and the international airliners that operate in Australia. While not all of the attempts were successful, some of them were, namely from some of the airliners listed earlier. This also has a significant effect on travelers who purchase international flights. They had the option of lower prices through Airlines like Singapore Airlines, but are forced to pay more because of the intimidating moves of Flight Centre to keep the prices artificially higher. There's also an impact on the image of the company as a whole, since they used their influence by threatening to withdraw from selling Singapore Airline flights to strong-arm them into agreeing to keep their prices higher.

Looking at this from an Individualist point of view. Individualism is the theory that businesses should focus on making as much money as possible for stockholders while still staying within the laws of society and human rights. The first part of this theory is seemingly met, since Flight Centre is helping ensure it's prices are as high as they were originally set. This would generate more income and please investors/stockholders. The problem is that Flight Centre violated laws in order to make this happen. What they did is known as price fixing, and it's often prohibited or at least frowned upon in most societies. It takes away a big part of an open market or competition when it is done.

Graham Turner, CEO of Flight Centre

Moving on to Utilitarianism, Flight Centre is in clear violation of the idea of "maximizing happiness", which Utilitarianism is firmly rooted in. The actions they took made them happier, and their stockholders happier in the short term. More money usually means the company is happier, since they've turned a higher profit. However, this is done at the expense of the happiness of both consumers who use Flight Centre's services and the airliners that Flight Centre threatened in order to keep their prices artificially higher. Because of this, they're in violation of what Utilitarians stand for.

KantianismFor Kantianism, the idea is each action should be rational, should not involve deceit, and should be done because it is the "right thing to do". For this, it isn't looking at who is being pleased directly. For example, in Individualism, a focus is on stockholders and profits, where Utilitarianism is on overall happiness. To contrast, Kantianism looks at why someone is committing an act. In the case of Flight Centre, they forced international airliners to keep their prices matched or higher than Flight Centre's so that Flight Centre could continue to make more profits off of the sale of those tickets. This action, while rational, is done for the wrong reasons. It's directly hurting customers for the sake of making more money. It also was also a concealed act, which constitutes as lying.

Virtue TheoryAs a final theory, we'll look at Virtue Theory. This theory is based off four cornerstone virtues: Courage, Honesty, Temperence and Justice. Courage, standing up for what is right, is often practiced when companies catch themselves when they do something wrong. A great example is if someone in the company steals money from the company or customers, and someone within the company reports it so that the company can act on it and fix the problem. This did not happen at Flight Centre, and it was even shown through some of the emails disclosed that senior management were aware or even part of these price fixing attempts. Temperence, or realistic expectation setting and self-restraint, are absolutely violated by Flight Centre. Using power over another company to force them to higher their prices is not realistic or a show of restraint.

ConclusionContinuing on, honesty is being truthful with anyone involved and the public. By concealing these price fixing attempts, Flight Centre immediately violates this cornerstone. They lied in order to keep prices artificially high. Finally, we look at justice, which represents moral right within the law. This is violated because Flight Centre's action goes against the law, namely the Australian Trade Practices Act. Looking at the actions taken by Flight Centre, it is a clear violation of many ethical theories. I feel the fine they received is justified due to the actions and advantage they took over airliners and consumers.


"Flight Centre Fined $11m for Price-fixing Attempts with Major Airlines." Theguardian.com. Guardian News and Media, 27 Mar. 2014. Web. 29 Mar. 2014.<http://www.theguardian.com/business/2014/mar/28/flight-centre-fined-11m-price-fixing>

Parker, Justine. "Flight Centre Fined for Attempted Price Fixing on International Fares." ABC News. N.p., 28 Mar. 2014. Web. 29 Mar. 2014.<http://www.abc.net.au/news/2014-03-28/flight-centre-fined-for-attempted-price-fixing/5352720>

"Flight Centre Hit with $11m Fine." Financial Review. N.p., 28 Mar. 2014. Web. 29 Mar. 2014. <http://www.afr.com/p/business/companies/flight_centre_hit_with_fine_jm5J1b6n2gszMFXuhE75CP>

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