The Full Federal Court has opened the door to findings that Air New Zealand and Garuda engaged in price fixing in the air cargo market.

On 21 March 2016, the Full Federal Court overturned the October 2014 Federal Court decision that dismissed claims by the ACCC that Air New Zealand and Garuda colluded with other airlines to fix surcharges for air cargo services in contravention of the Trade Practices Act 1974 (TPA) (now theCompetition and Consumer Act 2010).

In a split decision, Justices Dowsett and Edelmen (Justice Yates dissenting) held that Justice Perram erred at first instance in finding that the airlines’ conduct did not occur in a market in Australia. In reaching this conclusion, Justices Dowsett and Edelmen undertook a textual, legislative and purposive analysis of s 4E to support a holistic approach to identifying the geographic extent of the relevant market.


The ACCC alleged that Air New Zealand and Garuda had engaged in anti-competitive conduct, including price fixing, in markets in which cargo was flown into Australia from Hong Kong, Singapore and Indonesia. The specific conduct that the ACCC alleged constituted anti-competitive conduct differed in each location:

  • in Hong Kong, a published index of fuel surcharges, which the airlines claimed enabled them to make joint applications to the Hong Kong Civil Aviation Department, was allegedly used by the Hong Kong Board of Airline Representative Cargo Subcommittee as a mechanism to fix prices;
  • in Singapore, Air New Zealand allegedly used ‘trigger points’ in the published index of surcharges as occasions to discuss with other airlines what surcharges they were intending to impose; and
  • in Indonesia, Garuda allegedly used the published index at meetings with other airlines as a basis for determining what surcharges and custom fees would be imposed. 

First instance decision

Before Justice Perram, the ACCC argued that the conduct in Hong Kong, Singapore and Indonesia amounted to conduct contrary to s 45. The airlines raised a number of defences, including that international commercial aviation was not regulated under the TPA, that the TPA did not apply extraterritorially to capture the alleged conduct and that the application of the price fixing provision in this proceeding would interfere with the sovereign authorities. 

These defences were rejected by Justice Perram, who nevertheless dismissed the claim on the basis that the conduct did not occur in a ‘market in Australia’, which is a required element of the prohibition in s 45 of the TPA.  As noted by Justice Perram, in order to succeed the ACCC had to show that the conduct alleged to have contravened s 45 of the TPA was conduct that occurred in a ‘market in Australia’.

In finding that there was not a relevant market in Australia, Justice Perram emphasised that “[t]he evidence showed that the surcharges were imposed and collected at the origin airports”, which were overseas. As a result, demand side substitution occurred at these ports of origin and therefore the relevant competition affected by surcharges was the competition between airlines in markets in these locations, not competition in any market in Australia

Full Federal Court decision

The central issue on appeal was Justice Perram’s finding that the contravening conduct did not occur in a market in Australia.

The ACCC criticised Justice Perram’s approach to identifying the relevant markets by limiting it to the geographic location where customers were switching between providers of air cargo services.  The ACCC argued that the correct approach required consideration of the product dimension in geographic terms.  To this end, the ACCC pointed to evidence accepted by Justice Perram that significant parts of the ‘suite of services’ offered by competitors physically took place in Australia. These included delivery capabilities, ground handling services and inquiry services, such as tracking services dealing with lost or delayed cargo.  The ACCC argued that Australia was therefore a relevant market because it was a location where the airlines were able to express rivalrous behaviour.

In a joint judgment, Justices Edelman and Dowsett overturned Justice Perram’s decision, but did so by endorsing an alternative abstract approach to identifying the relevant market.  Their Honours held that the correct question is “whether, as a matter of characterisation, the market is in Australia”.  To this end, their Honours emphasised that the reference to a ‘market’ in s 4E is to an “abstract concept, not to a physical place”.

Justices Edelman and Dowsett held that Justice Perram’s approach of identifying the geographic location of demand side substitutability was an arbitrary criterion that was not supported by either a textual analysis of s 4E, the legislative history or purpose of the provision, or past authority. Rather, in reviewing these considerations, their Honours held that the correct approach requires a holistic consideration of the entire market and all its dimensions.

Applying this, Justices Edelman and Dowsett gave seven reasons why Australia was therefore one of the relevant markets:

  • there is no reason why a relevant market must be confined to one particular country, meaning it is not necessary to decide whether the market is only in Australia or Hong Kong;
  • this finding is consistent with the text of s 4E read together with ss 45 and 45A;
  • a significant part of the ‘suite of services’ were provided in Australia;
  • the ‘suite of services’ provided by the airlines involved barriers to entry in Australia, such as the availability of landing slots and licenses to operate in Australia;
  • the services were marketed in Australia to shippers, with the airlines competing for business in Australia;
  • this finding is supported by a purposive approach to s 4E that accounts for Australia being part of the ‘era of global commerce’; and 
  • the conclusion that the market is ‘in Australia’ is consistent with the conclusions reached on similar fact patterns in New Zealand and Europe.

In dissent, Justice Yates held that Justice Perram did not err in finding that none of the relevant markets were located in Australia. Justice Yates supported a principled approach to identifying the relevant market, looking to the “field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution”.  His Honour held that the field of transactions set the boundaries of the market, but must be understood not as a limiting legal concept but in a broad economic sense to refer to the exchanges between buyers and sellers to buy and sell substitutable products.

In reaching this conclusion, Justice Yates emphasised the importance of maintaining a distinction between ‘transactions’ between buyers and sellers, and the product itself. His Honour argued that “[t]]he distinction between the two concepts should not be eroded simply because the product is a service which has a geographical element in terms of the place or places at which the service is or is to be physically provided or delivered.”


The joint judgment of Justices Edelman and Dowsett brings the Australian position in line with decisions and settlements in other jurisdictions, including a US class action filed in 2006 that has seen 26 airlines reach settlement deals totalling $US1.19 billion.  In New Zealand, the Commerce Commission has reached settlements with 11 airlines, including Air New Zealand, securing penalties totalling $45 million. The judgment also vindicates the decisions of 13 other Australian airlines including Qantas, Thai Airways and Cathay Pacific, who have already settled with the ACCC, collectively paying almost $100 million in fines.

However we should not speak too soon: given the divergence in reasoning between the three judgments we have seen thus far, the novelty of the central question to the proceeding, and the potential penalty at stake, there are good reasons why Air New Zealand and Garuda may seek special leave from the High Court to appeal this decision.

At the same time, we note that if the High Court does grant Air New Zealand and Garuda special leave to appeal, any decision may be of limited application to future cartel conduct cases under the Competition and Consumer Act 2010. Price fixing is now picked up by the new cartel prohibitions which do not have the same requirement in relation to a market in Australia as the previous provisions under the TPA.