Australian Competition & Consumer Commission v Flight Centre Travel Group Limited

[2016] HCATrans 167

[2016] HCATrans 167

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B15 of 2016

B e t w e e n -

AUSTRALIAN COMPETITION & CONSUMER COMMISSION

Appellant

and

FLIGHT CENTRE TRAVEL GROUP LIMITED ACN 003 377 188

Respondent

FRENCH CJ
KIEFEL J
GAGELER J
NETTLE J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 27 JULY 2016, AT 10.15 AM

Copyright in the High Court of Australia

MR J.T. GLEESON, SC, Solicitor‑General of the Commonwealth of Australia:   May it please the Court, I appear with MR M.R. HODGE and MS R.C.A. HIGGINS, for the appellant.  (instructed by the Australian Government Solicitor)

MR B.W. WALKER:   May it please the Court, I appear with my friend, MR M.I. BORSKY, for the respondent.  (instructed by King & Wood Mallesons)

FRENCH CJ:   The International Air Transport Association has been given leave to intervene, limited to its written submissions.  Yes, Mr Solicitor.

MR GLEESON:   Your Honours, the questions in this appeal essentially come down to two main questions and then some subsidiary ones.  The first main question is that where a principal supplies goods or services to consumers through two channels, the first channel is a direct channel, such as the internet, and the second channel is an agency channel, can the principal and the agent ever be regarded as being in competition in the supply of goods or services in a market under the Trade Practices Act?   Can it ever be so?  As we read the Full Court’s judgment, the answer to that question is no.  Once you find agency then whatever degree of competition or rivalry you find between the two channels, that can never be relevant competition; competition, as I say, in the supply of goods or services in a market.

The second question which arises, more specifically, when one turns to the facts is that there are four features of the facts here which are important.  The first is that the agent, Flight Centre, is an agent for many principals, multiple principals, hundreds of principals.  Flight Centre holds the PSAA Agency Agreement with clause 3.1 from hundreds of airlines.  The result of that is that when it deals with a consumer it is dealing, for any or all of those principals that it wishes to promote and, indeed, it can promote one principal against another.  So this is not a simple agency of one agent, one principal.  An essential part of Flight Centre’s business is to provide a service to the customer of a smorgasbord, here are a range of possible airlines that might meet your needs.  That fact, that it is an agent for many principals, has never really been brought into the competition analysis by the Full Court.  That is the first key fact. 

The second fact which distinguishes this case from, for instance, DaimlerChrysler in Europe, the Mercedes‑Benz Case, is that the agent makes its own decisions as to price and as to whether to make a sale and it takes substantial independent economic risk on every transaction.  Now, in the European case, the Mercedes‑Benz dealer was told what to sell and what price to sell at.  Now, this is a case where the agent makes these independent decisions.  Now, that second fact has never really been brought into the analysis by the Full Court.

The third fact is that there was substantial rivalry between the principal channel and the agency channel.  That is the rivalry which the Full Court observed but then said that occurs in a market where you are not in competition and that creates what we have respectfully called “the conundrum”.  To the extent there is rivalry between principal and agent it occurs in a market in which, according to the Full Court, the two rivals are not in competition for the supply of goods or services.

FRENCH CJ:   Are you maintaining the distribution of booking market argument?

MR GLEESON:   Yes, your Honour, yes.  They are two ways of seeing the same thing.

NETTLE J:   No, they are not.  They are different things, different services.  One is an airline ticket and one is booking.

MR GLEESON:   Yes.  Two ways of capturing the same ultimate thing, your Honour, the same ultimate thing being the principal and agent in vigorous competition to do something to win the customer’s business.

NETTLE J:   But is not the reality that they are selling airline tickets, not services.  That is what they are competing against each other for surely, the sale of tickets.

MR GLEESON:   In a layperson’s sense, yes.  Of course, yes, your Honour, and we are urging reality, not artificiality.  If I want to fly to London, I have got a couple of choices; I can go to the travel agent and they will ‑ ‑ ‑

NETTLE J:   Or go to the airline.

MR GLEESON:   Or I go to the airline.  What I want at the end of the process ‑ ‑ ‑

NETTLE J:   Is a ticket.

MR GLEESON:   ‑ ‑ ‑ is primarily a ticket which, as we know from the GST Case in this Court, Qantas v FCT is a contract of carriage, a promise to use best endeavours to carry the person.  We accept all of that, all of that is so.  And to the extent the trial judge got distracted with “Flight Centre does not operate aeroplanes”, that was a false distraction.  What it is about is contracts of carriage and there are two sources of supply.  I can get them from Flight Centre or I can get them from the airline through its website.  They are about as closely substitutable services as you can imagine because each of them will give me the same thing.

KIEFEL J:   Substitutable products.

MR GLEESON:   Substitutable product.  Each of them will give me the same thing.

KIEFEL J:   Why was there so little attention given to product here and not to services?  Was it because of the way in which it was pleaded?  It would seem that that was the case.

MR GLEESON:   Your Honour, that is probably so but what I need to add is this and it is answering both of your Honour’s questions, I hope.  The first service that was pleaded was the distribution service and that probably is viewed as a service in the strict sense.  That is, Flight Centre providing something to the airline which is the performance of all of the duties under the PSAA, making available the flights, accepting the booking, ticketing money, et cetera, et cetera.  Now, that is probably a service.  That is a service going from Flight Centre to the airline.

The second service was pleaded as the booking service, paragraph 6 of the statement of claim, which was ‑ and perhaps Dr FitzGerald put it better ‑ it was the arrangement service.  It was doing all of the arranging that the customer needed, and the arranging might start at the very simple end, the person coming in with no idea, what are my options, making available various options, proceeding through a transaction to the point where the person says, I am happy to take Singapore to London at 2100 hours, then doing the more strict things under the PSAA and the end result of that is, as your Honour says, the making available of a ticket, of a contract of carriage which can be viewed as a product.

But there was a correctness in what the ACCC was saying which is, as a service, the whole package of what you get from the travel agent is a slightly larger creature than the fact that you leave with a ticket.  So the booking services market was designed to say, functionally, if I want to go from Sydney to London, of course I ultimately need a ticket which you can look at as a product, but the source of supply, the way I get the ticket, can be different between whatever I get from Flight Centre and what I get from the website and, in that sense, there is a service.

So, when I answered your Honour very shortly a little while ago, it is ultimately the same thing.  It is the same thing in the sense that if we are trying to capture the competition and the rivalry, then they are two ways of looking at the same thing.  If one is more precise and analytical, they are different perspectives on that same thing.

FRENCH CJ:   The anterior question is the market, is it not, because you have to identify competition in a market?  I am just wondering whether the market for booking or distribution services, which the Full Court rejected, is really a functional aspect of the market for the sale of international passenger transport services – in other words, a functional submarket.

MR GLEESON:   That is what we have put.

FRENCH CJ:   A functional submarket is not a market for the purposes of our competition or ‑ ‑ ‑

MR GLEESON:   If it is a functional submarket, it is not.  If it is a functional market, it is ‑ ‑ ‑

FRENCH CJ:   Well, that is right.

MR GLEESON:   ‑ ‑ ‑ so a bit hangs on the sub.

FRENCH CJ:   The question is how do you characterise it, I suppose.

MR GLEESON:   I should be clear, your Honours, and I put this on the special leave application when some of these issues arose.  What I call the bigger market, which is the tickets market, to put it loosely – the contract of carriage market – we, today, do seek to embrace as part of the case and as a simple way home – it is a case that was put at first instance ‑ ‑ ‑

FRENCH CJ:   You say that they are in competition in that market.

MR GLEESON:   Yes, and it seems to have a lot of intuitive appeal as well as appeal when put against the language of the statute.  Under the language of the statute, all you ultimately have to have is goods or services supplied – and “supply” is defined to mean “provide, confer or grant” – and it is not a difficult use of language to say if I go to Flight Centre and ask can they give me a ticket to London, and they do, they are providing, conferring or granting a contract of carriage.  If I do the same thing on the Qantas website, Qantas is providing, conferring or granting a carriage.

A simple way home to resolve the whole case is to say you have got the market for international air passenger carriage.  You will have a number of those, point to point, and in that market you have got two sources of supply.  The first is Flight Centre.  What it is offering you is a smorgasbord.  It is offering you a range of tickets on different airlines.  You have then got competitors over here who are airlines offering tickets direct.  Of course, as is true of any market, not every supplier can provide every product that every purchaser needs.  Qantas cannot sell Singapore; it does not make any difference to the case.

On that case, one then simply says we have got two sources of supply.  We have got a product, which is a contract of carriage.  We have got competition, fierce rivalrous competition, between these two people; competition in a market, the one your Honour identified; and then we have got price fixing conduct, and that is the 45A case.

KIEFEL J:   For the purposes of this argument, do you rely on the finding of the Full Court at paragraph 8, that:

The impugned conduct in fact took place in the market for the supply of international passenger air travel –

I think it is mentioned in your written submissions at paragraphs 27 and 28.

MR GLEESON:   Yes, your Honour.  That has given us a market, and that has given us impugned conduct.  You only really need to put that together with – the Full Court describes that impugned conduct at paragraphs 25 and following, and the critical finding is at paragraph 34, where they record and do not disturb the primary judge’s finding, 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.

That is the finding of the conduct, and then the only further element that is needed is the finding that it is price fixing.  That is found at paragraph 73 on page 351.  The nature of the price fixing – it has a double step to it.  First, what happens is it is controlling, fixing or maintaining the airline’s price; you must not sell to the public less than the GDS fare available to us.  That has the immediate effect of fixing Flight Centre’s margin.

FRENCH CJ:   If you cannot get home on characterisation of Flight Centre and Singapore Airlines and the others as competitors in that market for the sale of international air transport for passengers, can you get home on the distribution and booking market?  I am just wondering what is really essential.

MR GLEESON:   Your Honours, as Mr Ellicott would say, if I answered that question directly, we would be out of here very shortly.  We have the finding of competition in that market.  We have got the finding of rivalry.  That part of it, I submit, we are home on; we do not need to get further home than home.  But, trying to answer your Honour’s question, on that market – that is, the larger market – the only reason we have lost, apart from the pleading point, is agency.

FRENCH CJ:   Yes.

MR GLEESON:   The only reason we lost – it is paragraph 175 ‑ ‑ ‑

FRENCH CJ:   In other words, there are not really two sources; on that characterisation, there is just the one ultimate source of supply.

MR GLEESON:   Yes.  If we can show that that agency finding does not end that case, then I submit we have won that case.  To knock that agency finding over, we only need to do two things.  The first is the legal point, the pure legal point; does supply under the Act, “provide, confer or grant” include where appropriate on the facts supply as an agent.  Is that an available meaning of the Act?  If it is, that really has taken the heart out of the agency point.  I said there were two points, but that is really the key one.

Coming back to your Honour’s question, if we cannot win on that, if we cannot knock over the agency finding, we have a difficulty in the booking services market because one of the multiple reasons for rejecting that is agency.  I have to win on agency; that is true.  We probably can independently win on the distribution services market, because that did not get knocked over for agency.  That got knocked over for the in‑house supply point, because in a distribution services market, the Full Court accepted there was a service supplied by Flight Centre to the airlines; that is obvious.  The question it faced was when the airline decides to forward integrate and do that function itself – that is, do the selling itself – is that to be treated as an in‑house supply of distribution services?  They said no.  We would say yes, and that is just consistent with cases that look at in‑house supply as an example of the way in which a service can be supplied under the Act.  That is the Re Fortescue line of cases.

If we can establish that that is a relevant supply, then the distribution services market is an alternative way of capturing this conduct – quite a good way of capturing it, actually, because the airlines have, as I say, forward integrated into the distribution services market.  There is fierce rivalry, and Flight Centre decides to shut it down and that is independent of the agency point.  I am not sure, your Honours, if there are other general matters before I return to the ‑ ‑ ‑

NETTLE J:   Are we going to start, though, with the market for selling airline tickets or the market for selling booking services?

MR GLEESON:   I am going to start with the market for selling airline tickets, your Honour.  In respect to that market, in our outline, as per paragraphs 2 to 4, could I just review the core facts which really fall into three categories?  The first, which is paragraph 2, is the nature of international air passenger carriage and, as I have indicated, I start by accepting that we have got a sale of tickets or contractual rights of best endeavours to carry from one point to another against airlines, and the parties to the contracts are the customers and the airlines.

That is the starting point.  We then have to accept, because this leads us to the second channel of supply, this process of intermediation, which is an established feature for many, many years, that Flight Centre, which is a separate firm, a completely independent business, to Qantas, runs a business of aggregating information about the flights which are available from many suppliers and it offers the customer a single port of call for selection.  There may be ancillary services, but that is part of the overall package.  So what you will get if you go to Flight Centre is you will get the benefit of that aggregated information.  You get the smorgasbord.

Next on the facts, Flight Centre’s business is necessarily double facing.  The trial judge was correct to say that.  It is supplying an activity beneficial to the airlines, promoting and selling the product, and to consumers by doing the reverse – making available the smorgasbord and then taking particular bookings and ticketing, et cetera.  I have made the point that Flight Centre is an agent for multiple airlines and that has to be viewed as part of the nature of its supply.

Could I just pause there, your Honours.  You will have seen in the Full Court most of the analysis of competition is through the concept of price.  Of course, competition occurs through many levels, including price and quality and innovation and the like.  One of the critical areas of competition between Flight Centre and the airlines is not just price, although it is price, but it is quality.  It is what do you get?  What is the service you get?  We all know when we find ourselves stranded in an overseas destination and we have booked an internet flight.  There is no one we can blame except ourselves.  If we had gone to a quality travel agent like Flight Centre we know what we have got is that magnificent after‑care from the travel agent.  Now, it is just one of the many aspects of the quality that excellent travel agents provide and travel agents provide at different levels.  That is part of the competition.  That is part of the difference between these sources of supply.

Your Honours, as to price, you know from the evidence that Flight Centre can set its own price, charge whatever it likes.  What it has to do is to remit a fixed amount to the airline.  The GDS price, less the commission, are fixed by the airline.  Flight Centre’s price or revenue becomes the margin, the difference between what it chooses to charge and what it has to pay.  That is what makes it an independent economic unit, taking independent risk on these transactions.

Finally, we emphasise this point about independent financial risk.  It is obvious, but it is true:  Flight Centre is taking all the risks on having shops, employing people, as well as having its internet, its “price beat guarantee”, which means it has to drop its price to match prices which Qantas puts on a website.  So the essential business of Flight Centre is trying to set its prices in a way which earns enough margins to offset its fixed and variable costs.

All of those facts sit within the larger market, the market for air passenger carriage, but what they show is that in that market there will be two sources of supply.  There will be the intermediary – the source that I have been mentioning to date – and then I come to the second source of supply, which is our outline at paragraph 3, which is because of this intermediation airlines became a direct source of supply to the public, particularly through the internet.

The two features of the case that are critical for the airlines are, firstly, they establish this second channel and then, secondly, they engaged in a sustained course of rivalry or threat to Flight Centre’s business by offering flights that Flight Centre could match only by erosion of its margin.  The findings on that are in the Full Court at paragraphs 22 to 27 on page 334 to 335.  The Full Court in those paragraphs has very compendiously described what the trial judge went into more detail on.  That is the rivalry or the competition which the airlines posed to Flight Centre.

If we pause the case at that point, in the market we are speaking of we have two sources of supply.  One is Flight Centre; one is the airlines.  The supply is the product, the ticket.  One has fierce rivalry or competition threatening the business of Flight Centre.  At paragraph 4 of the outline we get the response:  “What did Flight Centre do?”  Flight Centre attempted to make an agreement with the airlines that they would not offer prices to the public lower than the prices available to Flight Centre on the GDS.

They are the findings the Court has at paragraphs 33 to 40.  I have already mentioned paragraph 34.  I do not need to read the emails, but they are graphic.  Your Honours have seen them.  At the bottom of page 337, saying, “It is difficult to be both friend and foe”, it captures the problem.  At 339, I might just draw attention to lines 20 to 30.  Flight Centre is saying to Emirates, “If you don’t come to heel, our people are going to stop selling Emirates and are going to put people on Singapore or someone else”.  There is no doubt, and the findings are there, that this was the attempt to shut down the competition coming from the airlines.  I have taken your Honours to the findings, particularly at paragraph 73, that this is price fixing, and it is price fixing at the two levels I have mentioned.

FRENCH CJ:   Is it irrelevant to the competition analysis that the airline actually provides the service ultimately, because you are looking at competition analysis for the purposes of these proceedings on the basis that they are selling the right to travel?

MR GLEESON:   It is irrelevant in this case and the problem with the Full Court is it has done the competition analysis without asking why it is doing it.  I do not want to be too critical.  But let us take a different case.  Assume the airline is engaged in a price fix directly, then it would be irrelevant to inquire into the fact that the agents were the people doing the selling.  We would only be thinking about the airline’s price fixing.

But take another case, which shows the real vice in the Full Court.  Assume the travel agents price fixed between themselves, assume Flight Centre got together with Webjet and the like and said, “We will all stop discounting; it’s too hot out there”.  Now, that would be a price fix where the relevant suppliers were the travel agents.  They would all be doing it as agent.  It would be completely irrelevant that they are not operating aircraft.  Part of the vice, if I could bring your Honours now to the Act ‑ ‑ ‑

GORDON J:   Before you go to the Act, Mr Solicitor, is the proposition any more than the airline has engaged Flight Centre to sell flights on their airline and that arrangement was multiplied hundreds of times?  The airline also sold flights on its airline.  They were in direct competition.  In a sense, how Flight Centre sold the flights is interesting but irrelevant.  What they were selling, as the agency agreements record, and authorised to sell, were flights provided by an airline.  I do not understand.  In a sense, it is a bit like sort of recommended retail prices in reverse.  If you have an airline saying, “Listen, here’s the price that we think you should sell the flight for but, by the way, through the back door don’t dare sell it below the price we have told you”.  It is a price fix.  And here you have got, in a sense, Flight Centre saying, “We know what the minimum price is – we know what the price is going to be because we have been told.  We’re told what we’re going to get, but don’t you dare undercut us”.

MR GLEESON:   I am tempted to say yes, but I have not yet mapped your Honour’s question on to whether we win the case or not; that is my problem.  It is a simple ‑ ‑ ‑

GORDON J:   The simple case is they were selling flights provided by an airline.

MR GLEESON:   The simple case is the consumer – starting from the consumer’s end, there are alternative sources of supply.  I can go to the airline’s website; I can go to Flight Centre.  I have choice.  Whichever one I go to, I will end up with the same thing.  I will ultimately have the same thing, a ticket – a ticket on the same airline, that is true, but that is the choice that I have as a consumer.

There is fierce, rivalrous competition between those two channels of supply.  One channel does a price fix to shut down that competition.  We submit that is 45A conduct.  That is our simple case.  The critical feature of this is that it is the agent that is seeking to price fix against the principal.  Most of these cases arise in the reverse situation, which your Honour has mentioned, and the American cases are in that situation.  They are looked at – I know we are not allowed to say “vertical” and “horizontal” but they are useful analytical tools.  Resale price maintenance is a vertical price fix and your Honour’s question to me was, I think, in that territory.

The American cases have looked at:  when is it that the vertical price fixing will apply or not apply if you have an agent involved?  And the more normal case is the principal trying, in some way, to tie up the competitive behaviour which is otherwise going on by agents and dealers.  That is the US cases; that is the DaimlerChrysler in Europe.  What we have here, which is almost unique, is that the person with the power in this situation is the agent because it has the established intermediary business.  They are the big players.  The little player, nipping at the agent, happens to be the principal trying to build up its direct supply of product.  The person trying to shut that down is the agent.

If this was being looked at under other provisions of the Act, such as section 46, the way you would approach this would be to say:  does Flight Centre have a substantial degree of power in a market?  What sort of market would that be?  The market for supply of tickets to the public.  Has it taken advantage of that power to shut down a competitor?  Now, this was not run as a 46 case, but the reason I am suggesting the Act issue is important is that the way the Full Court has approached it, as soon as you see agent, you can never have a supply under the Act, so you can never apply any of these provisions of the Act to any conduct.  As soon as it is ‑ ‑ ‑

GORDON J:   But on your analysis on the sale of tickets, the agency question is irrelevant.

MR GLEESON:   It is irrelevant, and one way of putting that is to say – and your Honour the Chief Justice made this point as long ago as Singapore Airlines, and others have said it – but you do not ignore the impugned conduct when you are trying to carry out a market analysis.  The impugned conduct here on no view is occurring under the agency relationship.  It is outside it.  It is the agent attempting to shut down the principal’s behaviour.  Now, nowhere in the Full Court’s judgment has that fact been grappled with.  So, your Honours, the matters on the Act that I just wanted to go to briefly were firstly in terms of the definitions just starting with “services”.  It is a definition which includes rights:

benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, and without limiting the generality –

includes certain contractual matters.  So, within the definition of “services” we see this broad conception of provide, confer or grant which we submit can include doing so as agent.  We see it is not limited to contractual rights.  It can include benefits, privileges or facilities.  Therefore it is broad enough to capture, when we come to the latter part of the case, notions such as self‑supply ‑ you can have a self‑supply of a service – and it is broad enough to capture a functional division of a supply into, for instance, a booking service and another service.  The definition ‑ ‑ ‑

KIEFEL J:   The definition does not include the supply of goods.

MR GLEESON:  No, goods I had passed over.  The definition there is inclusive and not terribly informative here.  “Supply” is defined to include:

when used . . . 

(a)in relation to goods—supply . . . by way of sale, exchange, lease, hire or hire‑purchase; and

(b)       in relation to services—provide, grant or confer ‑

Your Honours, I will just check because I do not think we have dealt with this in our submissions, or perhaps Mr Walker, but the supply of a contractual right may be regarded as a service, and I think there is authority to that effect.  The supply of a contractual right is a service, whereas goods are tangible.  We will seek to give your Honours the authority on that.  So, I would not disavow that in the big market, as I am calling it, that the contract of carriage is a service.

Now, next in section – if your Honours have the full Act there, in section 4C(d) and 4C(c) there are some provisions which deal with the cases where there are both goods and services being supplied at the same time.  Section 4E is the classic definition of “market”.  We then come to section 45(2); subparagraph (a)(ii) is the relevant provision.  Section 45(3) is competition being linked back to a market.  Section 45(3) is the provision that has now been removed from the cartel provisions.

Then we come to 45A, and mapping that onto the present part of the case, allowing for the attempt provisions which complete the case, what was attempted was to make a “contract, arrangement or understanding” which is deemed “to have the effect, of substantially lessening competition” because it had the purpose or likely effect “of fixing, controlling or maintaining . . . the price for” services, being the contracts of carriage, supplied by Flight Centre on the one hand and the airlines on the other hand, in competition with each other in the market that I have identified.

Now, your Honours, I had commenced on a proposition that unless supply by an agent can be a relevant supply under the Act, there will be a gaping hole in the Act for its treatment of potentially any competitive conduct.  I have given the example where the travel agents do a price fix between each other.  The persons directly harmed by that conduct would be the consumers.  The airlines may also be harmed, but the consumers would be harmed, and on the Full Court’s view that would not be a relevant supply.  I had commenced to give an example with section 46 which is to the same effect.

A simple example would be under section 47.  Imagine a case where Flight Centre or a travel agent supplies the tickets on condition that you must take insurance from its preferred insurer.  That would be a classic third line forcing under section 47(6).  On the Full Court’s approach, no supply because you are an agent.  Section 48, resale price maintenance, one can think of examples there.  Finally, section 50, the merger provisions could not apply if Qantas, for example, swallowed up Flight Centre, because they would be treated as – there could not be a competitive effect because they are in the market but they are not supplying services in competition with each other.

KIEFEL J:   What is the conduct of Flight Centre that is indicative of competition with the airlines?  Is it the fact of the sale of the ticket for a seat or is it in the advice and the choices that it is steering a consumer to make, or some other conduct?  How does one get the idea of them actually being in competition with the airlines from their conduct?

MR GLEESON:   It is both of those, your Honour.  The way Dr FitzGerald put it was that he did not like the word “booking” but he liked the idea of arrangement, that what Flight Centre is giving you is anything and everything you need to get the right ticket.

KIEFEL J:   But it is making a selection.  It is not going to give you the whole range if you make a selection.

MR GLEESON:   No, exactly.  It has access to the GDS.  It has 1,000 possible fares.  So you go in and say “Sydney to London about this time”.  They will do that initial selection and come down to you and say “Perhaps these are three good choices”.  That is something you are getting from Flight Centre at that part of the transaction.

At that point the agency has not really descended because all Flight Centre are saying is, “We have an ability ‑ we have three clause 3.1s in our back pocket and we can activate any of them if you give us the instruction to do so.  And what we are doing is giving you”, as your Honour says, “that narrow range, the preferable range”.  They are then giving you everything you need by way of advice to get your choice down to one.

At that point, when you say, “I want to go Singapore”, then it is realistic to regard clause 3.1 as either coming to life or having its real life because at this point Flight Centre has advised you perhaps against the other two airlines.  They have advised against their other two potential principals and they have said, “For you, Singapore is best and we’ll now do the booking”.  At that point, as it were, they almost line up more closely with what has happened if you have already decided independently to go Singapore because at that point ‑ ‑ ‑

KIEFEL J:   I suppose my inquiry is really, in the process of doing that, is Flight Centre actually in competition with the airlines or are they creating a competition between the airlines?

MR GLEESON:   The answer is both, your Honour.  In the old days, the latter.  In the old days, what the intermediary was doing was exactly, creating a competition between the airlines and it was a particular market where the market could not operate without the travel agent creating that bit of competition.  So you could almost view in the old days the travel agent as a bit like the owner of the market in the local town.  They are the person who organises the stalls for everyone to turn up and exhibit their wares, bringing all that together.  That is what it was doing.

Therefore they were generating competition or perhaps facilitating or allowing those airlines to compete because in the old days without Flight Centre what an airline would have to do is have its own shopfront or perhaps its ticket booth at the airport and if a customer wanted to compare between them they would have to do a lot of walking.  That is what Flight Centre was doing.  But once the airlines decided to supply direct, then you have the bit of competition that is what this case is about because at that point we have got the two channels of supply for a customer.  That is the critical point at which the competition cuts in.

FRENCH CJ:   The critical question is one of – it is not just being in competition with each other, at least when they are talking about the big market; it is in competition with each other in the supply of international air transport passenger services.

MR GLEESON:   Yes.

FRENCH CJ:   I wonder how critical it is that one characterises what Flight Centre does as a distinct supply, rather than focusing on the ‑ perhaps one needs to focus on the question:  is what it does in supplying those services competitive with the airlines themselves?  That is where one focuses.

MR GLEESON:   One focuses and says, first, what is it that Flight Centre does?  I have tried to give a description of that.  What does the airline do?  Are those two things competitive and rivalrous and how do we answer that question?  We answer that question in classic ways, by, for instance, seeing if consumers are switching from one source of supply to another and we look at it by seeing the way in which the parties have responded to the situation.

So the impugned conduct tells you that Flight Centre is in competition in the supply of those services because, firstly, it is losing business to the airlines and therefore losing money but, secondly, the price beat guarantee, which the Full Court has not really given much weight to, the mere fact that the airline is advertising the cheaper price over here allows the customer to come to Flight Centre and get a lower price and make $20.

So Flight Centre is either losing business to the airlines or, even if it is winning business, it is making a loss.  That is the classic evidence of two people supplying in competition with each other that one is causing this harm to the revenue account of the other.  So applying the section 4E test, one can see that the services, being ultimately the contracts of carriage, are substitutable or otherwise competitive with the services of the other.

GORDON J:   If that is right, consistent also with the definition of “competition” in 45, does that not mean though that the material that you keep referring to about the way in which Flight Centre does its business becomes less relevant, i.e. this broader task of what it does.  Is not the focus on what is the good or service that they are competing with giving rise to substitutability and that is the market and that is – it may be a part of a market, it may be a broader market but, in a sense, that is the element that they compete on.

MR GLEESON:   Ultimately, they compete on the element but what I said to your Honours before was competition as a multi‑faceted thing is price but it is also quality of service and its innovation and the like.  Now, what you get from Flight Centre at the end of the process may be the same thing, it is the service, it is the contract of carriage, but the extras you are getting from Flight Centre, the quality you are getting, is that hopefully a human being has carefully selected from the millions of possible flights, the three best flights for you and given you some advice on where to go.  That is part of the quality of the service.  If that was not a part of the service, our travel agents would be out of business.

GAGELER J:   It is a different service.  If the service is the contract of carriage, then Justice Gordon’s point is that these add‑ons really just confuse the analysis.

NETTLE J:   They do not confuse it but they detract from the strength of your case.  The more the focus of the customer is on the price, the stronger position you are in.

MR GLEESON:   Well, if I am both confusing the case and weakening the case, your Honours, then I am ‑ ‑ ‑

GORDON J:   Well, I think that is the point we are trying to put to you.  If you go to the definition of “competition” in 45 it says it is competition in any market in respect of a good or service, and one has to – you say it is a market for selling a ticket.  How anyone sells it is interesting but irrelevant.  They compete with each other on price, their substitutability completely.  I just do not know why it is that we have to worry about what else Flight Centre does.

MR GLEESON:   It may be that is enough for this simple market and maybe ‑ ‑ ‑

GORDON J:   I thought that was what we were addressing.

MR GLEESON:   Yes.  Well, I will come back to the other bits later then, your Honour.  So, to keep this part of the case simple, two sources of supply, at the end of it there is a contract of carriage which at the moment I am calling a service, not a good.  They are the closest possible substitutes you can get because each of them is a ticket on the same airline, same place, A to B.

GAGELER J:   They are not really even substitutes, are they, they are the same thing.

MR GLEESON:   But they are the same thing which you have acquired from two sources ‑ ‑ ‑

GAGELER J:   I am not arguing against you, Mr Solicitor, but I do not even think on this very simple market that you would get to substitutability.

MR GLEESON:   Your Honours, it is probably right.  If I can buy the Australian Trade Practices legislation from the Co‑Op bookstore in Sydney or I can buy it online, I am getting the same thing, and the online supplier is in competition with the Co‑Op bookstore and it is irrelevant to that analysis whether anyone is selling to me as principal or agent.  They are just two sources of supply.

GORDON J:   Or how they are selling it to you, whether they are providing another service along the way.

MR GLEESON:   Well, I have got ‑ as a minimum to attract 45 I have got two sources of supply, they are in competition, they are fighting over price and one of them tries to shut down the price competition.  So, on that theory it becomes irrelevant whether either is selling as principal or agent.  That is the shorter case. 

Now, your Honours, can I just see whether there is anything else I want to put to you on a shorter case and then deal with the other issues?  I probably should do this.  If your Honours go to the judgment, the shorter case is dealt with at paragraphs 171 and following.  There is no objection down to paragraph 175, end of the first sentence, the problem emerges thereafter.  We have got the conundrum, as I have called it, in 175 and 176 that we have got competition in a market but no competitive services in the market.  There is an excursion into the nursery stock supplier but ultimately agency is the only reason this case was rejected, paragraph 181.  For that page ‑ ‑ ‑

GORDON J:   I thought that the point was at 175 where the Full Court seemed to dismiss this – what we have identified as the straight sale of tickets by contending that – they seem to start off by identifying it as the sale of tickets and then moving to being not only the sale of the ticket but the provision of the actual flight itself. 

MR GLEESON:   Your Honour, that is where there is a slight difference between the Full Court and the trial judge.  The trial judge, we have submitted, went off track when he said if you do not run planes, you cannot be in this market.  That is at page 247, paragraph [135].

GORDON J:   I thought the Full Court were adopting that argument at the bottom of page 175.

MR GLEESON:   They look like they are, but when you get to paragraph 181, last sentence – this is the crux of it:

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 –

Your Honour is correct.  It adopted that, but said you need something more; you need the agency point.  If that is the essence of this part of the case, firstly, whether you own the aircraft or operate it is irrelevant; it is the contract of carriage that is the service.

GORDON J:   My point was probably more subtle than that, and that is it seems that the first limb ‑ I had understood from your simple argument about what was the market, that it was wrong on the first point.  They seem to conflate, as I said, the ticket with the flight.

MR GLEESON:   Yes, they are doing that.

GORDON J:   So you do not even get to the agency question.

MR GLEESON:   Your Honour, I cannot pass over it ‑ ‑ ‑

GORDON J:   No, I am not asking you to pass over it.

MR GLEESON:   No.  The last couple of words of 181, they are slightly elaborating upon the trial judge and saying it is not only that you do not run planes, but it is because you are only there as an agent.  They seem to think you need that extra element to sustain the trial judge’s conclusion.  For completeness, I am seeking to attack both those elements.  It is irrelevant that Flight Centre does not own planes, and whether it supplies as agent or not is irrelevant in this simple market.

KIEFEL J:   Is not the Full Court’s view of the importance of agency dependent entirely upon their view of the market as one only for services?  Once you see the market as only one for services, agency becomes much more into focus, does it not?  You are acting, you are providing a service on behalf of your principal.  It is harder to say that when you are talking about the sale of a product.

The switch is in paragraph 175 itself.  They put the market that was identified as involving the rivalry or competition in relation to that good or product.  They put that to one side and identified the market as only one for services, and that is where agency arises in that market, on that reasoning.

MR GLEESON:   Yes, but even in a fewer services market – take one that is not perhaps on the line like this; take home handyman services.  You can have two sources of supply.  Whether they are doing it as principal or agent, depending on ‑ ‑ ‑

KIEFEL J:   That may be the answer to it.  I am just trying to understand the reasoning of the Full Court.  That seems to me to be critical to their reasoning.

MR GLEESON:   It may be, your Honour.  The elision between owning the aircraft and selling the tickets, that is also somewhere in this.  Can I perhaps shed one other piece of light on these very difficult paragraphs?  If your Honours go back to 358 to see the notice of appeal, relevantly there were the first six grounds of appeal.  The current grounds we are dealing with are grounds 1, 2 and 3.  One can see those grounds, and then one can see Flight Centre’s argument, which is recorded at paragraphs 101 to 103, particularly 103.  What Flight Centre said is there was an inconsistency in what the trial judge did, because he found competition, and yet he found that:

Flight Centre did not supply international passenger air travel services in competition with the airline.

Flight Centre says there is the tension in the primary judge’s finding, and the way we want you to resolve that is to do what the Full Court went on to do in this judgment.  But in fact, the Full Court has resolved the so‑called tension the wrong way.  The tension arose because the trial judge, as I have shown you, thought that if you did not own aircraft, you could not be supplying the service.  Once you focus on the contract of carriage, the tension disappears.

Your Honours, the only other thing I need to say on the simple case in terms of the Full Court is there are two legal authorities that the Full Court addressed.  They are in an earlier part of the judgment; could I just deal with those?  It is Castlemaine Tooheys, which is dealt with on page 371 at paragraphs 155 to 160.  The Full Court at 157 says this is a Castlemaine Tooheys case.  This is the key to the Full Court’s thinking on agency and services.  If your Honours have Castlemaine Tooheys 162 CLR 395, the short submission is it is obviously distinguishable.

Castlemaine Tooheys was the case where the product ‑ and this was a goods case ‑ the product was beer, delivered beer, delivered to your premises as a publican and there was only one source of supply for delivered beer to your premises which was the preferred carrier, QRX, stipulated by Castlemaine and the Court rejected the 47 case.  So, the obvious differences were, firstly, that the QRX had no direct dealings with the consumers other than dropping off the beer.  Secondly, QRX was not selling the beer of Castlemaine or any other person in competition with Castlemaine.

So, one did not have two sources of supply competing and that is apparent on page 400, particularly in the last paragraph in Chief Justice Gibbs.  I might just note, on page 403, Justice Wilson in the first paragraph, it actually relates to some of the questions your Honours have asked this morning, that depending on the circumstances, you might characterise something as the separate supply of a service or you might characterise it as simply the supply of the goods and in this case the delivery is being treated as part of the supply of the goods.  There is no separate service, but what is important is there is only one channel.  If you want beer delivered to your premises, there is one channel, which is Castlemaine, so it was not a case where there were two sources of supply.

The second authority which the Full Court dealt with is in paragraph 162 which is the decision in ACCC v IMB Group, Justice Drummond at first instance and on appeal, the Full Court.  Could I just go to the Full Court?  You can see the present Full Court has said IMB is just irrelevant to this case. The Full Court decision, we have not found it reported yet, (2003) FCAFC 17, one can see from page 13, at paragraphs 39 to 40, Justice Drummond’s findings.

This was the case where IMB, who was an agent, was trying to market a scheme and it was a condition of the scheme that you had to buy an insurance policy through IMB for the particular reason that the premiums would be used to fund the scheme.  So, it was central to this scheme that the insurance policy had to be acquired through IMB.  The Commission ran and failed on an exclusive dealing case.  The Commission’s case was, well, here is IMB imposing a condition that you must acquire the insurance policy of a third party.  So, the trial judge in the Full Court rejected that case saying, it was essential to this scheme that the policy was being acquired through IMB and so the agency supply of IMB was treated as a supply.  The Full Court upheld those findings of Justice Drummond, particularly at paragraph 89.

We would submit that this case is a square authority that a supply by an agent can be a relevant supply under the Act depending upon the purpose of the inquiry.  The Full Court was wrong to dismiss the case and Justice Logan was wrong to also dismiss it.  He dismissed it at page 246 of the book at paragraph 133.  He thought it turned on the words “directly or indirectly” which are in section 47, but it did not, it turned on a simple application of supply to the facts of the case.

Your Honours, that completes what I wish to put in‑chief on that part of the case and that part of the case is sufficient to sustain the result.  Can I then deal with the alternative markets?  I might deal first with the distribution market, as the Full Court dealt with that first.  Commencing in the appeal book at page 365, the services are described in paragraph 130, which Flight Centre supplied to the airlines.  So we have a finding of supply of services:

bringing the availability of . . . flights to the attention of consumers, and booking and collecting the fares –

and so on.  And at 131, the Full Court says that is a supply to the airlines done under the agency agreement and the price, the remuneration, is the commission and the other payments, so we have one supplier of a distribution service.  Then at 132, the question is whether the airlines provided the same or a substitutable service. The trial judge said they did because they could:

make the availability of their flights directly known to would‑be passengers and . . . “cut out the middle man”.

That is the finding at 132 that we commend as remaining correct.  The Court rejects it for three reasons.  The first is the artificiality reason.  Paragraph 134 says this is all artificial and 135 explains why it is artificial.  I just want to focus on 135:

If the 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.

We agree because in that world you have one channel of supply and that is all you have.  There is no reason, there is no purpose, there is no trade practices reasons why you would start breaking it down.  The error is in the next sentence.

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 ‑

Why would that mean there is a self‑supply?  The answer is it would not necessarily compel a change but it may, depending upon why you are asking the question. 

If the reason you are asking the question is the present reason, that the starting point is not the one of the Full Court but the starting point is travel agents supplying the distribution service to the airlines, that is point one; point two is the airlines forward integrating, doing that service for themselves, such that they do not have to pay the travel agent any more but they have to incur their own costs, and then if you have rivalry and then if you have the rivalry being shut down, that is what would change the characterisation.  So our submission in respect to 135 is that it just has not grappled with the purpose for which the inquiry has been conducted or the full facts of the case.

Now, at paragraph 136 the court makes a different point, which is you cannot use a self‑supply concept unless a business organises itself into separate divisions.  They say that, again, in 137.  They cite the Competition Tribunal in Fortescue Metals as authority for that.  We submit this is a legal error.  Fortescue Metals does not stand for the proposition that you can only conceive of self‑supply if a business is organised into separate units and that is not the law either.

Fortescue Metals is that long Competition Tribunal decision which this Court considered in another context.  The relevant extract is in Justice Logan, at pages 248 to 249.  Your Honours may recall that, when Fortescue Metals got to the High Court it concerned whether there was a market for rail haulage services, separate to a market for the sale of iron ore.  The question was whether you could regard BHP and the like as self‑supplying rail haulage services because that was done as part of its overall vertically integrated operation.  That is the context of the case.

The Competition Tribunal has set out here – it gives quite a detailed discussion of vertical integration.  Nothing in this discussion says that you can only use the concept of in‑house supply if you have organised yourself into separate business units.  Indeed, it is quite to the contrary and this discussion indicates that you can use a concept of self‑supply where it captures the conduct of the parties and the competition forces at work.

Indeed, in what is paragraph 1038 of the Competition Tribunal the first, second and third sentences are somewhat apposite to the present case.  The second sentence says:

The in‑house producer should be included in the dependent market if a hypothetical monopolist of vertically separated supply could not profitably increase its price.  This is frequently the case with end products, where consumers do not consider whether firms are vertically integrated or not when making their consumption choices.

So the proposition is here, once the airlines decide to forward integrate into the distribution service, they are placing themselves in competition with travel agents in the supply of that service to themselves and that competition is shut down by the price fix.

So, your Honours, returning to the Full Court, that concludes paragraph 137.  Then the court comes to its second objection, which is essentially was there sufficient evidence upon which to find that the services were substitutable.  So if we have got over the first hurdle that we can conceive of the airline supplying to itself a distribution service, is that service sufficiently substitutable for what the travel agent is doing?  The short answers to that are, firstly, obviously, yes, you only have to describe the services to know that they are substitutable.  I am an airline, I need to make my flights available to the public.  I can either use Flight Centre and pay them seven per cent or I can use my website, incur the costs and keep the margin.

Now, one might think you do not need much more than that for substitutability, but there is more.  The second thing there is is to look at the conduct, the conduct of Flight Centre.  Why was Flight Centre trying to shut down the competitive behaviour of the airlines, that is, the direct sales at prices below the GDS price?  Because it was a threat to its business.  Just to give an example of Flight Centre’s accurate perception of the facts, if your Honours go to page 240 and the trial judge, at paragraph [117], these internal emails show Flight Centre’s perception.  The third dot point is that, under Flight Centre’s strategic plan the:

“External Threats” include “Supplier competition, suppliers developing direct relationships with customers” –

and the suppliers they are talking about are the airlines.  So there is the identification that the self‑supply by the airlines is a competitive threat to Flight Centre.  Returning to paragraph 139 of the judgment on page 367, over on page 368 the court says in the middle:

There was, however, no evidence that the airlines chose to self‑supply . . . because of movements in the margin or commission earned by . . . Flight Centre.

One might think why are the airlines investing the money in the website if only so that the effective cost they bear of distribution is less than what they are paying the travel agents.  But apart from that commonsense proposition, there is evidence at page 136.  This is an email from Singapore in response to one of the price fixing emails from Flight Centre.  In the middle paragraph Singapore explains why it is selling direct.  If I could just read out this part:

While the short term impact this activity may have had on FCI is unfortunate, we cannot, with respect, allow FCI’s price beat guarantee to prevent us from pursuing head office directives to strengthen our distribution across lower cost channels.  Singapore Airlines is a full service carrier and must cater to customers who prefer to purchase tickets directly online, however, this remains a tiny element in our overall distribution strategy.

Obviously enough there is proof there, Singapore is moving to its self‑supply, at least in part, because it is a lower cost channel.  So one can see the pricing of Flight Centre is competitive with the internal pricing of Singapore in this distribution market.

Your Honours, returning to the judgment at paragraph 140 and following, page 368, this is the third and the only other reason why the distribution services market is rejected.  This, with respect, just contains an error in understanding market analysis.  The point is the court says, well, Singapore cannot compete with Malaysian in respect to distribution services because Singapore cannot supply them to Malaysia.  True, true but irrelevant, because not every person in a market needs to be able to supply to every purchaser in the market.  The question is whether there are sufficient persons imposing competitive constraint on others to place you in the same market.

In the example given, it is important to bear in mind that the demand for distribution services is, as an economist would say, a derived demand or an ancillary demand.  You do not want distribution services just for themselves; you want them because they are ancillary to the selling of a ticket.  So for customers who are considering a choice between Singapore and Malaysian, if the contracts of carriage are substitutable then the ancillary services, such as the distribution services, are also substitutable.

Your Honours, that proposition – I will just give the reference in our written submissions.  We have said a little bit more about that in relation to the same point in the booking services market at paragraphs 65 through to 72.  So, your Honours, we have maintained the submission that while we do not need the distribution services market, it is an independent way of analysing the conduct and it is not surprising that sometimes there can be more than one way of capturing the same conduct.

Your Honours, finally that brings me then to the booking services market to the extent it needs to be reached.  Now, in the light of your Honour’s questions I now need to be a bit more precise about what the booking services are and to distinguish them from the mere contract of carriage.  The way the case was pleaded is at page 23.  The booking service was any combination of paragraphs 6.1 to 6.7 but, as we see from paragraph 7, at least paragraph 6.6.

Paragraph 6.6 is the core and it is possible some people will only need the core service but for many people it will have some of these additional features attached to it including, for instance, the paragraph 6.2 service is what your Honour Justice Kiefel put to me, it is making a preference between infinite possibilities and narrowing down the available field.  So, that was what was pleaded as the booking service and the findings are that Flight Centre was doing those things.

Now, as to the airlines, once they start establishing website sales they are offering some of those things.  They are offering paragraph 6.6 and they are offering paragraph 6.2 in respect to themselves.  So, the airlines are offering a subset of the services which are offered by the travel agent.  Now, they are substituted with services.  In this case they are not identical services but they are substitutable or competitive, in part because when you get to the core 6.6 stage you will end up with the contract of carriage.  But looked at as a package you get some extras from Flight Centre and consumers have a material choice, do I want to have the larger range of services from Flight Centre or do I want to simply go direct to the airline.

Now, the reason to carve that out as a booking services market is because it is a good way of capturing the rivalry that is occurring because the rivalry at its heart is about the margin, who earns the margin as between Flight Centre and the airlines and how much will the margin be because of the price beat guarantee.  The reason that the booking services market was considered to be one way of analysing the case was based on Dr FitzGerald’s expert analysis.

“[T]he agency relationship has a function other than to circumvent the rule against price fixing” when, objectively viewed, the arrangement serves one of the economic functions of agencies in general, such as apportioning risk to the firm best able to bear risk, or lodging pricing decisions in the firm best able to gauge market conditions.  In Morrison itself the court found that a food broker is an agent because the principal is in the best position to evaluate market conditions ‑

So if, as I say, we are at an earlier part of the competitive process and the principal says on day one, “If you want to be my agent, you will only be my agent to sell on my price”, that is the sort of context this case is dealing with and it is saying, “Does the law prevent a principal establishing as it were from the outset they are the terms because I as the principal want to set my price to the market?”.  That is the context of it.  Our case is the exact opposite where, because the travel agents developed as they did with their independent ability to set their own prices, in effect the Australian travel agents have done for a long time the very thing which the travel agent here was trying to achieve through the Sherman Act.

The question then is at that point in the competitive process can that be shut down, that competition, either by the travel agent dictating to principal, or vice versa.  So the factual stage in the competition process is very different.  Your Honours, in DaimlerChrysler the article in question is set out at paragraph 82.  But at paragraphs 86 and 87, the court is discussing when it will be that a principal and an agent will be treated as a single entity and therefore not subject to Article 81, and the question is whether they are:

a single economic unit, the agent being an auxiliary body forming part of the principal’s undertaking, is an important one ‑

And that is fleshed out a little in paragraph 87:

The position is otherwise if the agreements entered . . . confer upon the agent or allow him to perform duties which from an economic point of view are approximately the same as those carried out by an independent dealer, because they provide for the agent accepting the financial risks . . . It has therefore been held that an agent can lose his character as independent economic operator only if he does not bear any of the risks resulting from the contracts negotiated on behalf of the principal and he operates as an auxiliary organ forming an integral part of the principal’s undertaking ‑

On the facts of this case, when one comes to paragraphs 93 and 94, at 93, the dealers had “no authority or power to sell”.  So they could not make the contract without the approval of the distributor.  And 94, the dealers could not set the price.  The most they could do under 95 was grant some modest discounts, and that was regarded in 99 as not being a sufficient price risk to treat the agent as an independent entity.

So, the European authorities are authority that you do not just assert agency, you have got to look at whether the agent has sufficient independent economic risk to be regarded as a separate firm.  If it does, then all of the ordinary principals of price fixing and the like can be applicable.  So, if one does go to those authorities, your Honours, we would submit that they do not harm the Commission’s case, they may advance it.

GAGELER J:   Where do they fit in with the statutory language?  I understand the analysis, but where does it fit into the statute?

MR GLEESON:   Where it fits in under our analysis is that a supply by an agent on behalf of a principal can be treated as a supply of a good or service, provided the agent bears sufficient of these characteristics of conducting a business taking substantial independent risk, provided (a) they are the facts, and (b) it meets the purpose of the inquiry.  That is where it fits in.  It fits into supply.

GAGELER J:   Not competition supply?

MR GLEESON:   Well, supply of services in competition.  We need, under 45A, as we agreed, to show supply by two firms of services in competition.

GAGELER J:   We had some pretty high power economists in this case.  Did they address this issue at all?

MR GLEESON:   Dr FitzGerald was perfectly satisfied that this was a supply of services in competition.  He chose to put the label on it that is being muttered here of booking and distribution, but what Dr FitzGerald said at the heart of his report is what we have been saying, which are two sources of supply, at pages 162 to 164.  Your Honours, the final matter is that the Commission is now accused of being both artificial and pseudo‑spiritual in its pleading of markets, which is ‑ ‑ ‑

FRENCH CJ:   Doctrine of the Trinity, I think.

MR GLEESON:   That is an extraordinary ‑ ‑ ‑

FRENCH CJ:   Communing with yourselves.

MR GLEESON:   That is an extraordinary achievement, and also absurd at the same time.  That is the response to what is now the alternative part of the case.  What we would say seriously about it is that you can dismiss it like that, but what you have not done in doing your service and functional definition is look at the very precise rivalry and competition which emerged, and the purpose of the inquiry.  When you do that, the booking and distribution services markets provide one analytical way of resolving this case.

I said to your Honour Justice Nettle this morning there were authorities that the supply of choses in action are services, not goods.  One authority to that effect is Justice Perram in ACCC v Air New Zealand 319 ALR 388 at [208], and we believe that proposition was not challenged on appeal in that case.

NETTLE J:   Thank you.

MR GLEESON:   Apart from that, we rely upon the definition of “goods” which appear to be either tangible things or perhaps extended to gas and electricity, but not apt to capture choses in action.  The contract of carriage is best viewed as a service.  May it please the Court.

FRENCH CJ:   Thank you.  The Court will reserve its decision.  The Court adjourns until 9.30 tomorrow morning.

AT 4.03 PM THE MATTER WAS ADJOURNED