Qantas chooses ‘flight’ over an ACCC ‘fight’: agrees to sky-high $100 million penalty for cancelled flights

Key Takeaways: 

• Qantas has admitted that it misled consumers through advertising and offering for sale tickets that it had already decided to cancel.

• The ACCC and Qantas have agreed to a penalty of $100 million for Qantas’ breaches, subject to Federal Court approval.

• Qantas has also agreed to pay affected consumers payments ranging from $225 to $450 as compensation.

• The ACCC’s case against Qantas highlights the importance for businesses of assessing their compliance with the ACL, which we explore further below. 

Yesterday, Qantas admitted that it contravened the Australian Consumer Law (ACL) by misleading consumers through advertising and offering for sale tickets for tens of thousands of flights that it had already decided to cancel. 

Following a period in which Qantas defended its conduct in the face of court action brought by the ACCC last year, Qantas and the ACCC agreed that they would ask the Federal Court to impose a penalty of $100 million for Qantas’ breaches. Qantas has also agreed to a court-enforceable undertaking to pay $20 million to affected consumers.

Qantas’ admissions

Qantas now admits that during a period of over two years, it:

• offered and sold tickets for sale for two or more days after it had decided to cancel a flight; and 

• continued to display flights on the ‘Manage Booking’ page of consumers that had purchased tickets for those flights, two or more days after it had decided to cancel the flight, with no indication that the flight had been cancelled.

Qantas admits that in doing so, it made the following false and misleading representations in contravention of sections 18(1), 29(1)(b), 29(1)(g) and 34 of the ACL: 

• Scheduled Flight Representation: Qantas represented to consumers that a flight with the stated flight number and scheduled date and time were still available.

• Reasonable Endeavours Representation: Qantas represented to consumers that it would use reasonable endeavours to operate the flight at the scheduled date and time.

• Flight Unchanged Representation: the relevant flight with the stated flight number and scheduled date and time displayed on the ‘Manage Booking’ page was unchanged. 

• Manage Booking Representation: Qantas would use reasonable endeavours to operate the flight displayed on the ‘Manage Booking’ page at the scheduled date and time. 

Qantas admits that the Scheduled Flight Representations and the Flight Unchanged Representations were false and misleading because at the time the Representations were made, there was no longer a flight with the stated flight number and scheduled date and time because Qantas had already decided to cancel it.

Qantas admits that the Reasonable Endeavours Representations and the Manage Booking Representations were false and misleading because Qantas did not have reasonable grounds for making the representation because Qantas had already decided to cancel the flight.

The ACCC is no longer proceeding with its claims against Qantas about wrongful acceptance of payment for the relevant flights in contravention of s 36(3) of the ACL, including any allegation that Qantas received payment for a service it did not, and had no intention of, providing.

Qantas’ sky-high $100 million penalty 

The ACCC has heralded the $100 million penalty because, if agreed by the Court, it will be the largest settlement the ACCC has achieved and as noted by ACCC Chair, Ms Gina Cass-Gottlieb it “will send a strong deterrence message to other companies ” not to engage in “conduct [which was] egregious and unacceptable”. 

That said, the penalty, while significant, is considerably less than the ACCC was originally hoping for (at least if the matter had been fully contested). In August 2023, when speaking on ABC Radio National, ACCC Chair Gina Cass-Gottlieb noted the current record penalty for a breach of Australia’s consumer law was $125m - issued to Volkswagen in 2019 for misleading consumers over diesel emissions. At the time, Ms Cass-Gottlieb said she was hopeful that if found in breach of the law, Qantas should face more than double that figure. 

Notably, the case was also originally brought by the ACCC in respect of conduct that pre-dated the commencement of the increased penalty provisions of the CCA. However, Qantas has since admitted that some of its contravening conduct took place after the new penalty provisions took effect. The current regime now provides a maximum penalty greater than $50 million, three times the value of the benefit or 30 per cent of relevant turnover for contravening conduct that took place after 10 November 2022.

The $100 million penalty is still subject to Court approval and the matter will be brought before the Court on 12 June 2024 for a case management hearing. 

Cooperation by a party who is alleged to have contravened the CCA will be taken into account by the Court in determining the penalties the ACCC will seek from the Court. 

Ultimately, the penalty to be imposed in any given case is solely for the Court to determine and there are cases where the Court has not agreed with the parties, either considering a proposed penalty to be too high or, conversely, too low. For example: 

• in November 2021 the ACCC and Volkswagen jointly put to the Federal Court a penalty of $75 million for making false and misleading representations about compliance with Australia’s diesel emission standards. The Federal Court determined a $125 million penalty was more appropriate;

• in December 2022, the Court determined a penalty of $21 million for Uber’s misleading and deceptive conduct to be more appropriate than the agreed $26 million penalty. 

Qantas’ undertaking

In addition to agreeing to the $100 million penalty and making the above admissions, Qantas has agreed in its Court enforceable undertaking:

• to not repeat this type of conduct in the future, agreeing to an internal set of “Cancellation Processing Obligations” and “Cancelling Processing Notices” to ensure this conduct does not happen in the future; and 

• to pay a total of $20 million to the more than 86,000 consumers that were affected by the conduct of Qantas by way of a detailed remediation scheme, with payments to affected customers ranging from $225 to $450 depending on the route;

• to review and update its Competition and Consumer Law Compliance Program; and

• for the above to take place under the scrutiny of an independent Compliance Auditor with reporting obligations to the ACCC. 

Qantas noted separately in its statement that it intends to commence the remediation program in advance of the Court approval process. In reference to Qantas’ undertaking, Ms Cass-Gottlieb noted that the ACCC “consider[s] that the early settlement is bringing forward a better remedy and assurance for customers - earlier than waiting to spend some time and possibly years going through court.” 

Live issues in flight

The proceedings take place against the backdrop of a 2024 compliance and enforcement priority of competition and consumer issues in the aviation sector. In particular, Ms Cass-Gottlieb stated that the ACCC continues to receive high numbers of consumer complaints about  airline services, and voiced concerns that rates of cancellation and delay remain above long-term averages. 

The ACCC’s case against Qantas highlights the importance for businesses of assessing their compliance with the ACL, including: 

• the critical importance of the context in which a representation or statement is made; 

• the need to consider whether or not a consumer is likely to be under a particular impression which means they are likely to misinterpret representations or statements; and

• the importance of cooperation by a business that is alleged to have contravened the ACL, as in most cases it will involve some reduction in the total penalty the ACCC will seek from the court.

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