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Ghost flights haunt Qantas: $120m settlement with ACCC

By Shaun Temby, and John Naoom

• 07 June 2024 • 8 min read
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Qantas settled the Australian Competition and Consumer Commission (ACCC) ‘ghost flights’ proceedings by agreeing to pay $120 million in refunds and a penalty.


In May 2024, Qantas settled the Australian Competition and Consumer Commission (ACCC) ‘ghost flights’ proceedings by agreeing to pay $120 million in refunds and a penalty on the basis that Qantas misled consumers by advertising flights that it had already cancelled and, further, by cancelling flights without promptly telling ticketholders that it had done so. While the trial Judge must now decide whether the parties' settlement is appropriate, fair and reasonable, the conduct at the heart of the case provides some useful guidance for business on how to effectively use ‘fine print’ conditions to qualify primary promotional claims.

Introduction

On 31 August 2023, the ACCC instituted proceedings against Qantas alleging that Qantas engaged in misleading and deceptive conduct between May and July 2022 in a variety of ways, including by:

  • selling 8,000 tickets to flights that were already cancelled (infamously dubbed “ghost flights” by various media outlets);
  • failing to promptly notify more than 10,000 passengers about the flight cancellations and delaying these notifications for about 18 days and as much as 47 days in some instances; and
  • accepting payments for flights that had previously been cancelled.

The ACCC's investigation revealed that Qantas cancelled nearly one in four flights during the specified period with approximately 15,000 out of 66,000 scheduled flights were cancelled. The ACCC’s proceedings focussed on over 10,000 of these cancellations (Investigated Flights).

Qantas defended the ACCC’s allegations by arguing that it does not sell specific flights to consumers but rather a ‘bundle of rights’. The ‘true position’ was clearly explained to consumers through a series of pre-contractual statements and the terms of the contract that were clearly outlined on its website. The ‘bundle of rights’ defence was widely derided at the time in various media articles, as “failing the pub test”. Many commentators, including myself, predicted that Qantas would not want to run that argument to trial and was highly likely to want to settle the proceeding as soon as possible this year, which is precisely what happened. On 6 May 2024, Qantas admitted to much of the alleged misconduct claimed, accepting that:

  • from 1 May 2022 to 10 May 2024, it offered and sold tickets for various flights after it had decided to cancel the flight, and it sold tickets for some of those flights; and
  • from 1 May 2022 to 1 May 2024, it continued to display flight details for some flights on the ‘Manage booking’ page of consumers that had purchased tickets or made bookings for those flights after Qantas had decided to cancel the flight without indicating to the consumer that the flight had been cancelled.

ACCC’s claim

In alleging that Qantas’s conduct was misleading and deceptive, the ACCC’s examined Qantas’ conduct at different stages of a consumer’s purchasing journey.

1. Initial consumer inquiries

The ACCC posited that, when looking at possible flights options, a consumer would review Qantas’ website or the Qantas App to identify available flights on the date on which the consumer wished to fly. In doing so, the consumer would identify different options, each with a departure time, arrival time and flight number. The ACCC alleged that for the Investigated flights at least one of those flights advertised was, in fact, cancelled and Qantas’s conduct in advertising that flights for sale was, therefore, misleading and deceptive.

2. Booking decision

If the consumer chose the cancelled flight, they would be prompted to enter their details and on the same page be informed (through the use of a small fine print disclaimer) that Qantas would use ‘reasonable endeavours’ to operate a flight at the scheduled time and date. The ACCC claimed that this ‘Reasonable endeavours representation’ was misleading, as Qantas could never operate that flight given that it had already been cancelled.

3. Managing the booking

The consumer was then directed to a page on the Qantas’ website (entitled ‘Manage Booking’) to view the details of their booked flight. Once again, the page showed fine print disclaimers to the effect that Qantas would use ‘reasonable endeavours’ to operate the flight displayed. The ACCC contended displaying flight information and assurances of reasonable endeavours on this page was likewise misleading due to that flight having already been cancelled. Similarly, the ACCC alleged that this information gave rise to two separate false representations, namely, that the booked flight was still available and that Qantas would use reasonable endeavours to operate the flight at the scheduled time and date.

Qantas’ defence

Qantas defended the claim by asserting that it did not promise to supply carriage on any ‘particular flight’, but rather supplied consumers with a ‘bundle of rights’. Qantas argued that this bundle of rights was consistent with Qantas’ promise to do its best to get consumers where they wanted to be on time, but did not include any promise or obligation to operate any specific flight with a scheduled date and time. The airline said that these arguments were supported by its conduct in two ways:

1. Qantas used various pre-contractual statements in its booking flow to inform consumers (in effect) that flight times or schedules are not guaranteed and do not form part of the terms of the contract. Examples of these statements include:

“We will do our best to get you where you want to be on time, but we don’t guarantee flight times or schedules and they aren’t part of our contract with you”, included as bold text at the bottom of the web page, and

"I acknowledge that flight times are not guaranteed and do not form part of my contract of carriage. Qantas may need to change or cancel flights or schedules – travel insurance is recommended”, included as a ‘tick-box’ requiring a user to ‘accept’ the acknowledgement

(together, Pre-contractual Statements)

2. Qantas’ contracts explained that the airline did not guarantee flight times and offered consumers a range of alternate options when flights were cancelled for various reasons.

    Effectively, Qantas argued that each of the ACCC’s alleged representations was qualified by the use of the Pre-contractual Statements made by it during the consumer’s purchasing journey such that the statements were mot misleading or deceptive.

    Our analysis

    Effectively, Qantas’ argument was that despite the consumer being granted (at several stages of the consumer’s purchasing journey) with detailed information on flight numbers, and departure and arrival times, that the ordinary reasonable consumer would understand the true position from its Pre-contractual Statements. In order for this argument to be successful, Qantas would need to convince the Court that, in the overall effect of the conduct, the Pre-contractual Statements were sufficiently clear and prominent to come to the attention of the ordinary reasonable consumer and explain, qualify or neutralise the primary claims as to the availability of specific flights.

    In our view, Qantas’ defence had several problems:

    1. The primary claim that consumers could select and book specific flights with specific plans, seating plans and dates for flying with specific departure and arrival times all contributed to a very strong representation that each specific flights was able to be selected and purchased by the consumer.
    2. While Qantas was correct that the Pre-contractual Statements somewhat mollified the primary representations, they weren’t sufficiently clear or prominent to overcome those presentations, which were very strong and clear and repeated throughout the purchasing journey.
    3. While consumers might understand from the Pre-contractual Statements that flights might be slightly delayed in terms of departures and arrivals or could be cancelled at a later date (due to weather events or similar issues), they would not understand this to extend to flights that had already been cancelled.
    4. The ‘bundle of rights’ argument was overly technical and would not be understood by the many of their customers once the Court applied the “ordinary, reasonable consumer” test to the conduct.
    5. Some of the Pre-contractual Statements were ‘sandwiched’ within other information (relating to currency and additional fees, taxes and charges) not relevant to the purpose of the qualifying statement.
    6. The colouring, styling and location the Pre-contractual Statements (namely, small light grey lettering fixed to the bottom of the page may not have been sufficiently visible to dispel the consumer’s belief that a specific flight would operate.
    7. The Pre-contractual Statements (in the form of pop up windows and mandatory acknowledgements) were found towards the end of the consumer’s booking flow once the consumer had already been convinced to start the process of investigation and purchase.

    In short, it is our view that Qantas was at serious risk of being found by the Court to have engaged in misleading conduct despite the Pre-contractual Statements and, as such, we aren’t surprised that Qantas settled.

    What can businesses learn from the case?

    The decision provides some important lessons for business trying to qualify or impose conditions on a strong, clear and prominent primary claim.

    • Strong primary claims need clear and prominent disclaimers.
    • Separate any qualifying statement from other irrelevant information.
    • Conduct will be judged by the usually very low standard of the understanding of the ordinary, reasonable consumer. Qualifying statements must clear, proximate and prominent.
    • Avoid incorporating qualifying statements in the ‘marketing web’ or late in the purchasing journey.


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    Want to know more?

    Shaun will be covering this topic in his next Watchdog podcast episode. Stay up to date with these proceedings, and other leading ACCC cases, by subscribing to our Watchdog podcast series below.

    By Shaun Temby, and John Naoom

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