Qantas and one of the key shareholders in Virgin Australia are skirting the law in their apparent attempts to negotiate a truce over prices and capacity, Australia's top competition regulator has warned.
Competition and Consumer Commission chief Rod Sims said he had heard public comments from Qantas and from the Virgin shareholder Etihad along the lines of: ''We need to reduce capacity,'' and: ''If you reduce capacity we will.''
''That's what's known in the trade as a facilitating practice,'' he told a competition seminar in Canberra. ''It's against competition laws in Europe and the US.''
Price signalling legislation introduced by Labor's Wayne Swan makes it illegal for firms to use ''nods and winks'' in the media to communicate about pricing or market strategies. In banking the practice is known as ''the mating call of the banks''.
Although at the moment the regulations introduced under the act apply only to banks, but the act itself is worded broadly.
''It is not against the competition laws in Australia unless you are in the banking sector,'' Mr Sims said, referring to the apparent behaviour of Qantas and Etihad.
On Monday Etihad's chief, James Hogan, a former Ansett executive, issued what appeared to be a plea for the two airlines to stop fighting over capacity and prices.
''At some stage the market has to correct itself,'' he told a media conference call. ''The market has to price correctly and in most cases it is the market leader who takes that initiative. I think there needs to be responsible pricing in Australia.''
Mr Sims told the conference Australia had ''laws that stop you making those statements in the banking sector''.
The capacity war between Qantas and Virgin has delivered consumers bargain basement prices while wiping out both airlines' profits and driving Qantas to cut 5000 jobs and unsuccessfully seek a government debt guarantee. It's the third time in a year Mr Sims has expressed concern about apparent public negotiations between the two. In September Qantas boss Alan Joyce told a media conference that if Virgin stopped building its capacity: ''I would be quite happy to make sure that Qantas adds zero.''
In March the head of Qantas domestic, Lyell Strambi, said that he would add two more flights for each one that was added by Virgin. ''If a competitor puts one in, we will put two in as a group,'' he said. ''We are not making any apologies for it. That's the game and people need to understand the game.''
Mr Sims said he would use the government's forthcoming competition policy review to push for the price signalling law to be extended to businesses including airlines.
''We have laws that stop you making those statements in the banking sector, but that's the only sector and that's a very strange way to go about making a law,'' he said.
Other businesses to which the laws could be extended could include petrol retailers and supermarkets.
Mr Sims was speaking at a seminar to mark the 21st anniversary of the so-called Hilmer competition policy reforms. He said much that remained to be done. Australia still had restrictions on coastal shipping even though it was an island nation.