Originally Posted by
MickG0105
The legality of pricing strategies under the Competition and Consumer Act 2010 largely comes down to a matter of intent. Generally it's not illegal to sell an item 'below cost', particularly if that decision forms part of a legitimate marketing strategy such as attracting new customers and gaining market share. Similarly, it is not illegal for Qantas and Virgin to match Rex's prices so long as their intent is simply to protect their business.
It would have been illegal if Qantas had have rolled out $39 fares that started a week before Rex launched and then carried on selling them till say the end of the year. That would likely meet the three elements of the test for predatory pricing, specifically that Qantas:
a. had substantial market power,
b. that the pricing strategy had an anti-competitive purpose, and
c. that the very low prices were sustained.
The fact that it is Rex who is leading the charge on low prices essentially absolves Qantas and Virgin from any entanglements when they price match. Just another master-stroke from dumb as a bag of hammers Sharp and Co. in Rex's self-induced exsanguination.
There is also the issue of the directors' duty of care to the shareholders. Directors cannot deliberately pursue a strategy that worsens the wealth of the shareholders and, if found to be acting against their fiduciary duties, they can be personally liable for losses. I would imagine class action lawyers are already paying careful attention to the behaviour of ZL's directors and may look to launch an action if the losses continue.