Pearls and Irritations

As reported in Pearls and Irritations on 11 November 2024, the ACCC executive members who had accepted membership to the QANTAS Chairman’s lounge should have divested themselves of that benefit before commencing the investigation into QANTAS or resigned. Following on from the ACCC issue, Australia at least at the Federal level, has a very serious issue involving gifts received by its regulatory agencies.

Currently, some Commonwealth regulators accept gifts from organisations they regulate and believe that by declaring them in their gifts and benefits register, that is the only treatment necessary for that conflict of interest. But many Commonwealth regulatory agencies do not understand how the gifts they receive from organisations that they regulate tarnish their reputation and bring into question their independence; integrity and professionalism. And where a third party, has concerns about an action undertaken or not undertaken by a regulator, then it could have serious repercussions not only for the agency, but for the Government and Australia.

The following examples will highlight the seriousness of the current situation. The Australian Transport Safety Bureau (ATSB) is responsible for investigating accidents and incidents involving Australian registered civilian aircraft, commercial and rail operations in Australia. This would include investigating any incident involving QANTAS or Virgin Airlines. According to the ATSB it conducts independent investigations to determine the issues which led to an accident or safety incident occurring. It does not conduct investigations for the purpose of criminal proceedings or to determine liability. But is it independent? The ATSB Gifts and Benefits Register from 1 January to 31 March 2024 reveals that two ATSB Commissioners were gifted access to Virgin’s Beyond Lounge (though for one of those commissioners, lounge access was carried over from a previous non-ATSB role). While the ATSB Chief Commissioner was gifted access to the QANTAS Chairman’s Lounge and to Virgin’s Beyond Lounge on 1 July 2023.

Airservices Australia is Australia’s air navigation service provider and lists amongst its services air traffic management and aviation rescue and firefighting services. It claims to “strive to achieve safe, efficient, equitable and transparent management of Australia’s airspace”. But its transparency is questionable because the Chief Executive Officer accepted a gift from QANTAS, namely membership of the Chairman’s lounge, which was effective from 31 March 2024.

On 31 July 2024, the Group Manager for Corporate and Engagement at the Office of the Fair Work Ombudsman (FWO) accepted the gift of “Lifetime Membership of Frequent Flyer Program” from QANTAS. While on 23 October 2023, the Fair Work Ombudsman accepted lifetime membership of the QANTAS frequent flyer program. The FWO monitors, investigates, and enforces compliance with Australia’s workplace laws. It has previously dealt with a matter involving QANTAS underpaying its marketing and administration staff. While that occurred several years before the current gifts were accepted by mangers referred to, the acceptance of gifts from organisations subject to regulation by a regulator or umpire, raises questions or doubt about the thoroughness, independence and integrity of any investigation undertaken.

The Australian Securities and Investments Commission (ASIC) gifts, benefits and hospitality register for ASIC Commissioners for 1 January to 31 March 2024 simply records: “Complimentary membership of Qantas lounge for 2024” for 5 commissioners plus one “Complimentary membership of Virgin Airlines lounge for 2024” for a commissioner in addition to her Qantas membership. The type of lounge membership is not stated. ASIC is Australia’s corporate regulator or corporate cop as it is sometimes referred to. If it intended to undertake either a criminal or civil investigation into QANTAS or Virgin Airlines, the senior executives who accepted lounge membership as a gift would be in the same position as the ACCC senior officers were in relation to the ACCC investigation of QANTAS. ASIC executives with exclusive lounge access gifted to them by the airline being investigated would have to cancel the membership or resign to remove the conflict of interest.

The continued acceptance of the lounge privileges provided by QANTAS and/or Virgin by various senior managers of Commonwealth regulatory agencies, including those referred to earlier could raise questions about their independence and impartiality. Even if, an agency such as the ATSB, does not conduct investigations to determine criminal or civil liability, any report it prepared on its findings could end up in court. For example, the ATSB finds no fault against either QANTAS or Virgin in an incident involving a third party. An injured third party might have grounds to seek a fresh investigation from another agency, on the basis that the ATSB, due to the connection between senior staff and the airline involved, was biased.

Australian Government regulators represent the Australian people. They exist to protect Australians from harm. Whether it be in ensuring a safe flying environment, protecting people and business from scams or pursuing corporate criminals who use companies as vehicles to strip creditors and investors of funds. Australia and Australians rely on them. And to be valued, regulators must not only be effective in the discharge of their functions but also be seen to be effective. The acceptance of a gift in any form, by a regulator from the regulated, creates a serious conflict of interest and destroys the faith Australians have in them and its management. The only way for a conflict of interest to be avoided is for regulatory bodies to refuse a gift from entities they regulate.

The Australian Government must immediately mandate that no Commonwealth department or agency accepts any gift or benefit from any organisation that it is responsible for regulating or could be involved in investigating.

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