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BA has not abused dominant position with lower booking payments

PN 87/02     11 December 2002

British Airways (BA) has not infringed the Competition Act 1998 by making low booking payments to travel agents, the OFT has decided.

The decision follows a complaint from the trade association ABTA (Association of British Travel Agents) which alleged that BA had abused a dominant position by excessively reducing the payments it makes to travel agents for booking BA short haul flights. BA reduced the payments from £6 to £2.50 for economy tickets and from £11 to £5 for premium tickets in June 2002. ABTA argued that these lower payments do not allow travel agents to cover their costs and that BA is obliged, by virtue of an alleged dominant position, to pay a reasonable level of remuneration.

The OFT has concluded that, even if BA was in a dominant position in any relevant market - a question which is left open in this decision - the reduction in booking payments is not an abuse. As with other providers of retail services, travel agents are free to recoup their costs from consumers through a mark-up or service fee.

ABTA also argued that if travel agents charged customers a service fee to cover the costs they incur in issuing tickets, this would encourage customers to book their tickets direct online at BA's website instead of through a travel agent.

The OFT has decided that such price differences between online and agency tickets would not be abusive. Different means of selling tickets have different costs and the additional service provided by travel agents, such as searching for available routes and schedules, could feasibly be reflected in the price they charge.

The OFT has therefore found that BA's reduction in booking payments has not infringed the Competition Act.

NOTES

1. Powers under the Competition Act 1998
The Act gives the Office of Fair Trading powers to investigate suspected infringements of the Act's prohibitions:

• Chapter I prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices which have the object or effect of preventing, restricting or distorting competition in the UK (or any part of it) and which may affect trade within the UK (or any part of it)
• Chapter II prohibits conduct by one or more undertakings which amounts to the abuse of a dominant position in a market which may affect trade within the UK (or any part of it).

2. ABTA is trade association representing over 2,000 travel agents and tour operators in the UK. ABTA complained to the OFT in May 2002 regarding BA's decision to reduce booking payments to travel agents from June 2002.

3. In this press release the functions of the Director General of Fair Trading (DGFT) under the Act are for simplicity described as the functions of 'the OFT'. The Enterprise Act will replace the office of the DGFT with the OFT, to which will be transferred the DGFT's functions.

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