Firm charges major operators with price-fixing
By David Cogswell
Originally Posted on: www.travelweekly.com
SAN FRANCISCO -- A Chicago-based tour operator is charging that some big-name suppliers are trying to get consumers to book direct on their Web sites under the guise of "leveling the playing field" by restricting price discounting.
According to Tom Stelter, chief financial officer of Foremost Travel & Tours, the policies constitute price-fixing and are illegal under antitrust law.
Stelter's attorney, Al Anolik, sent letters to the Department of Justice and the California Attorney General's office asking them to consider if the policies have antitrust ramifications.
He also sent copies of the letters to wholesalers Tauck World Discovery, Pleasant Holidays, Abercrombie & Kent, Butterfield & Robinson and Gogo Worldwide Vacations, all of which have antidiscounting policies.
"When you manipulate prices and tell agents, 'This is what you will do,' it's [an antitrust violation]," Anolik said.
He said that such violations are felonies that can incur penalties of up to a $1 million fine and a year in jail. In a civil case, Anolik added, "it can be triple damages plus attorneys' fees."
Stelter's Vacation Discount Superstore is a Web-based discount retailer that recently was told by some operators to stop cutting prices.
For Stelter, who has owned an agency since 1983, the Web channel was providing a third of his business in first-quarter 2004.
"We believe our success has been a combination of offering discounted travel and coupling the pricing with extraordinary customer service," he said.
When Stelter read about Tauck's policy change in TravelWeekly.com, he said he voluntarily took the company off his site, even though he felt it was wrong from both "a legal and a competitive perspective."
Then he heard from other tour operators.
"We were contacted by A&K, Backroads, Butterfield & Robinson, Pleasant and Gogo," he said. "They said, 'We want you to stop discounting.' " That's when Stelter called on Anolik.
The tour operators, which said they had not received their copies of the Anolik letter, offered limited comments.
"What we are doing is nowhere near antitrust," according to Phil Crosby, chief financial officer at Tauck World Discovery. "We're not saying you can't discount Tauck. We've said you can't promote and advertise the discounting of Tauck. We don't want our name out there as a discount tour operator."
Crosby added that Tauck has no plan to drive consumers to its Web site. In fact, it has no online booking engine for consumers or agents.
A Pleasant Holidays spokesman said he believes the company is on firm legal ground.
"Anyone doing business with us online must sell our products at the rates we set and not provide their own rebates or discounts that would negatively impact our pricing," he said. "This is nothing more than protecting the integrity of our product."
The Pleasant spokesman said that although the company is following an industry trend to drive consumers to its Web sites to cut costs, Pleasant is not providing any incentive for consumers to bypass agents.
"Our prices have always been the same for consumer or travel agent bookings," he said. "And even on our consumer site, we offer the option of finding a travel agent."
Michael Hughes, the deputy attorney general of California, said the office cannot comment on a letter that it has received.
John Hughes, general counsel for the U.S. Tour Operators Association, said, "We are studying this in depth. There are a lot of factors you have to consider before you can draw any conclusion."
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