Guest Post: PPC bidding restrictions on agents is an issue that won’t go away

By Colin Matthews, managing director at Travel Club Elite

There is no doubt that the future of travel retailing, as for most of retail regardless of sector, is online.

There will always be a place for the many, excellent, traditional travel agencies, but the growth in online activity and purchasing is unstoppable.

However, our experience is that many operators are seeking to exclude agents from the online marketplace, by restricting their Paid Per Click (PPC) advertising.

At Travel Club Elite, we believe that this is incompatible with UK and EU Competition and Fair Trading law.

This is a view backed by specialist travel law firms at this year’s Abta Travel Law seminar and the Competition Markets Authority (the new Office of Fair Trading).

The CMA refers to two pieces of relevant legislation: ‘Competition Act Guidelines on Vertical Agreements’ and the ‘European Commission’s Guidelines on Vertical Restraints’.

There is also recent, relevant case history of OFT action against a company in the mobility scooters industry placing illicit restrictions on its agents’ advertising.

However, the CMA seems to have no appetite to take action, since so few travel agents have complained.

The reason for no complaints is that agents risk their livelihoods, in an unequal dispute with tour operators and their much bigger resources.

Operator restrictions are becoming more and more onerous, having moved beyond not allowing brand name bidding, to attempting to block bidding on resort, or property names, or both.

Some operators have gone even further and ask agents, as a condition of trading, to set negative keyword matches, to block any possibility of consumers seeing an agent’s advertisement.

Recent research by Deloitte shows that it is unrealistic to expect customers to book on the first site visited, or indeed with the first price offering they find.

A very significant 59% are searching for price alternatives. Also, 81% of travel shopping baskets are abandoned, compared to 68% of other online retail.

Online agents act as an important remarketing tool in this regard, closing sales which the tour operator has not, for whatever reason.

So, if tour operators imagine that consumers will make a booking on their first, or even subsequent visits to their site, or call centre, they are sadly mistaken.

Worse is that they risk their prospective customers disappearing off to rival companies.

Agents create a valuable ‘firewall’ effect, by surrounding operators’ own Google listings with their own ads promoting the operator, at their own expense and displacing competitor ads.

It seems that operators are trying to have the best of both worlds, relying on travel shops for bookings, but seeking to control and dominate the online space, exclusively for themselves.

No prizes for guessing where that leads for most agents.

What operators are risking, however, is a consumer backlash when the public realises that they have been prevented from seeing all options.

We operate in a free market, thank goodness, and we must all be allowed to compete fairly and openly.

It has been suggested that if operators want to stop agent discounting and insert restrictions in contracts to prevent this that agents agree to then that is fair enough.

This is most definitely not a ‘grey area’, it’s price-fixing, absolutely prohibited by law, with draconian penalties.

Agents and operators should not touch such agreements with a barge-pole.

This is an issue which will not go away and needs to be addressed openly by the operators concerned, in conjunction with Abta, consortia and the CMA.

Consortia should look at building protection for their members into agency agreements, especially where the operators have ‘preferred’ status.

We should not wait for a show me your boarding-card-type scandal that has hit airports recently to erupt and take us all by surprise.

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