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Travel agents under the whip
August 17, 2004
By Ann Crotty
Johannesburg - The competition commission has asked that national carrier SAA be fined as much as R200 million following alleged abuse of its monopoly position.
On day one of a case that will continue for the rest of the week, the competition tribunal heard yesterday how travel agents were told to challenge the sale of all tickets on "non-preferred" airlines such as Nationwide.
The tribunal also heard how travel agents were selling SAA tickets to customers when they knew there were cheaper tickets available for the same journey from Comair.
Travel agents that came under the incentive spotlight at yesterday's proceedings include Seekers, Sure Travel, American Express Travel, Tourvest and Rennies Travel.
The case was referred to the tribunal by the commission in 2001.
The commission alleges that SAA, a dominant firm, is offering incentive commissions to travel agents as well as incentives to travel agent consultants in the form of travel bonuses, in contravention of the Competition Act.
The incentives involve a basic 7 percent on all ticket sales and additional "override" incentives, which represent a significant bonus for travel agents who meet targets.
In addition, SAA offers incentives to consultants in terms of the Explorer Scheme.
The commission has requested that the tribunal orders the incentive scheme an abuse of dominance and also that the tribunal imposes a penalty on SAA of 10 percent of turnover on affected sales.
This penalty could amount to as much as R200 million.
However, SAA's legal counsel is arguing that the travel agents do not have the power to influence the consumers' choice of airline and incentives are not an abuse of dominance.
The case was brought to the commission in 2000 by Nationwide, which alleged a falloff in its sales growth in 2000 was attributable to the incentives offered to travel agents by SAA.
From its inception in 1995 until 1998, Nationwide had strong growth. From 1998 to early 2000 that growth was described by its chief executive, Vernon Bricknell, as phenomenal.
Yesterday's hearing referred to an internal memo from William Puk of Sure Travel dated December 11 2001, which stated Sure Travel was "still giving too much of our domestic business to Nationwide.
We cannot hope to keep both SAA and BA/Comair satisfied if we can give a non-preferred so much business [R40 million]."
Puk acknowledged the "very competitive pricing policy of Nationwide" and noted that Nationwide had signed up override incentive deals with some Sure Travel members.
"Members who are receiving an override from Nationwide are an embarrassment and liability to our group," the memo said.
It urged travel agents to reinforce the commitment to SAA with their staff "and challenge all sales on non-preferreds".
Comair commercial director Erik Venter, who was questioned at yesterday's hearing, also gave evidence that Comair's sales through travel agents had fallen off significantly from mid-2000.
Venter stated that Comair's investigations had revealed that travel agents were selling SAA tickets at higher prices than those available from Comair