The Association of Retail Travel Agents (ARTA) added still another dimension to the United Airlines credit card cost shifting controversy by filing a complaint with the Department of Transportation (DOT) and a request for a rulemaking investigation of the “discriminatory airline credit card policy” announced for selected travel agencies by United Airlines on July 20. ARTA also asked the Airlines Reporting Corporation (ARC) to state its position on the issue. Alexander Anolik, ARTA’s general counsel, charged United with trying to bypass, if not eliminate, agents so that United could deal directly with consumers.
In a statement, ARTA said United's notice to certain travel agencies prohibits those agents from selling United's air transportation utilizing United's merchant account:
“This may turn the travel agent into a credit card service provider and thereby, it seems, make agents directly responsible for chargebacks if and when the carrier goes back into bankruptcy,” ARTA said. "The Airline Reporting Corporation's accreditation and settlement program that replaced the Air Traffic Conference of America (ATC) established that ARC was to set up criteria to accredit travel agents who could be relied upon to sell air transportation in a reasonable and competent manner and to account for the funds they received from the public on behalf of the carriers. It has always been ARC's position that monies paid by consumers to agents are to be held in a fiduciary manner strictly for the benefit of the carrier and not to be encumbered by the travel agent.
"Creating a new scenario where a travel agency merchant account could be charged back for defaulting carriers, such as we have seen in the past and could see in the near future, places too much of a burden upon travel agents and is not consistent with the policies contemplated and imposed by ARC in the current settlement system," the statement continued. "This is not a system the DOT should allow carriers to put upon agents. The ARC Agreement was created, in part, to account for both cash and credit card funds collected by agents on behalf of the carriers they represent and to settle those funds with ARC on behalf of those carriers.
“Nowhere in the Agreement does it say that an agent is authorized to use its own merchant account to issue traffic documents," ARTA said. "Several sections, in fact, cite how the use of a travel agency credit card is prohibited for booking consumer tickets. A major concern for the airlines was the floating of cash or obtaining frequent flyer miles by agents utilizing their own cards. By not allowing the consumer's credit card to purchase the ticket through an agency, United is encouraging what are consumer risk management issues. This also encourages consumers to stop using travel agents, who are the only objective source of travel information in the industry.
“Travel agents are bound by their accreditation by ARC and the Industry Agent's Handbook, section 8 and section 80," the statement continued. "ARC specifically implies that agents are in an agent-principal relationship with carriers, holding in trust all transactions, cash and credit on behalf of the carriers. There is no process or procedure, which dictates the manner in which credit card sales are to be handled other than where the carrier is the merchant. To date ARC has not made its position clear. Section 8.4 (Credit Card Acceptance and Charge Back Information) can be read no way other than where the carrier is the merchant.
“It clearly indicates that the agent accepts a credit card, as agent for the carriers, where the carriers themselves process the transaction as merchants.," ARTA continued. "ARTA has asked the DOT to immediately request that United defer its implementation of its new credit card policy until the DOT has been able to have a thorough investigation and issue a rulemaking decision.”
ARTA additionally called upon ARC to state its official position on the matter, state its position as to how the proposed action by United Airlines would impact ARC reporting agreements with the targeted agencies and announce what processing procedures agencies in receipt of the United letter are to use to avoid violation of the ARC settlement agreement.
Anolik also advised travel agents that “under law” a group is prohibited from boycotting when the agreeing parties hold a dominant position in the relevant market. “Because of the action of United and other carriers, travel agents are now directly competing with online agencies and the airlines' own sales through direct carrier solicitations and other antitrust-riddled carrier sales policies," Anolik said. "Therefore, travel agents do not hold the dominant position in the 'relevant market,' which would be the sale of United tickets to consumers. For years, United has worked to bypass and eliminate the agent community and deal directly with consumers. Therefore, an agent's plan to plate away from United Airlines would not appear to meet the new antitrust criteria of a prohibited boycott."