No prohibition proceedings against Lufthansa’s cancellation of travel agencies’ commission

After an intensive examination lasting several months the Bundeskartellamt in Bonn has decided not to initiate prohibition proceedings against Deutsche Lufthansa AG for cancelling the basic commission it pays to travel agencies.

The President of the Bundeskartellamt, Dr Böge, stated: “The step taken by Lufthansa undoubtedly changes the economic conditions in the travel agency sector. Nevertheless, even powerful companies and even dominant companies cannot be bound to terminable contracts in the long term. They must have the possibility to cut costs, which Lufthansa intends to do by changing its ticket sales system. However, for the Bundeskartellamt it was important that Lufthansa allowed the travel agencies an adequate readjustment period and that the travel agencies have the chance to charge their customers directly for their services. Lufthansa has complied with this. Anything else would have been an unfair hindrance.”

According to the Bundeskartellamt’s findings Lufthansa has not violated the prohibition of the abuse of power under competition law. As the leading provider of air travel services in Germany Lufthansa is subject to abuse control, particularly as regards the dependence of the IATA travel agencies on the sales of Lufthansa flights. However, Lufthansa’s decision to change its sales system to save costs cannot be considered as an unfair hindrance of its travel agency partners.

Basically even a powerful company must have a possibility to use its entrepreneurial scope for action in its own business management interests. At the same time it has to take account of the dependence of small and medium-sized companies, e.g. by allowing reorganisation periods. Lufthansa has done this by granting a minimum period of six months which is compatible with legal requirements. By imposing a surcharge of 30 or 45 Euro for its direct sales Lufthansa has set a price range for its travel agency partners they can charge for their own sales services they provide to their customers.

In comparison, the specific services which the travel agencies provide for Lufthansa are limited. The analysis of the operation costs used by the Bundeskartellamt does also not reveal any specific services for the airline. The new sales contracts essentially contain no sales obligations for the travel agencies but allow them access to Lufthansa tickets and the privileges already enjoyed by all IATA agencies. Where travel agencies provide Lufthansa with billing services for cancellations or rebookings, Lufthansa has announced that it will alter operation arrangements to relieve the travel agencies of any such service obligations in future. Lufthansa will also underwrite the risk of deficits in payment (de credere) for specific modes of payment in the future. Finally, Lufthansa continues to provide the travel agencies with free services and assistance (software, booking and billing systems, incentives).

The President of the Bundeskartellamt, Dr Böge, stated: "After extensive consideration of the interests of all parties involved, the Bundeskartellamt has come to the conclusion that the cancellation of the basic commission does not constitute an unfair hindrance under competition law. The fact that service charge will be paid directly by the customers in future will result in more transparency and more (price) competition amongst travel agencies."

The question of whether travel agencies are entitled to remuneration under commercial law if they continue to act as commercial agents for Lufthansa has been left open in the evaluation under competition law. This question is subject of a civil law dispute between the German Association of Tour Operators and Travel Agents (Deutscher Reisebüroverband) and Lufthansa.