Travel operator breaks price agreements with agent
Partnerships between agents and principals in agency relationships don’t always go smoothly. In this case, a dispute arose between a travel agent and a travel operator related to ‘price manipulation’. Specialist in obligations law Manita Hamberg discusses the case and its outcome.
Agency agreement: brokerage commission
The claimant in this case was an online travel agent which offers a so-called ‘Best Deal Guarantee’, which involves the difference in price being paid back to the customer if he/she finds exactly the same trip for a lower price on a different website. The respondent was Corendon, a travel operator which offers package holidays both through its own website and through different travel agents. The travel agent and Corendon had concluded an agency agreement which involved the travel agent receiving a commission worth 9 percent of the package amount on all Corendon package holidays for which it acted as broker.
Price via site lower than in the guide
The following provision was part of the agency agreement: “The travel operator shall respect a level playing field in terms of prices, availability and conditions. This provision is not intended to create any obligations on the part of the travel agent.” A debate arose between the two parties about the term ‘level playing field’. At a certain point, the travel agent observed that Corendon was charging different (read: lower) prices via its own website than the higher guide prices that were being imposed on the travel agent.
Travel agent: price differentiation not permissible
According to the travel agent, this was not permissible, since the ‘level playing field’ meant no differentiation may be made in the prices. Additionally, the travel agent asserted that Corendon was offering discount promotions via other travel agents and that there was therefore differentiation in the conditions and that Corendon had decided to (temporarily) remove 115 popular accommodations in Turkey from the travel agent’s package offer, resulting in a difference in availability. Plenty of points for dispute, in other words.
Corendon told to cease price manipulation
The travel agent stated that it had suffered significant losses as a result of Corendon’s actions because, since the travel agent was offering a ‘Best Deal Guarantee’, it had had to compensate many customers for the discounts provided by or via Corendon. It had also lost turnover now that accommodations had been (temporarily) removed from its offer. After these facts were noted, the authorised representative of the travel agent called on Corendon to cease the manipulation of prices and desist from further manipulation of prices and to compensate the travel agent for the losses it had suffered as a result of the imputable failure or wrongful action on the part of Corendon. The travel agent estimates its losses at over 1,000,000 euros.
Interpretation of the term ‘Level playing field’
Corendon had given notice to terminate the agency agreement and it rejected all claims by the travel agent. Corendon asserted that the provision about the level playing field did not relate to the (vertical) relationship between principal and agent, and that it was only obliged to offer its package holidays to all its agents at the same prices. Aside from this, all agents who paid towards the promotion, so-called ‘select agents’, could take advantage of specific discount promotions. The travel agent was merely a generic agent. Corendon further stated that it, in fact, was the party that had suffered losses since the travel agent was “undercutting” Corendon’s prices, causing Corendon to lose turnover. These losses were (likewise) put at over 1,000,000 euros.
Agent demands compensation for goodwill following agency agreement
The travel agent initiated proceedings on the merits, claiming client compensation upon the termination of the agency agreement in addition to compensation for the losses suffered. Corendon then filed a counterclaim for compensation. The outcome was that the judge disagreed with Corendon’s interpretation of the term ‘level playing field’ and ruled that Corendon was itself also bound by the agreement about (equal) prices, availability and conditions.
Judge awards agent client compensation
Further, the judge ruled that there was no requirement that the travel agent should understand the distinction between an ‘ordinary’ and a ‘select’ agent, and was entitled to assume that it would qualify for all of Corendon’s discount promotions. The judge also found that Corendon had failed in its duties by temporarily withdrawing the 115 accommodations from the travel agent and awarded the travel agent client compensation.
Corendon was ordered by the judge to pay the travel agent a sum in damages/client compensation of over 1,000,000 euros. The counterclaim was rejected since the travel agent on its part was not obliged to refrain from applying discounts to its package offer. In the judge’s view, therefore, the travel agent was not culpable for undercutting Corendon’s prices.