LEGAL BRIEFS
If pact says you’re not an agent, cruise line can’t dictate prices
Mark Pestronk is a Washington-based lawyer specializing in travel law. His Legal Briefs
column appears regularly in Travel Weekly.
Q :A
a
i cruise line has presented our
gency with a new contract offer-ng high commissions and overrides. We would like to sign, but the contract contains some peculiar clauses.
In one place it says that we are not an
agent of the cruise line, and in another
place it says that we must sell only at the
prices dictated by the cruise line, with no
discounting allowed.
The same contract makes us liable for
deposits, final payments and cancellation
fees due from our clients even if the clients
don’t pay or get their credit card charges
refunded. Is it legal for us to sign such a
contract?
A:N
t
a o, it is not legal. Signing the con-ract you describe could create civil
nd even criminal liability under
the antitrust laws for both the cruise line
and your agency.
The Sherman Antitrust Act has been interpreted by the courts to mean that a supplier such as a cruise line cannot dictate the
prices at which a middleman may offer the
supplier’s products and services to the public. Such resale price maintenance is considered to be price-fixing by the supplier and
the middleman.
For the travel industry, the sole exception
to the rule is the principal-agent relationship. When the middleman sells as agent
for the supplier, the supplier is free to control the level of pricing and the terms and
conditions of the sale.
You could send a copy of this column
to your sales rep and the vice president for
travel agency sales, along with a list of proposed changes to the agreement that would
make it consistent with either agency status
or nonagency middleman status, depending on what agreement you and the cruise
line can reach.
Finally, I’m sure that the following question has occurred to clever readers: If I just
go ahead and sign the illegal agreement,
can I ignore the anti-discounting clauses, as
they are unenforceable?
The answer is that you can legally ignore
them, but you need to be cautious because
the cruise line might try to terminate the
agreement.
Then all you could do is sue for an injunction reinstating it, which would probably make the cruise line decide not to renew it next year.
To submit a question for Legal Briefs, e-mail Mark Pestronk at mark@pestronk.com.
The DOJ and
FTC would love
to pounce on
any evidence
of price-fixing.
By stating in the fine print that your
agency is not an agent of the cruise line,
the contract goes part of the way to negating your agency status. By making you responsible for paying the cruise line if your
clients don’t pay, the contract goes the rest
of the way toward making you a nonagent
middleman.
So, you should not sign any contract that
states that the supplier has the right to dictate prices unless the contract clearly states
that you are an agent. The U.S. Justice Department, the Federal Trade Commission
and numerous class-action attorneys are
watching the cruise industry, given its highly concentrated ownership. They would
probably love to pounce on any evidence of
price-fixing.
I realize that you have a practical problem in calling these matters to the attention
of the cruise line. Your sales rep will either
have no idea what you are talking about or
pretend to have none, and your agency does
not have enough clout with upper management to get its attention.
