§ 8.7 p.m.
§ Earl AMHERST rose to ask Her Majesty's Government whether they are aware that the Agency Investigating Panel of IATA are circularising some of the smaller travel agencies to the effect that as they do not produce air ticket sales to a figure prescribed by the Panel their licences are being currently withdrawn and whether this is not a restrictive practice. The noble Earl said: My Lords, I ask this Question as it seems to me that the situation arising as between the IATA Agency Investigating Panel and some smaller travel agents has now reached a position where some sort of official inquiry is needed. Not long ago, I tried at some length to explain to your Lordships how, without IATA—an organisation supported by most if not all the international air lines of the Western World—the whole structure of fares and rates and also the general practice of commercial relations between air-lines would collapse into total chaos, possibly accompanied by a fall in standards that might also involve safety. That was perfectly true when IATA was first set up and it is true today. Consequently, I am a firm supporter of IATA.
§ IATA saw fit to set up an appendage called the Agency Investigating Panel, whose function it is to check the many hundreds of travel agents to make sure that they adhere to the rules of the club—in other words, that, in the opinion of the Panel, they are worthy to continue to hold IATA approval and so to sell airline tickets. There is a considerable variety in the size and scope of our travel agents and there must be a considerable difference between the service requirements of a small travel agent with modest premises and a small staff but who has, over the years, assiduously built up a large clientele who require a wide variety of travel facilities, and the really big agents who have commanding premises and huge staffs. One assumes that the Agency Investigating Panel take these differentials into full account in scrutinising agents, but have they and do they?
§ It must be recognised that, very understandably, the airlines are anxious to make sure that the cost of servicing their agents should not over-run revenue bene 112 fits. However, there now comes a circular letter addressed to many smaller agents virtually demanding that they increase their air ticket sales to a figure determined by the Panel or lose their IATA approval. In one case that I know of, the target figure demanded by the Panel is nearly double the agency's previous sales. An agent of more than 40 years' standing tells me that this is the first time that the agency has been so threatened or, indeed, approached by IATA at all, although it has frequently been visited by airline representatives to aid and abet its activities and to express satisfaction. I am informed that already 25 small agents have recently had their licences withdrawn—and at five weeks' notice. So far as I can ascertain, IATA has remained stubbornly dumb as to who these agents are. I hope that the noble Lord who is to reply for the Government will be able to tell us who they are.
§ The IATA passenger sales agency book of rules published in English, but in Paris, in April 1961 states that when an agent is notified that his licence is to be cancelled he shall have not more than 30 days to make known his wish to go to arbitration, and that if in this period he wishes to name an arbitrator he is required to put up, by a certified cheque, a deposit of 500 United States dollars or its equivalent to ensure satisfaction for any costs payable by him. There does not appear to be any such requirement demanded by IATA. I have not heard that this rule book has been subsequently amended or withdrawn.
§ In any case, arbitration is an expensive business and is likely to be well out of the financial reach of many small agents, but well within the financial reach of IATA and its owners. No such demands seem to have been made to agents in the United States, Canada or Australia. Indeed, in the United States I believe there is a drive to increase agencies, even to the small shops. So it looks as if this action by the Panel is restricted to Europe. I am told that recently a small agent in Italy took IATA to court on this issue and won its case.
§ Besides selling air tickets, many small agents—in fact most—also sell rail, road and boat transportations as well as hotel accommodation. But the main business 113 of most of them is the sale of airline tickets. If they lose their licence they are debarred from selling these airline tickets and must close down, with the loss of all their other business, and so a very widespread and considerable travel facility will be denied to the general public. The consumer will then likely be forced to deal only with a few big agents whose sales offices may not conveniently be in many consumers' localities, or indeed even in the same town.
§ In all this the IATA Investigating Panel seems to be acting as judge, jury and prosecutor, which I submit is not in the public interest. It is difficult to escape the uncharitable thought that such a creeping elimination of the small travel agents would not at all be unwelcome to two or three of the big agents who could then scoop the pool and be in a strong position to establish a monopoly, which I should have thought would amount to a restriction of trade. The sitution seems to be one of, "heads I win, tails you lose", with the small agents on the losing end. I hope that when the noble Lord replies he will be able to tell us what steps are to be taken to monitor this whole position—if not by the Monoplies Commission, then by whom?
§ 8.14 p.m.
§ Baroness ELLIOT of HARWOOD
My Lords, I rise to support all that has been said on this subject by the noble Earl, Lord Amherst. I, too, have been told that IATA policy on the other side of the Channel—namely, that organised from Canada and the United States—has not pursued this action of trying to cut off the heads of small agencies; in fact it has not discouraged small agencies at all. It seems to me most extraordinary that the IATA Panel should have settled on the United Kingdom and some European countries, while no one in the United States or Canada has been treated in this way. The situation as described by the noble Earl, Lord Amherst, is, I believe, absolutely monstrous. That people in the small agencies should be singled out for this treatment in a very arbitrary manner seems to be quite unjust. We should look at the position very carefully to try to see what can be done to change it.
Travel agents cater for a very wide spectrum of the population. Many people 114 like to travel in very large groups. They take package holidays, which are catered for largely by the big travel agencies—and there is no harm in that, except that some of the big agencies are successful, but others, as we know, are not successful at all, as I understand my noble friend Lord Onslow is to point out in his speech.
I want to concentrate on the personal service which is given by the small agencies to their clients. It is this personal service which is so extremely valuable and which brings clients over, particularly from the United States of America and other dollar countries, and which is the backbone of our tourist trade and of the airlines. The agency which caters for small groups and individuals is the type of agency which I believe is important, and there are small agencies in America which are linked to individual agencies here. Groups with special interests come over from the United States and from other parts of the world, too. These may involve, for instance, special trips organised by the National Art-Collections Fund, to see art exhibitions, or trips to see gardens or historic buildings. There are also special small groups which leave this country to see other museums and similar attractions on the Continent. Such groups are organised —I believe successfully—by the Victoria and Albert Museum and the National Art-Collections Fund. There have also been trips organised for the Venice in Peril Fund. These are specialised services which are particularly suited to be handled by small, specialised agencies.
When the noble Lord, Lord Oram, replied to a Question on Monday he referred to the 760 agencies in this country which are operating with IATA licences. These agencies are giving personal service on an excellent scale to people coming into this country and they are doing valuable and important work here. The fact that companies do not want to become very big and lose their personal touch is a very good thing indeed. Why should people be told that they must become larger when in fact they are running excellent services which are much valued by their clients? They are bringing substantial foreign currency, particularly dollars, to this country. To withdraw the licences of these companies and to close them down would be very serious from the point of view of the air travel population 115 here. Furthermore, it would hurt the agencies, as the noble Earl, Lord Amherst, said, because the rest of their business, which may well be concerned with other types of travel—by sea or rail, or organising bus tours—is tiny compared with the enormous amount of air travel in the world today. By adopting this kind of policy IATA is cutting off the hands that feed it with tickets.
Furthermore, it was suggested by the noble Lord that the agencies which are being so treated by IATA should appeal against this treatment and this letter; but, as the noble Earl, Lord Amherst, has said, appealing to the law is a very expensive operation, and while it might be quite possible for perhaps a dozen or so agencies, all of whom have been treated in this way by IATA, to get together, how can they do so when no one knows who are the other agencies which have been treated in this way? To take a case to court in this matter would mean that you would have to get certainly a dozen companies which would come in with this scheme and would co-operate in a court case. There are 25 companies, we are told—there may now be more, because more of these letters have gone out—and we do not know any of them except those that are known to those of us who happen to have a personal interest in any particular company and who therefore have been told what is happening.
I think this is an extraordinary way to treat people. I also understand that the targets which are in fact set vary. One company has been suddenly told that it must sell another 100,000 tickets, while another company, which sells far less, is being left alone. I do not know whether or not this information is correct, but, anyway, it is some of the information which is coming through which shows that there is quite a varied manner in which IATA is operating. Why they should cut off the heads of some small companies and not others is also a mystery.
The company in which I am particularly interested has been running since 1932. Its first licence was from Imperial Airways—and that was not yesterday, my Lords: in 1934. It has been operating successfully for 42 years. It has run up no debts, and there has been no failure of business or finance. It has asked for 116 no subsidies, or help from anyone at all, and has relied on nothing except its own skill. It has a valuable clientele, particularly from the United States of America. Then, all of a sudden, it is told that it cannot continue. I think this is monstrous interference with the liberty of the subject.
In all these years the air companies—BOAC, Air France, TWA and all the others—have been perfectly satisfied with the work of this particular business (and I am sure there are others very much like it) and with the service it gives to the public. No complaint has ever been received or suggestion made that enough business was not being done. Then comes a letter saying that its licence will he taken away because this company is a small company. It is not that it has failed its clients, the airlines or the business; it is just that it is too small. There is no justification for taking away someone's livelihood for those reasons, and I trust the Government will stop IATA from taking such high-handed action.
§ 8.24 p.m.
§ Baroness BURTON of COVENTRY
My Lords, I hope we shall succeed in getting something done about this most monstrous practice, which some of us have a chance to talk about tonight. First of all, I should like to thank the noble Earl, Lord Amherst, for giving us the opportunity to do so, because it seems to me that a great many people had no idea that this sort of thing was going on. I also very much hope that the Minister who is to reply will do his best—I am sure he will—to answer the questions that are put to him. I have some simple ones that I shall put during my remarks; and it really is not the slightest use writing to me afterwards to tell me the answers. What I am anxious about is to have the answers, if possible, in Hansard, so that we can see where we are going.
First of all, if I may, I should like to deal with the more general aspect and to take some of the points made by the Minister in his reply to the original Question on Monday last. The fact that there are at present, as he told us, about 4,500 travel agents in the United Kingdom, of whom 760 are approved by IATA and who operate from over 1,500 locations, seems to me to have nothing to do with the point of principle with which the 117 House is concerned. But, as the Minister has brought this in, may we be told whether the approximate 3,500 agents not approved by IATA sell airline tickets; and, if so, on whose authority, and on behalf of which airlines? I have given the Minister notice of that question. Secondly, on his reply concerning the 760 agencies approved by IATA, what on earth has the number given to do with the withdrawal of licences from efficient and profit-making agencies? I would repeat, in effect, what the noble Baroness, Lady Elliot, has said: Is it a crime to be small?
The other main point I would make on the Minister's comments concerns something of which I think many people inside and outside Parliament have become completely weary. I wish we could do away with it once and for all, or certainly stress it a great deal less in this House. My noble friend Lord Oram told us that the present version of the IATA resolution was approved by the Department of Trade and Industry in 1972, and included a provision for arbitration machinery. Here, I am not implying criticism of my noble friend—the answer was in reply to an intervention—but my noble friend the Leader of the House rather stressed this aspect in his remarks, and I have no desire to look a gift horse in the mouth, because even though we are late it is due to my noble friend Lord Shepherd that we are having this debate at an early date. But my noble friend is a fair man, and I am quite convinced that he will agree that what matters is not who set up what. The people who are now losing their livelihoods are not concerned with such distinctions: what they are concerned with, and what they hope for, is fairness and equity, and I hope very much that by our speeches in this House tonight we can help to bring it about.
Now, my Lords, to the issue. I told the House on Monday last that recently 25 small travel agencies have had their licences withdrawn by the Agency Investigation Panel of IATA. Why, my Lords? Let me give the House actual details of two firms. One, which apart from the war years has been operating since 1932, has virtually been closed down at five weeks' notice. It has always been a small business, giving the best personal and efficient service to clients. It has never advertised, building up by personal recommendations.
118 In 1974 they had a letter from IATA advising them that their figures for 1973 were not up to what IATA considered they should be. This was the first time that any minimum figure had ever been suggested. They were told that unless their figures improved considerably their licence would be taken away. In 1976 they had another letter asking for a breakdown of figures for the years 1973, 1974 and 1975, and for the first two months of 1976. This they provided, showing an improvement of X thousand pounds in 1975 over their 1973 figures. The figures for January and February of 1976 showed an even better improvement, and so did those for the first five months of this year.
In spite of this improvement, on the 24th May they had a letter from IATA in Geneva telling them that from the 30th June they could no longer do business with any IATA carrier. On receipt of this letter they at once made an appointment to see the IATA representative in London, asking that they be given a few months' extension so that they could deal with the business they already had in hand, and to give them a chance of amalgamation with some other, similar business. At intervals through the month of June they could get no decision on this, and only on the 1st July did a letter arrive from IATA advising them that no extra time could be given them.
The firm take exception, very strongly, to the fact that after 44 years they have virtually been closed down at five weeks' notice. They stressed to me that they have obeyed every IATA regulation and there has never been any delay in paying the various airlines by the correct date. In conclusion, my informants say that it would appear, so far as they are concerned, that nothing can be done to alter the situation. But they believe that the matter should be questioned at the very highest level so that other unfortunate travel firms do not have to face this kind of experience in the future.
If I may summarise briefly from another firm, I am told, as I have already said, that 25 small travel agencies have had their licences withdrawn. Names have not been disclosed so that it is impossible for each of them to find out who the other victims are; so that they cannot fight the decision together by taking what would be 119 expensive legal advice. One of these agencies who appealed to IATA was told that he could take the matter to arbitration, but that it would not be worth while as solicitors would have to be employed and this he could not afford to do on his own. I am told that the 25 who have had their licences cancelled were warned a year ago that this would happen if they did not increase their turnover; and that in the case of at least three—and, for all I know, others—the target given was quite an impossible figure. Such figures mean that many travel companies in this country engaged in giving a personal service to their customers will be forced to close down merely because they are small—at least, they believe so.
This firm has always concentrated on being a small business offering a personal service to a varied clientele, 50 per cent. of whom are Americans, and over the years it has contributed a great deal in dollar earnings. I am informed by these agencies that the airlines have always been delighted with the amount of business produced by companies of their size; but now, it seems, it is unacceptable to be small. It was in November 1975 that this prosperous firm received a letter from IATA threatening to close the firm, for no reason except that it is small, and giving an impossible target for air ticket sales. The agencies conclude —and I agree with them—that such action seems to be quite wrong since their service to their customers and to the travel industry in the United Kingdom has always been appreciated, and that by remaining small they have been able to give a special type of service.
I am hoping that the Minister will say why these 25—and I think he gave the figure of 26—agencies have had their licences withdrawn. At the same time, could he tell us how many more have been approved and the conditions for such approval? These examples, and the facts accompanying them, are the background to the point of principle that we are discussing today. For all I know, similar facts may apply to other agencies affected. But it is always wiser to deal with what one knows, and these are my main examples. Arising from them, there are four points which I should like to put to the Minister in addition to the query at the beginning about the 4,500 travel agents 120 in the United Kingdom. I imagine that the answer can be passed along to him before he comes to reply.
The first question is this: has this Agency Investigating Panel of IATA the right to close down agencies in the United Kingdom? If the answer is: "Yes, under existing regulations", then I would hope that these would be changed after today's debate. The second question—and separately from that—is whether it is not contrary to the provisions of the Treaty of Rome on fair competition to close down agencies in this way. Can firms be closed down because they are small? Thirdly, I find it difficult to believe that the present Government would condone the withdrawal of licences from efficient and prosperous agencies offering a personal service greatly valued by their clients.
Have we really reached a stage when business from small firms making a profit is to be stamped on by bureaucracy and crushed out of existence? This is how it looks to the two firms who talked to me. Fourthly, if we have reached that stage, I want to know why this is being done. Is should like to know how this Panel of IATA arrives at its figures—figures which have been described as quite impossible by small prosperous firms. Is this present programme of removing what is small done at the behest of IATA, at the behest of the Panel or at the behest of the large airlines themselves? Somebody must be responsible. Could we be told whom?
Having asked that question, I now seem to he in a position to answer it. I do not know whether the Minister could comment on this in his reply, but in the BBC radio programme "Checkpoint" on Friday this affair was discussed. The IATA spokesman in Geneva was asked why these agencies had had their licences withdrawn. He said that it was not because of any malpractice and not because of any administrative costs for IATA, as these were negligible. The fact was that the large airlines had so ruled.
Many of us in this House and certainly I, myself, have been fighting this battle for a long time: the battle against the ever-increasing power of bureaucracy, of what is "big". My experience here, without taking account of that in another place, has been with gas, electricity, the 121 Post Office, British Airways. The list is long and continues to grow. I regard the growth as ominous. I am not saying that size is wrong or should be avoidable; but what alarms me, and others, is the inexorable growth of bureaucracy.
Those of us who stand in the way, or who try to stand in the way, seem to face a never-ending policy of rule by size and weight—by the large organisation plus Government Department against the individual. And we seem to face this which-ever political Party is in power. At times, and after many years, it seems wearying; and one becomes tired of being regarded as a nuisance. But if we give up, who is left?—just the bureaucracy. And so those of us who are persistent enough, and tough enough, to bear displeasure will have to refuse to be trodden on. It may be that one day we shall succeed; and perhaps we could start today.
§ 8.38 p.m.
My Lords, the House will be grateful to the noble Earl, Lord Amherst, for having put down this Unstarred Question and having succeeded in doing so remarkably quickly after the Starred Question of last week. I think that everyone would agree that the replies which the noble Lord, Lord Oram, gave to the supplementary questions on that occasion were entirely unconvincing and give cause for great concern. By that I do not mean to be offensive in any way. I do not think it was the fault of the noble Lord, Lord Oram. It was the nature of the subject and the replies which were appropriate to the subject which caused concern. I hope therefore that the Unstarred Question this evening will be an opportunity for the noble Lord to clear the air.
I would say at the outset that I am not blaming the Government for this situation. I know that the first thing that the noble Lord, Lord Oram, will say is that the International Air Transport Association has nothing to do with the Government, it has its own rules and procedures and that this is not a Government responsibility. Perhaps it is not a Government responsibility, but the facts that have been brought to. light this evening indicate that there is a very real concern with which I think the Government should involve themselves.
122 I was glad to see the noble Baroness, Lady Burton of Coventry, taking such a keen interest, as always, when consumer and aviation interests interlock. My advice to the noble Lord, Lord Oram—if I may be permitted modestly to give it—is simply this: Watch out! The noble Baroness's speech had all the indications of the danger signals flashing. I can recall answering questions from the Despatch Box a short while ago, and before the noble Lord, Lord Oram, was here, frequently, constantly, endlessly and without let up—and I may also say without recrimination—from the noble Baroness whose particular item of excitement then was the West London Air Terminal. I can assure the noble Lord she will not be fobbed off with any rotten or evasive Answers. I like to think in my day that she did not get any rotten or evasive Answers; and, for that reason, I cannot understand why she continued to put the same Question down regularly week after week for nine months.
As I understand the situation, any travel agency who wishes to sell an airline ticket for an airline which is a member of IATA has to have a licence from IATA to do so and, therefore, the agency has to be approved by IATA. I cannot help thinking from the replies which the noble Lord, Lord Oram, gave the other day that if there are 4,500 agencies and only 760 are approved by IATA, what do the other 3,700 seat, because I have never found a travel agency from which I could not buy a ticket. Possibly I have been lucky. However that may be, it is perfectly fair for IATA to approve the agencies. There is nothing wrong in that. Airline tickets are expensive and are valuable documents. A wrong booking, incompetent documentation or suspect financial viability of the firm could cause chaos.
It is reasonable that IATA should approve those agents who are to traffic in their goods. Maybe they should be sparing in their allocation of new licences; maybe they should make the hurdles high for a prospective new applicant who wishes to begin to trade in their tickets. It is a very different thing to remove from people who are already in business their licence to trade. Very often travel agencies deal in a number of commodities other than airline tickets, but the sale of airline tickets may make a substantial contribution to the 123 viability of their enterprise. The removal of this right to trade in this commodity could seriously embarrass them financially and, almost worse, even if it did not, it could cast an innuendo on their efficiency and integrity as a firm.
Therefore, I suggest the sanction of removing the right to trade is infinitely greater than the authority to grant a new licence to trade. It is a powerful and, in this case, monopolistic weapon to use. On occasions, we all know the right to trade has to be removed. What we want to know from the noble Lord, Lord Oram, this evening is, in these circumstances, what is the reason for it? What are the criteria for it? Small firms have been told that if they do not increase their sales by a certain amount or to a certain figure at a certain time, their licence will be removed. Indeed, we heard from the noble Baroness and others this evening that some 25 cases have fallen within this category. So I ask: What are the criteria?
As I understand it, the target given in each case is different, depending on the firm and the location of the firm. Does the target relate to sales or airline sales as a proportion of the agency's whole sales, or what? Indeed, one queries what is the justification for IATA requiring a certain level of sales, as they do, in, if I may say so, a perfunctory and bureaucratic fashion. I venture to quote from a letter from IATA in which your Lordships can see the way in which IATA consider this situation. They wrote to a firm and said:In examining your productivity for the year 1973 the Agency Investigation Panel in comparing your achievements with other approved passenger agents in similar environments find that your sales performance is below that expected of an agency of your standing. The Panel considered that the minimum productivity expected of your agency was £112,000.The interesting part is that the figure of £112,000 was put in in different type to the remainder of the letter. Therefore, it looked as if the letter itself was cyclo-styled and sent out to a number of different companies with the appropriate figure being put in. The letter continued:This letter therefore serves to notify you that the Agency Investigation Panel will consider recommending withdrawal of your IATA approval after twelve months from the date of this letter, unless the situation has shown considerable improvement.When examining your position after twelve months from now, the Agency Investigation 124 Panel will compare your current year's performance against the minimum level expected of an agency of your standing in an area comparable to your area. The minimum expected level cannot of course be known until the close of the current year, and for this reason I cannot be more specific than to indicate to you your present weakness relative to other approved Agents.I should have thought that was a pretty offensive letter, not only in the threat and I the financial implication. but the tone of the letter which was cold, unyielding and to many would seem frightening. It is slightly humourous that the address at the top of this letter (this will ring a bell in Lady Burton's heart) was Room 619 of the West London Terminal.
The noble Lord, Lord Oram, said, in answer to one of the supplementary questions the other day, that it was reasonable that the Association should require a minimum size of operation by appointed agencies. Why, my Lords? I hope the noble Lord will be able to tell us. He, answering for the Government, said that it was reasonable to require this and I should like to know why. What possible difference does the size of operation of an independent agent make to IATA? It is not a rhetorical question. I hope the noble Lord will answer it. Surely the viability of the enterprise and the success in dealing with customers, and the personal and public relations of the firm should be of more importance, even if that means the firm remaining small. I refer to the remark of my noble friend Lady Elliot which was endorsed by the noble Baroness, Lady Burton. What is wrong with being small?
If size is so important, why has it suddenly become so important, and why does it need such sudden action? For instance, as in the case of two of the companies to which the noble Baroness, Lady Burton of Coventry, referred, if they have been in business for 42 years and 44 years respectively, why should this have been entirely acceptable in 1960, 1970 and 1975, but has become so unacceptable in 1976 that the right to trade is removed within five weeks? Again, I should like to quote from an IATA letter so that your Lordships can see the tone of it:I refer to our letter of 16 January, 1976, advising you that Member Airlines do not consider the results of your efforts to promote the sale of International Air Passenger transportation as satisfactory.It goes on to say:I am now directed to inform you, with regret, that the Board decided to withdraw the approval 125 granted the above location to sell international air passenger transportation on behalf of appointing Member Airlines as an IATA agent.It continues:The effective date of the withdrawal of this approval is 30 June 1976".The letter was written on 21st May 1976.
The letter continues:Arising from the above, I regret being compelled to request you to return to this office, at your earliest opportunity, the IATA Passenger Sales Agency Agreement and also, under registered cover, all validation dies, plates or stamps incorporating the assigned IATA Code Number 91–2 4488 (not the entire validator imprinter), this Code Number being no longer valid after that date. You are also requested to remove the IATA crest from the entrance door or display window of your Agency, and to delete any reference to the IATA crest or insignia on your stationery.Again, that is a cold, unyielding letter written in a frightening bureaucratic form. I use the word "frightening" advisedly, because not many people like to get that kind of letter from people whom they know have authority over them. It is bad enough to have that authority over you: it is worse when the authority is displayed in such a manner as that. Even accepting that this is necessary, who is going to benefit from it—the small business man? No; he cannot possibly benefit. The consumer?—obviously not, because if the consumer had not been satisfied with the service he was getting he would not have gone to that agent in the first place. What about IATA? I am bound to say that I cannot see how they will benefit. The large business?—of course they will benefit because they will be able to scoop up the crumbs which fall from the small businesses as they are closed down. Will this benefit individual airlines, who are the members of IATA? I have a horrible feeling that it is the individual airlines, the members of IATA, who will benefit. If that is so, perhaps the noble Lord, Lord Oram, will tell us how. I do not want to put him on the spot, but I am seeking information.
This, as the noble Baroness said, is another example of a bureaucratic regimen being introduced for reasons which are wholly obscure. It will kill off the small man and can only lead to the long-term disadvantage of the consumer. Perhaps the noble Lord, Lord Oram, can remove some of the obscurity this evening. 126 I think that this sanction to remove the right to trade is a desperately powerful sanction to put in the hands of a body like IATA. The power to remove from businesses the ability to trade would be quite intolerable, if it were in the hands of an individual. It would be hated, even if it were acceptable, if it were in the hands of a Government Department. But being used, as it is, by a body which is no more than a consortium of airline operators—the majority of whom run their businesses at a loss—does not in my judgment make it any more acceptable or justifiable. I think it is unreasonable.
The noble Lord may say, as he did the other day, "You can go to arbitration". With respect, I do not think that that is a satisfactory answer. The fact of going to arbitration, as the noble Baroness said, is expensive and frightening to most small businesses. This Government, and indeed all Governments, I think, use the fact of arbitration far too readily as a means, as it were, of whitewashing bad legislation and disagreeable practices. There is no Party political point of view whatsoever in this, so far as I am concerned, and I hope that the noble Lord, Lord Oram, will not say, as he did before, for some reason which I did not really understand, that it was the fault of a Conservative Government for setting up something or agreeing to certain practices when they were in government. I am the first to admit that not all we did when in government was right. Of course it was not; but the point is that this is happening now. Does the noble Lord, Lord Oram, think it is right? If so, why? If he does not think it is right, are there any steps which the Government can take to improve the situation? And if there are, what steps will the Government take?
§ 8.55 p.m.
§ The Earl of ONSLOW
The noble Earl, Lord Amherst, is sincerely to be thanked by all of us in your Lordships' House for his efforts on behalf of these small companies, one of whom my family have used since the war and have never had anything but cheerful and helpful service to what at times has been a difficult client. The two companies of which I have knowledge have two different sales target figures. One is 45 per cent. of the other. What is the explanation of this? Incidentally, the smaller one has reached 55 per cent. of its set figure in the first five months of this 127 year. This has had no effect on IATA, however, and the licence was withdrawn last week. I am informed by a gentleman in IATA that they have recently issued 20 new licences. Will the noble Lord, Lord Oram, please inform your Lordships of the criteria on which these licences were issued?
My last point is this. When Mr. Gordon Ruddock of IATA spoke on the BBC programme "Checkpoint", one of the reasons he gave was that it was done for the benefit of the protection of the public. I do not have his exact words, but I checked this when I heard the tape replayed to me. I must admit that I gave a hollow laugh. What action did IATA take to protect the public when the Court Line and other travel agencies failed two years ago? The same London spokesman for IATA admitted to me on the telephone under, I would hasten to add, considerable pressure, that it was done at the request of the airlines. As the noble Earl, Lord Ferrers, has said, these airlines are not renowned for their profit-making or efficient running.
The noble Earl, Lord Ferrers, also spoke of the high-handed tone of the IATA letters. They seem to me to be the ukases of a weaker czar, issuing rockets to bad chessmen-makers in Siberia. Magna Carta, my Lords, among other things said:No free man shall be disseised of his freeholds or liberties.That was repeated in a Petition of Rights 300 years later. Neither of these, to the best of my knowledge, has been repealed. It now seems that IATA is bent on disseising the freeholds of these small companies, which is arbitrarily removing 80 per cent. of a man's business and so putting him out of business. That, to my mind, is disseising you of your freehold.
§ 8.58 p.m.
My Lords, I am sure we can all agree that we have had a worth-while debate and that we are all grateful to the noble Earl, Lord Amherst, for having taken this early opportunity to put an Unstarred Question.
In one sense, of course, this debate began, as the noble Earl, Lord Ferrers, reminded us, a week ago at Question 128 Time, I am grateful to him for the way in which he referred to the exchanges on that occasion and, in a sense, to my personal position. I am sure the noble Earl is right in saying that on the occasion of last Monday's Question Time the House was clearly impressed by the points which the noble Earl, Lord Amherst, and my noble friend Lady Burton were able to marshall in their Supplementary Questions. I make no secret of the fact that this evening I have myself been very impressed by many of the points that have been brought forward, the illustrations that have been read from correspondence and so on.
May I first take up points which have been made by quite a number of noble Lords and Ladies regarding smallness? The noble Baroness, Lady Elliot, linked personal service with smallness and the question has been asked: what is wrong with smallness? Let me assure those who have made this point that they have me with them. Indeed, until I came to occupy the position which I now hold in your Lordships' House I was working closely with a certain Dr. Schumacher who wrote the famous book Small is Beautiful, and I very much share his philosophy. So in that sense there is very little difference between us on that point.
But I want to say—reverting to last Monday—that I was very grateful, as I am sure were others who have interested themselves in this matter, to my noble friend the Leader of the House for his suggestion that this matter could best be taken further forward, as we have been doing tonight, through the medium of an Unstarred Question. For a variety of reasons, it was not satisfactory to pursue it last Monday. I suggest that my noble friend's advice has had three beneficial effects. First, as this evening is showing, an Unstarred Question gives us greater freedom and greater time to deal with a complex matter of this kind and to deploy the many facts and arguments on both sides of the case.
Secondly, I notice that it has given the noble Earl an opportunity of rephrasing his Question somewhat. Last Monday's Question suggested that the problem was one for the Monopolies Commission, and figures I gave in my reply indicated that 129 this was far from being the case. I am glad to see that this week our attention is, in my view quite rightly, now being called to the possibility that we are dealing not with a monopoly situation but with a restrictive practice. Thirdly, and perhaps most important, I have welcomed the opportunity during the past week to give the matter further and quite deep consideration within the two Departments for which I speak, in consultation with the Civil Aviation Authority whose chairman is with us; and I again acknowledge how much we appreciate his attendance when these matters are being discussed.
Later I shall seek to explain the procedures and something of the legal position, but I believe it would be helpful at the outset if I summarised the outcome of that further consideration which it has been possible to give in this intervening week. There are two aspects of the problem. The first concerns the legality of the action taken by IATA, and my noble friend Lady Burton gave me notice that she would ask this question for which I am grateful to her. What is the legal position? Is the IATA agreement a restrictive practice which should be registered with the Office of Fair Trading and investigated by them? In my view, following the consideration of the last week, it is a borderline case and the answer to that question can be given only by the Director-General of the Office of Fair Trading and ultimately, if necessary, by the Restrictive Practices Court. But I can say that the Government intend to consider this whole matter afresh, in the light of any views which are put forward by the Office of Fair Trading as to the status of the agreement under the Fair Trading Act. I know that the Director-General is aware of this problem and he will no doubt be giving it due consideration.
My Lords, can the noble Lord expand a little on that, because what he has just said is extremely important. Am I to understand him to say that it is up to the Office of Fair Trading to say whether or not this is fair, and that if it says it is unfair the Government will take action? I was not quite certain what part the Government would play.
My Lords, what I was saying was that it is up to the Office of Fair Trading to take note of the problem, 130 to indicate whether, in its view, it is a registrable agreement, and to investigate the nature of that agreement. What I was further saying was that the Government will review the whole problem that has been raised last Monday and this evening, in the light of any views which the Director-General may bring forward.
§ Baroness BURTON of COVENTRY
My Lords, may I just ask the Minister—it is so wonderful to get a favourable response; we are nearly all stunned, but we thank him—this question? While this consideration is being given, is there the slightest chance—he may be coming on to this—that these firms, which, as we think, have lost their livelihoods because they are small, may be able to continue in business until the Government have looked at the matter, or will they have to suffer as at present?
My Lords, I was coming on to deal with a second point—not the question of the legality, but the question of the practical application of the criteria of IATA in establishing agents. If my noble friend will await that, I think she may be stunned still further. I was grateful to the noble Earl, Lord Ferrers, for warning me about the thunderbolts that can come from behind me. But let me assure him that I knew my noble friend Lady Burton in another place long before the noble Earl knew her, and I recognise her dedication and persistence in any of the causes that she takes up. But whatever the situation regarding the legality of IATA's action, there is, secondly, the question—and it is to this that most noble Lords have directed the attention of the House—of whether the way in which the criteria have been applied in withdrawing approval from certain agents is satisfactory from the point of view of the public.
If my noble friend Lady Burton of Coventry will take a deep breath, in this connection I am very glad to be able to tell the House that the Civil Aviation Authority have assured my right honourable friend the Secretary of State for Trade that they have already taken steps to inform IATA that the Authority's approval of Resolution 810A no longer extends to the criterion of turnover and, moreover, that the Authority will be further studying the agreement which is embodied in that 131 resolution in the light of the anxieties which were expressed a week ago and which have been very much reinforced this evening.
I hope that what I have said on both counts will he seen by your Lordships as a welcome indication that action is already being taken and that all relevant aspects of this question will be further examined. I have no doubt that we shall return to the subject from time to time. Therefore it will, I believe, be helpful if I explain first in a little more detail than has hitherto been possible the system and the criteria—it was this that the noble Earl, Lord Onslow, asked about—which IATA uses in approving its agents and the advantages of the system as seen by the Civil Aviation Authority. Secondly, I should like to say something about the arbitration system which has been a little unduly criticised in one or two quarters. Finally—although I do not think that I need to pursue it very much further—I should like to deal with the question of whether IATA's agreement is a restrictive practice that is registrable under the restrictive practice legislation. If I deal with those questions I think that it will help us in any future consideration of these matters. I hope also that your Lordships will concede that in view of the two rather helpful statements which I have been able to make I shall not need to deal in full detail with the previous situation which has now been changed as a result of what I have said.
§ The Earl of ONSLOW
My Lords, first may I thank the noble Lord for giving way. Can the noble Lord tell us how the effect of the withdrawal on 13th June of the licence to sell air tickets is or is not to be altered by what he has just said? The noble Baroness, Lady Burton of Coventry, made this point and the noble Lord did not quite answer it. Is that company now going to be able to sell air tickets again?
My Lords, I shall come later to the effect of the action taken by the Civil Aviation Authority and if what I say does not entirely meet the noble Earl's point perhaps he will intervene. The information which the Government have about the arrangements of IATA for the approval of agents is provided to them by the Civil Aviation Authority. They examine and approve on our behalf agreements entered into by member airlines on 132 fares and conditions of carriage. The procedure which I shall describe has received their approval, just as it had the approval, in much the same form, of the Government themselves before the Authority was set up in 1972.
If I may reply to a point that was made by the noble Earl, Lord Ferrers, on Monday last I was not seeking to make a Party point. I merely quoted a date. It was the noble and learned Lord, Lord Hailsham of Saint Marylebone, with a little of a guilty conscience, perhaps, about 1972, who, I thought, reacted unnecessarily forcefully. I was not then, nor am I this evening, seeking to make a Party point. I was then making purely an historical analysis.
IATA has set up an agency administration board for the purpose of appointing and retaining the Association's agent. The hoard is advised by a local investigation panel for each country. Any travel agent may apply to be entered on the IATA agency list and it is for the agent to decide whether or not it is in his interest to become an approved agent, having regard to the benefits and obligations which this entails.
The House will appreciate from the figures I quoted last week that with 4,500 travel agencies and only some 1,500 locations approved by IATA it is by no means essential to hold an IATA approval in order to be able to carry on the business of a travel agent. It was here that my noble friend Lady Burton of Coventry asked about those which are not approved. She asked whether they could sell air tickets and whether they did sell them. The answer is that they do, but of course they do so without commission. My noble friend will then no doubt go on to say: "But a good many sales go on through agents who are not approved under the IATA system of approval", and I recognise that there has grown up a market in discounted air tickets and that this is unsatisfactory. However, we are tackling that problem and trying to remove the unsatisfactory features, and some progress in this matter has taken place.
There are highly successful agencies that concentrate on forms of travel other than the scheduled services of IATA airlines, including, of course, package holidays by air. Once a sales agency agreement has 133 been concluded with the agent, the Board reviews regularly the agent's performance in selling tickets on international scheduled services of member airlines. If for any reason at all the Panel considers the performance of the agent to be unsatisfactory he is, I understand, first told informally.
Both last Monday and this evening your Lordships have focused attention on the question of the level of sales, although of course that is only one of the other criteria that the Panel keeps in mind; and it was this point of what are the criteria that I think the noble Earl, Lord Onslow, was asking about. The procedures seek to ensure that agents are reputable folk; that they are financially sound; that they have adequate accommodation and that they are capable of providing a satisfactory and comprehensive service, both to passengers and to the airlines, and if an agent is regarded as having failed to match up to the IATA standards that agent is later given a formal warning.
§ The Earl of ONSLOW
My Lords, I am sorry to interrupt the noble Lord again, but is he aware that in the case of the two companies of which I and other members of your Lordships' House have knowledge, not one single factor other than the level of sales tickets was being questioned by IATA? I am very pleased that the noble Lord is producing the other factors, but in these two particular cases no factor other than the level of sales was queried.
My Lords, if that is so—and I do not at all dispute that piece of information—it will be all the more satisfactory to the noble Earl to know that the CAA has withdrawn its approval of that particular part of the agreement, certainly for future cases, and I shall come to further points in that connection in a moment.
My Lords, I apologise to the noble Lord, but I should like to interrupt also. Do I understand from what he has said that the criteria by which one is accepted as an IATA approved agency are the ones which he has given and that level of sales is not a criterion?
My Lords, whether or not I said it I am not sure, but I intended it to be understood that although the level of sales was one criteria, there are others. The noble Earl, Lord Onslow, then intervened to suggest that in those particular cases it was only the one criterion that had been operated. I do not dispute that, and I suggest that if that is the case it is all the more satisfactory that the CAA is dealing with that aspect of the matter.
My understanding is that the agent is given the opportunity to put a case if he considers the target to he unrealistic, and it is only at the conclusion of this period that the Board may give an agent final notice that in 30 days his name is to be removed from the list. There have been one or two references to harsh treatment in terms of rather sudden warnings or decisions, but I think it will be found that they occur only after a considerable period of more informal warnings and that the 30 days is the actual formal period.
As I said last Monday, the agent is given the opportunity to take the matter to arbitration. I want to say a few words about arbitration in a moment. In the meantime, may I deal with the question of disclosure of the names. The noble Earl, Lord Amherst, referred to this, as did the noble Baroness, Lady Elliot of Harwood, and the noble Baroness, Lady Burton of Coventry, on Monday. All referred to what they considered to be an unsatisfactory situation about disclosure of names.
If I may here express a personal opinion, in my view such refusal can be justified only if the agent himself has reasons for his name not to be published. In my view, IATA should make inquiries of each agent to see whether he objects to his name being disclosed. If there is no such objection, then I think it should become public knowledge. In the particular cases referred to last Monday, the CAA is seeking the consent of the disapproved agents to disclose their names to other disapproved agents. Having said what I have as my personal view about the need for more openness in this matter, nevertheless, I should point out that there is an early indication that some of the 135 agents concerned certainly have reservations about their names being disclosed. So it is not just a case of getting a list and letting the whole world know, because there may be consideration in the minds of individual agents which would argue against disclosure. I am sure that this will be recognised.
§ The Earl of ONSLOW
My Lords, I am sorry again to interrupt the noble Lord, Lord Oram, but would it not be possible to have a half-way house, where the agents could be informed among themselves, without it being published to the whole world?
My Lords, as I indicated, this is the approach being made by the CAA. This is why they are making approaches to the individual agents. I have set out the procedure at some length, largely because I wanted to dispel any impression that the 26 agency locations which have recently received a final notice have only been aware of the possibility of having their approvals withdrawn in the past few weeks, or that those agents are necessarily the smallest. The mere fact that agents may sometimes fail to meet the sales target does not mean that they are therefore unsound. This is a point made by others in the debate. In some cases, quite the contrary might apply. It could be that an agency decides to concentrate on selling travel by charter flights because it finds it to its own advantage to specialise in that business.
I suggest that it would be understandable if IATA members viewed the policy of such an agent with disfavour because, after all, charter airlines are in direct competition with the scheduled services of IATA carriers. However, I am not necessarily saying that the pursuit of such a policy by the agent would in itself justify the withdrawal of IATA approval. I am just pointing to the fact that it would be understandable that IATA would not look with favour upon agents who boosted the trade of their competitors.
My Lords, may I now say a word about the advantages which the Civil Aviation Authority sees in the IATA approval system. I have already indicated, in answer to the noble Earl, Lord Onslow, 136 that the procedures seek to ensure that agents are reputable, financially sound, have adequate accommodation, and are capable of providing a satisfactory and comprehensive service both to passengers and to the airlines. The servicing of agents by airlines, which includes the supply of documentation and tickets, which are accountable and negotiable, is expensive to airlines. It is in the interests of keeping fares down that not too many agents are appointed in any particular area. However, as I have already said, the CAA has taken action on the turnover criterion for settling how many agencies there should be.
As I indicated, may I deal with the question of arbitration, because there were one or two rather critical references to that in this debate. I think it is worth spelling out what is involved in arbitration, since any judgment on the reasonableness of the system itself as a whole must surely depend on the view that is taken of this. If the agent and the Panel cannot agree on a single arbitrator, each party appoints one, and then the two appoint a third to act as chairman. The noble Earl, Lord Amherst, quite rightly told the House that there is a deposit then required of 500 dollars or, indeed in some cases 750 dollars, depending on whether one or three arbitrators are involved. The cost of the arbitration may work out at more or less than this, and the sum is forfeited if the agent loses his case. I agree that this sum is by no means trivial, particularly for a small business; but I suggest that your Lordships should remember that an agent can earn up to £100 in commission from the sale of a single long-distance air ticket. So that, to some extent, puts the deposit in proportion, although I agree again that it is a burden perhaps on a very small man.
The noble Earl, Lord Amherst, referred to a case in Italy, and I should like to follow him in that, because it is, I suggest, an interesting example of arbitration in practice, and one which shows that it is a mistake to underestimate the value of the arbitration procedure. I have seen a Press report about this case. It involved a leading Italian agent, and the arbitrators found in the agent's favour. The Panel came up with some interesting findings on the methods which IATA ought to use. 137 It said that the productivity target should be only a rough guide and that it should reflect market potential and economic conditions. Investigating Panels should tell agents how their targets are calculated, and targets should be communicated in good time to allow results to be improved. Finally, in the case of multiple outlet organisations—and some of the 26 to which we have been referring are in fact locations of a multiple outlet organisation—the results of the company as a whole should he taken into account. These strike me as eminently sensible findings by that arbitration tribunal, and if IATA acts on them, as I would hope, it may help to dispel doubts about the fairness of its procedures.
I have already perhaps sufficiently dealt with the question of a restrictive practice, and indeed the noble Earl, Lord Ferrers, intervened to give me a further opportunity of explaining the position, and unless I am asked further I propose to leave that as sufficient. There was a question, I think from the noble Earl, Lord Onslow, about the effect of what I was able to announce earlier about the CAA withdrawing its approval of an important aspect of the agreement. Perhaps I should say that the effect of the withdrawal of the Authority's approval is that IATA members in the United Kingdom will be free to make other arrangements with travel agents if they wish, and can do so without infringing the Association's rules. That will be the effect of the action that the CAA has taken. But they will not be compelled to deal with any particular agent. It is not the case that withdrawal of approval of the agreement will render the practice as a whole illegal. But I believe that the action that the CAA has taken is an important step in meeting the central point of the question that the noble Earl asked.
I hope that this evening I have been able to do three things which can be helpful to those who have taken such a keen interest in this matter. First, I have indicated that the Civil Aviation Authority has already taken action since last Monday, and that it has stated it is prepared to study further the working of Resolution 810A in the light of the anxieties expressed in this House. Secondly, I have said that the Government will consider the matter afresh when they 138 receive the Authority's views and when the position under the Fair Trading Act has been clarified. Thirdly, I ventured to spell out, perhaps unduly at length but I hope not, some information which will be helpful to your Lordships on future occasions when we consider these matters. I am sure there will be such future occasions because, as we have been reminded, in this matter we have certain protagonists—one behind me—who are very vigorous, very incisive, and very persistent in their examination of these things. I have no doubt that if these duties remain to me I shall be confronting the same team on future occasions. Let me say that I look forward to those occasions with equanimity, and I hope I may say with confidence that between us we shall seek to see that justice in these matters can be done. I believe that we have taken a number of steps in that direction this evening.
§ Baroness ELLIOT of HARWOOD
My Lords, may I ask the noble Lord one further question before he sits down? I appreciate that he has come a long way, but he has not said anything about the agencies who have been cut off now. Is there no possibility of a moratorium for them pending the inquiry and the procedure which the noble Lord has so kindly given to the House? It is very important. I acknowledge the moratorium; that is, that they will not be cut off until the decision is made. But 30th June is only 10 days ago.
My Lords, I agree that it is a most important question: but I would urge the noble Baroness to appreciate that it was only in recent hours that this particular decision was reached so that I should be able to convey it to your Lordships' House. There are certain consequences that I should prefer, if she will excuse me, not necessarily to follow through. If I may speak off the cuff, I think that they would possibly be covered by what I said about IATA member airlines being free to make their own arrangements with travel agents without infringing the rules of the Association. This does not mean that the 26 will necessarily be desirable agents to any particular airline, because the circumstances will need to be examined. But I think that door at least is opened up. Whether the airlines will go through it is for them to decide upon.