DTI suffers travel industry rebuff

THE DEPARTMENT of Trade and Industry yesterday suffered an embarrassing and rare defeat at the hands of the Court of Appeal, which ruled that the Government had acted unconstitutionally in making an order to restrict the terms of business between tour operators and travel agents.

Thomson Travel had sought a judicial review of the orders which, it claimed, oppressively went beyond the recommendations of a Monopolies and Mergers Commission investigation of the travel industry.

The ruling could have far- reaching implications, not only for the travel sector, but for all areas of business which are or have been the subject of an investigation by the Competition Commission.

John Cook, a partner at Macfarlanes, the law firm which represented Thomson said: "This is the first time a judicial review has been successful in this area of competition law and the Court of Appeal's judgment will stand as the leading authority on the proper role and powers of ministers following an adverse report from the Competition Commission."

He said the ruling could affect the outcome of the investigation into the motor industry if the commission uncovers anti-competitive practices in the agreements between manufacturers and dealers.

The Thomson case centred on an order instigated in 1997 by Margaret Beckett, the then Trade Secretary, and signed in 1998 by Kim Howells, the former Trade Under-secretary.

The order, which aimed to stamp out anti-competitive practices in the travel industry, was drawn up in response to an earlier MMC report. But Lord Justice Laws yesterday found the order was invalid because it "travels far beyond the fulfilment of legitimate objectives and could not possibly conform to the regime for regulating monopolies on its proper construction".

Thomson Travel said: "We welcome the Court of Appeal's judgment which confirms the advice we have received throughout ... the 1998 Order was too wide and amounted to a rewrite of the MMC's findings by the Government.

"The order generated a great deal of unnecessary uncertainty in the whole travel industry as to what all travel operators - not just Thomson - could legitimately agree with travel agents and thankfully we now know where we stand."

Dermot Blastland, managing director of First Choice's UK tour business, said: "[The order] was frustrating the normal course of business. In trying to create a level playing field, the Government did the opposite."

A spokesman for the DTI said: "We are studying the judgment carefully."