Shady Business with United Airlines Merchant Accounts
Travel agencies have typically relied upon acting as a merchant of record under the merchant accounts of airlines for ticket sales because of the costs involved in disputes regarding these high value transactions when airlines cannot deliver on the service offered due to flight cancellations, et cetera. However, United Airlines has made a move to break with this tradition by notifying several low-volume agents that they will no longer have the ability to make sales using United’s merchant account. The 28 affected travel agencies were first notified of this action by United on June 19, 2009, and were told that their access would be cut off by July 20, 2009. As a result of protests, United has since extended the cutoff date an additional 60 days. This would mean that the affected travel agencies would have to absorb the costs of using their own merchant accounts, if they could even qualify for them, or pass the costs onto customers in the form of higher service fees.
The protest lodged by the affected agencies claims that United’s action would undermine the Fair Credit Billing Act and is simply an attempt to shift operating costs to travel agents, and ultimately on to customers. United asserts that consumers would still be protected under the Fair Credit Billing Act which offers protection in the event that the airline would declare bankruptcy, and analysts point out that the amount of costs that United would be passing on to so few a number of agencies would not be significant. So why would United do this?
Speculation is that this is simply a trial for a much broader action by United to shift operating costs to agents. But the implications of this are much broader than cost shifting when considering how this would affect online travel services which allow for easy comparison between the price of tickets offered buy different airlines, forcing consumers to deal directly with United. Without access to airline merchant accounts, online travel agents would not be able to offer such easy comparison between airlines.
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