KITOCA addresses ACCC concerns over anti-competitive agreements in tourism

The Australian Competition and Consumer Commission has accepted court enforceable undertakings from the Korean Inbound Tour Operator Council of Australia Incorporated after concerns about agreements entered into by KITOCA members.

In April 2007, KITOCA together with the Government, through the Korean Action Plan Implementation Group, launched a voluntary Code of Conduct for Korean inbound tour operators to comply with. This code sets out a minimum code of ethics in relation to pricing, factual itineraries, complaint handling, disclosure of shopping arrangements including commission payments and appropriate licensing requirements. 

However in May 2007, the ACCC became concerned that KITOCA and some of its members had reached agreements to:

• not deal with certain Korean tour operators unless fees paid to Australian tour operators increased
• arrange for certain duty free stores and restaurants in Australia to not allow entry to Korean tourists on tours operated by those Korean tour operators, and
• impose sanctions via financial fines and boycotts on KITOCA members who refused to be part of these agreements.

The ACCC raised concerns with KITOCA that such agreements may contravene the price fixing and boycott provisions of the Trade Practices Act 1974.

Since becoming aware of the ACCC's concerns, KITOCA has cooperated with the investigations and has undertaken that it will:

• cease engaging in the conduct
• arrange for trade practices compliance training for its members, and
• correspond with each of its members and set out their responsibilities in terms of sections 45, 45A and 45(4D) of the Act.

Acting ACCC Chair, Ms Louise Sylvan, welcomed the undertakings offered by KITOCA to address the concerns raised in regards to this matter.

"Tourism is a vital growth industry for Australia which should be encouraged and the ACCC welcomes steps taken by KITOCA to introduce a voluntary code to regulate the conduct of its members and the non-disclosure of commissions paid between operators in the Korean tourism industry." 

However Ms Sylvan said that KITOCA's members need to be aware that the code is voluntary and ultimately it is up to individual businesses to decide with whom they will do business with and any attempts to exclude, boycott or control other business operators is likely to cause competition concerns.

She added that while the payment of commissions by businesses to tour operators is not in itself illegal if appropriately disclosed, businesses need to be careful that their customers are not misled or deceived as to the true value of the goods being sold to tourists, and she encouraged businesses to be transparent in their dealings in relation to commissions.

BACKGROUND

KITOCA is an incorporated association that represents the interests of inbound tour operators for Korean tourists. KITOCA has been involved in assisting the Australian Government to improve the perception of Australia as a destination for Korean tourists and to improve the standing of the industry. This followed concerns that Korean tourists visiting Australia were being taken to 'warehouse duty free stores' where the prices of goods were grossly inflated due to large commissions being paid by the store owners to tour operators. It was believed in the Korean tourism industry that the large commissions were paid to recover the full cost of conducting the tours for Korean tourists visiting Australia, as the retail price did not cover those costs. 

These Korean tourists purchased packaged tours at retail from Korean tour operators in the Republic of Korea. The inbound tour operators then conducted the tours in Australia for those Korean tour operators.

In 2005, KITOCA considered obtaining authorisation from the ACCC to allow it to recommend minimum tour prices for tour packages, but did not proceed with this option.