Q: Our largest corporate client
is interested in buying our agency. Is it legal under ARC rules for
corporate clients to acquire agencies? Isn't there some prohibition
on ticket sales to your parent company or to yourself? If not, can
anyone acquire an agency? What about banks? What about foreign
companies? What about multilevel marketing companies or so-called
card mills? What about a company in bankruptcy?
A:
When I first starting writing columns for Travel Weekly 21 years
ago, corporations could not own travel agencies if they were going
to issue tickets for their own business travel.
Agencies were
supposed to sell travel to the general public, and an agency that
existed primarily to service the buying needs of a parent company
was not viewed as selling travel at all.
Even though these
rules made sense to everyone and were supported by the travel
agency community and the airlines, ARC repealed them. Well over a
decade ago, ARC did away with any limits on the ability of
corporate or institutional clients to own agencies, as long as they
sold at least some tickets to the public.
Eight years ago,
ARC approved appointments for corporate travel departments. or
CTDs, and IATAN followed suit. Since a CTD is just a division or
department of a corporation, it was only logical that ARC would
drop the requirement that an acquired agency that became a
subsidiary would have to sell to the general public.
So, today, as far
as ARC is concerned, anyone can acquire a travel agency, as long as
they meet ARC's ownership qualifications, which essentially
are:
" The applicant must be a U.S.
company or a foreign corporation authorized to do business in the
local jurisdiction in which the agency is situated.
Note that ARC does
not care what kind of company the applicant is, even if it is a
bank, foreign company, multilevel marketing company, card mill or
bankrupt company.
" Every person involved in the
day-to-day operations with access to ticket money must be a U.S.
citizen or an alien authorized to be employed in the
U.S.
"
Officers, directors, qualifying managers or employees with access
to ticket stock or ticket money cannot have a financial interest in
a travel agency that was canceled by, or is in default to, ARC;
cannot have been convicted of a felony or misdemeanor related to
financial activities; and cannot have been judged by a court to
have committed a breach of fiduciary duty involving the use of
funds of others.
Even then, if the
conviction or occurrence happened more than seven years ago, there
is a good chance that ARC will approve the new ownership
anyway.
ARC also has
approval rules related to personnel, location and finances, but I
am assuming that your agency already qualifies under those rules.
The only issue is whether a new owner will qualify.
Finally, under ARC
rules, every agency must identify on its tickets a sale to itself,
its employees or parent company. As far as I know, however, there
is no adverse consequence when you do so.
So by all means,
pursue your corporate client's interest in buying your agency, as
long as your client meets ARC's criteria.
Mark Pestronk
is a Washington-based lawyer specializing in travel
law.