Thomson deal may face inquiry

THOMSON Holiday's acquisition of Budget Travel could yet be investigated by the Competition Authority, despite the deal being approved by the Department of Enterprise and Employment.

Under the 1996 Competition Act, introduced six weeks ago, the authority can investigate complaints of anti competitive behaviour. A new position, the director of competitive enforcement, has been created to carry out this task.

Although the position has not yet been filled, the authority would still be able to investigate a complaint, according to departmental sources. The most likely source of complaint would be the smaller tour operators. These include Panorama and Sunset Travel as well as Sunworld, which is owned by Thomas Cook. The Cork Fine Gael TD, Mr Michael Creed, has already called for the deal to be investigated.

The takeover has received a mixed response from the travel trade.

It is expected to lead to higher prices through the elimination off the late discounts that characterised the market this year. However, the prices offered in next year's brochures are not expected to be substantially higher than this year.

"If you look at Thomson's record in the UK, the smaller operators are likely to get squeezed," predicted the managing director of one major chain of Dublin travel agents, who declined to be named.

"On the positive side it could stabilise the market," said Ms Eileen O'Mara Walsh, managing director of O'Mara Travel and chairwoman of Forbairt. With less overcapacity, there is likely to be less dumping of seats and, as a result, fewer late bargains, she explained.

The expected stabilising effect on the market is likely to have been a major consideration for the Department of Enterprise and Employment when it approved the deal.

Although it may reduce competition, the takeover decreases the likelihood of tour operators collapsing overnight and holiday makers being left stranded abroad.

"My gut reaction is that it will be a good thing," predicted Ms Cathy Burke, managing director of Creation Travel. The prices of, holidays are already increasing because of the increase in late bookings as result of the poor weather so far this summer, according to Ms Burke.

Ms Gillian Bowler, the joint managing director of Budget Travel, argued that the deal would be good for consumers.

When looking at its impact on competition in the market, it must be taken into account that the barriers to new entrants are very low and customers are very price conscious, she said.

"You can lose your market share in one year.

Ms Bowler said that, although she and her husband, Mr Harry Sydner, were remaining as joint managing directors of the company, they have already been paid in full for their 10 per cent share of the company.

Ms Bowler and Mr Sydner were paid cash by Granada for their shares, before the British company sold Budget on to Thomson.

She would not comment on whether the price paid by Thomson involved stage payments linked to Budget's performance.

The exact price paid by Thomson is unclear and is thought to be at least £10 million. Budget has not paid a dividend since 1994 and has reserves in excess of £8 million, which could substantially inflate the purchase price, possibly to as much as £20 million.