This article was first published in Travel Weekly on Friday 6 May 2022.
On 20 April 2022, the Government published its proposals to radically reform the way in which consumer law (including the Package Travel Regulations) is enforced in the UK.
New enforcement powers will introduce fines of up to 10% of global annual turnover for travel companies which do not comply with the rules on package travel, unfair contract terms and misleading marketing practices.
This article looks at the key takeaways from the proposed reforms which are aimed at putting compliance with these laws on a par with the GDPR and competition law.
New powers for the Competition & Markets Authority (CMA) to impose punitive fines
Historically, the CMA had to take a travel company to court to obtain a remedy for non-compliance with consumer law. The CMA could not impose orders or sanctions itself. This made the process of enforcing consumer law quite slow and burdensome for the regulator.
The CMA has also been unable to impose fines for breaches of consumer law. As we have seen with the CMA’s enforcement activities against travel companies during Covid-19, enforcement usually means obtaining a court order (or undertakings) from a travel company to take remedial action. The CMA is not able to impose fines for non-compliance.
The Government has now published proposals which will see the CMA given new powers to sanction travel companies who breach consumer protection law. The CMA will now be able to decide for itself whether a travel company is compliant with consumer law and impose the following measures when it considers there is non-compliance:
The CMA has become increasingly active in the travel sector over the last five years. This began with a review of the marketing practices of hotel booking platforms in 2017, which ultimately led to these platforms undertaking to the CMA to change their marketing practices.
The CMA also took enforcement action against various travel companies during the pandemic regarding the non-payment of refunds. The next time the CMA takes such action, it will have significantly more draconian penalties to impose on these travel companies and which it will be able to impose without having to go to court.
In addition to enforcing breaches of consumer law, the CMA will be given new powers to sanction travel companies if they breach undertakings given to the CMA (such as those given by certain travel companies during the Covid-19 pandemic). The CMA will be able to impose fines of up to 5% of global annual turnover plus an additional daily penalty of up to 5% of daily global turnover until the breach is resolved.
Finally, if travel companies fail to comply with information requests of the sort issued by the CMA to certain travel companies during the Covid-19 pandemic, the CMA will be able to impose fines of up to 1% of global annual turnover plus an additional daily penalty of up to 5% of daily global turnover until the breach is resolved.
The impact of these new rules on travel companies cannot be overstated. The importance of complying with consumer law, and the dynamics of dealing with a CMA investigation, are going to be radically overhauled. Travel companies have no option than to comply or face punitive fines.
Can these fines be appealed?
The original consultation posed the question whether the CMA’s fines should be appealable and, if so, whether there should be limitations on the format of the appeal. The Government intends to give companies full rights to appeal to the High Court. The High Court will have the right to look again at the matter and to substitute its own decision for that of the CMA.
Will the Civil Aviation Authority (CAA) and Trading Standards receive new enforcement powers?
The CAA and Trading Standards will not be given the same new enforcement powers as the CMA. They will not be able to decide, for themselves, that a travel company has breached consumer protection law, an undertaking or an information request. They will similarly not be able to impose fines for these areas of non-compliance.
However, the CAA and Trading Standards will be given new powers to apply to a court for an order that the travel company pay a fine for non-compliance with consumer protection law, an undertaking or an information request. These fines will be for the same amounts as described above in relation to the CMA. Therefore whilst the CAA and Trading Standards will not themselves be able to impose fines, they will be able to secure such fines by taking court action.
With the Government having made clear its intention to pass new laws to make compliance with consumer law a necessity, travel companies will need to ensure that their marketing practices, customer terms and policies for compliance with the PTRs are in compliance with the regulations.
Non-compliance will bring significant and painful enforcement activities which will be intended to send a message to the entire industry about the importance of compliance with consumer law.
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