Businesses must be alert to potentially misleading sales practices and unfair terms
This article was written by Niki Sharp, Assistant Director, Consumer Protection and Andrew Hadley, Assistant Director, Policy and International, Competition and Markets Authority for ABTA's seventh edition of Travel Law Today which can be downloaded here: abta.com/travellawtoday
At the CMA we investigate a variety of consumer issues – our aim is to ensure markets work well for the public and that all customers, especially those who are vulnerable, are treated fairly.
As part of our consumer investigations, we have looked at the travel sector and a number of industries that sit within it, ranging from car hire to online hotel booking sites through to unfair terms linked to deposits and cancellations.
We have powers to stop businesses breaking consumer law. We also work with industries, for example, sharing guidance so businesses are clear on their consumer law responsibilities and take them seriously. We are doing exactly this in the travel accommodation online bookings market.
Online hotel booking sites and potentially misleading sales practices
Earlier this year, we announced that we had secured undertakings from Expedia, Booking.com, Agoda, Hotels.com, Ebookers and Trivago to avoid practices that the CMA considers could be misleading to customers, such as pressure selling, misleading discount claims, search rankings and hidden charges. Following this enforcement action, we developed a set of detailed principles for all online accommodation booking sites, including metasearch engines, big hotel groups and shortstay apartment rentals. The principles1 set out in detail our view on what online accommodation booking companies need to do to ensure that they comply with consumer law. We are urging all legal advisors to relay our guidance to the travel firms they advise and we have published a short guide2 that explains our principles in simple terms.
What our principles say – at a glance
- Be transparent about rankings and ‘premium’ listings – if the money the business earns aﬀects the search results make it clear for the customer to see.
- Show customers the total price up front so they are clear on the cost of the purchase and aren’t stung by hidden charges.
- Be honest and tell the whole story if using availability or popularity messaging (for example, ‘Only 2 rooms left at this price to book on this site’, ‘15 people looking at this hotel for a range of diﬀerent dates’).
- Don’t use misleading strike-through prices and discount claims; discounts must be genuine and compare the same types of rooms for the same stay dates.
- Don’t hide unavoidable charges, like city taxes and resort fees, until late in the booking process.
The takeaway message is that all businesses in the online accommodation booking industry have until 1 September 2019 to make any necessary changes. We’ll be engaging actively with key players to make sure they’re doing the right thing by their customers and monitoring compliance across the industry. Those who don’t comply with consumer law risk enforcement action through the courts.
Looking at unfair terms more broadly in the travel sector
Small print can make a big diﬀerence when it comes to treating customers fairly and maintaining a loyal customer base. To help businesses be clear on their consumer law obligations regarding fairness in contracts, we’ve been working closely with leading travel trade associations, including ABTA, to cascade advice. We’re urging all travel businesses to ‘check-in’ on their terms to ensure they are fair, transparent and ft for purpose.
Customers care about fairness and rightly so
New research by Ipsos Mori for the CMA shows that 89% of people believe that they should get all, or most, of their money back if they cancel and the business re-sells their booking, while 85% feel that it’s unfair if they have to pay part of the cost of a booking when they cancel. Alongside this, the research shows that 66% of people feel that travel and holiday businesses do not always make it as easy to cancel a booking as they should. Of those with experience of cancelling a booking, one in five felt that they had been treated unfairly.
Sometimes cancellation fees are justified but the amount a business keeps must be reasonable and in proportion to what they’re actually losing. This needs to be transparent and made clear to customers upfront. Crucially, businesses can’t rely on unfair terms, regardless of whether a customer has signed on the dotted line on a contract or not. Only fair T&Cs will protect a travel company if something goes wrong. Having a clear contract, which is compliant with consumer law, will help preserve customer relationships, trust and brand reputation.
A term can be unfair if it gives the business an unfair advantage
Examples of unfair terms can include those that allow a business to take a large, upfront deposit and refuse to refund any of the customer’s money if they cancel, regardless of the amount the business is losing or the reason for the customer cancelling. Another example is when a business insists on a large cancellation fee that bears no relation to the actual losses it experiences from the cancellation.
The law concerning unfair terms is broad and nuanced. To help travel businesses navigate fairness in contracts they should visit www.gov.uk/fairterms.
1 Consumer protection law compliance: Principles for businesses oﬀering online accommodation booking services. See here.
2 Guidance: Being transparent with your customers: a short guide for online accommodation booking sites. See here.