The following article appeared in ABTA's issue of Travel Law Today - Spring 2022.

The Competition and Markets Authority (CMA) has played a key role in attempting to regulate the travel industry during the COVID-19 pandemic. Here are some of the steps they have taken and lessons learned.

First, some context:

• The CMA has powers and responsibilities much wider than those discussed here; the points in this article are relevant to the issues under discussion only.
• The CMA took over the responsibilities of the Office of Fair Trading (OFT) in 2014. The OFT no longer exists.
• For our purposes, the powers and responsibilities of the CMA stem from the Enterprise Act 2002 (EA).

The EA gives the CMA power to deal with domestic infringements, which include breaches of any enactment that provides for a criminal penalty as well as breaches of contract (and even torts) that harm the collective interest of consumers (Section 211 EA). It doesn’t matter whether any previous criminal or civil proceedings have been taken. The list in Schedule 13 EA of enactments includes the Package Travel and Linked Travel Arrangements Regulations 2018 (PTR), the Consumer Rights Act 2015, and the Consumer Protection from Unfair Trading Regulations 2008.

Enforcement is carried out via Enforcement Orders, which are, in effect, injunctions to stop companies breaching their legal obligations. These can also include orders to pay compensation to consumers, and to take other steps to stop the consumer detriment.

However, before applying for an Enforcement Order, the CMA is required (except in an emergency) to consult with the business concerned with a view to reaching an agreement whereby the business gives ‘voluntary’ undertakings to comply with its legal obligations (ss 214 and 219 EA).

A business that gives and then breaches an undertaking will find that taken into account by a court in subsequent proceedings. It is important for a business not to give an undertaking that is impossible to comply with just to get the CMA off its back.

The pandemic
The CMA has taken the following steps regarding the pandemic:

• It sent two letters (10 July 2020 and 13 May 2021) to many travel companies warning them that it was monitoring concerns over:

1. Refunds to consumers, especially those payable within 14 days of cancellation under Regs 11, 12 and 13 of the PTR (cancellation by the organiser, the consumer or following a significant change to a holiday).
2. Misinformation given to consumers about their rights, eg telling customers they must claim on their insurance or must accept a Refund Credit Note etc.
3. Barriers to reclaims, eg requiring calls to a telephone line that is rarely answered.
4. Attempts to argue that FCDO advice against all but essential travel did not trigger refund rights – exceptionally strong grounds were needed by any company seeking to argue that, said the CMA.

• The CMA obtained undertakings from a number of travel companies, many well known and respected, including Virgin Holidays, Tui UK Ltd, Lastminute.com, We Love Holidays. As a generalisation (varying in each case), the undertakings made promises about future conduct over the issues listed above.
• It widened its investigation to include the obtaining of similar undertakings from ‘accommodation only’ companies such as Sykes Cottages and Vacation Rentals.
• It aborted an investigation into the refund policies of Ryanair and British Airways. It is well known that the single biggest reason for the travel industry struggling to meet its refund obligations was non-receipt of refunds from suppliers, notably some airlines. However, the CMA stated that, unlike the PTR, there was no clear law that required airlines to issue a refund where the flight operated but the consumer could not, for pandemic linked reasons, join the flight.

It was notable that the undertakings (which the CMA is entitled to and does publicise) did not set out the precise circumstances under which refunds were payable. The normal approach was to undertake to make refunds ‘where the PTR so require’, or words to that effect. That left it open to organisers to argue that refunds were not due in some cases, for example, fraudulent claims, consumers accepting vouchers direct from suppliers, or the famous ‘flicker of hope’ cases where consumer cancellation has
been premature.

The CMA also obtained undertakings from Truly Travel (Teletext Holidays). That company was badly affected by the pandemic and an inability to recover refunds from suppliers. Although it gave undertakings, under pressure from the CMA, it was unable to comply with them. On 29 October 2021 it went bust. Despite the liquidation, the CMA pressed on by applying for an Enforcement Order and on 28 February 2022, the High Court made a declaration that the CMA was entitled to this as Teletext had breached the PTR by not giving refunds. (Competition and Markets Authority v Truly Holdings and others [2022] EWHC 386 (Ch).)

Of course, being insolvent, Teletext was neither present nor represented at the hearing: I have no doubt that the judge tried his best to consider what arguments Teletext might have put forward, but it is not the same as having a skilled advocate arguing persuasively that an Enforcement Order was inappropriate.
I hope that this case will not set a firm precedent.

Conclusions

1. The CMA was under pressure from consumer lobbies and pressure groups to do something, although some argue that the CMA has achieved little during the pandemic. It secured undertakings to pay refunds from companies that were always going to pay them. It obtained a court order against a company that was no longer trading and irrefutably unable to pay. It did nothing to clarify the law as to when refunds were payable. It hit hard at the travel industry but did not use the same vigour against a major cause of the problem: airlines. It forced companies to use precious resources to dispute with the CMA, which inevitably involves the cost of lawyers, accountants etc.
2. The problem is not just the above. Once the CMA starts a well publicised action, it can and sometimes does, especially for SMEs, start a spiral in which the CAA, credit card companies, banks etc. start to panic and turn the screws on the same company.
3. The regulator should engage with the industry and its issues in a constructive and helpful way. However, the current legislative proposal being considered (Reforming Competition and Consumer Policy) is to give the CMA more power to enforce, and make it harder for businesses to resist and, on 20 April 2022, the Government confirmed that it planned to legislate to empower the CMA to take enforcement action itself, issuing fines and Orders to businesses relating to their behaviour towards consumers. It will be for the trader to initiate an appeal to a court if it felt that the CMA action was unjustified.

Stephen Mason, Travlaw LLP – Senior Counsel