CMA warns of ‘unintended consequences’ of package travel reforms

The Competition and Markets Authority (CMA) has warned the Department for Business and Trade (DBT) against proceeding with its most-radical proposals for reform of the Package Travel Regulations (PTRs).

The CMA, which leads enforcement of the regulations, warned significant changes to “longstanding” rules “may have unintended consequences”.

Responding to the Call for Evidence on reform, which closed in December, the CMA argued against proposals to remove protection for UK domestic packages and introduce a price threshold for protection to apply.

It also appears not to support clarification of an operator’s right to a supplier refund when there is a cancellation.

The authority warned the changes “could weaken competition [and lead] to poorer outcomes for some consumers”.

The CMA suggested “the higher level of protection” a package offers is “a primary reason consumers select a package holiday” and argued: “Should this no longer be the case, consumers may . . . vote with their feet [and] lead to significant change in the sector.”

It also warned: “Any weakening of insolvency protection may lead to higher costs from repatriation and redress, as well as difficulties in enforcing . . . protections.”

The CMA argued removing protection for domestic holidays could “generate confusion for consumers” and leave a UK consumer with “less protection than an EU consumer on the same trip”.

It suggested a cost threshold “may lead to complications around compliance”, noting: “Operators could exploit loopholes in cost calculation to deny refunds to consumers, and consumers who are least well off may find themselves facing unexpected expenses.”

The CMA does recommend bringing Linked Travel Arrangements (LTAs) – currently a separate category of booking – within the definition of a package, arguing: “There is a benefit to combining LTAs with the existing PTRs to have a single set of clear protections.

“The current rules incentivise operators to ‘drip’ additional services on to the initial purchase.”

It described current arrangements on ‘other tourist services’ as “a grey area”, suggesting consumers “may assume a particular service comes under the PTRs when this is not the case”, and advocates bringing these within the PTRs or at least requiring operators to note “clearly and in plain English” the elements covered by the PTRs.

The CMA acknowledged the difficulty operators had in paying refunds during the pandemic which led the DBT to propose allowing a delay to refunds in ‘extenuating circumstances’.

The authority called for “a clear definition” of ‘extenuating circumstances’, suggesting that it be “extraordinary, unforeseen and affecting the whole industry”.

It also noted the pandemic “exposed severe limitations in enforcement” with “disputes between operators and transit operators (e.g. airlines) accentuated by inadequate contractual and redress arrangements”.

However, rather than clarifying redress arrangements in the regulations, the CMA argued: “These issues should be resolved through contractual arrangements between businesses.”

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