Proposed changes to expand the ATOL regulatory regime to include component sales could be challenged as anti-agency and anti-competitive, a travel industry seminar was told this week.
The event on Monday, hosted by accountancy firm Grant Thornton, attracted a packed house of high-profile industry and consortia bosses, including ABTA chairman John McEwan, accountants and lawyers.
It came at a crucial time for ATOL reform during a Department for Transport (DfT) consultation on the future of the consumer protection regime, which will end on March 11.
Describing parts of the consultation document as “disingenuous”, Chris Photi, senior partner at White Hart Associates, said the proposals would have a serious impact on many travel retailers.
The Civil Aviation Authority (CAA) estimates its “flight-plus” proposal – to bring sales of a flight plus a “significant” other element under ATOL – would add five million holidays to the scheme and net £12.5 million in ATOL Protection Contributions.
However, companies not currently caught by ATOL would be required to bond as they would be considered, due to Package Travel Regulations that underpin ATOL, as less than four years old.
Photi said this was “uncompetitive”, adding that the only reason anti-competitive bodies have not already challenged this is because ATOL is intended as consumer protection.
However, Photi described the current protection regime as a “mess”, as illustrated by the fact that most customers looking for protection ignore ATOL or ABTA logos and pay on credit cards instead.
“What I would like to see is a consumer protection organisation, when it sees a failure, open its arms to them [consumers] and say come and get your money from us,” he said.
But he added failures end up in an “unedifying scrum” of consumers approaching the CAA with their paperwork but being sent away to claim from their credit card company.
He said this situation reached its “lowest point” last year with the failure of online retailer Freedom Direct. Although it had an ATOL, Photi accused the CAA of “hiding behind the Air Travel Trust Fund [ATTF] trustees” by saying it could not pay out because the paperwork was not in order.
“At the same time the CAA was prosecuting another company that was selling in exactly the same way, saying it was a package.”
Photi said his biggest criticism of the DfT consultation was that there was no practical advice for firms that would be affected by the changes. He said the proposals would “change their business model”, exposing them to VAT, legal obligations such as health and safety and product liability, and raise their assessed level of risk.
Questions the proposal raises
| The proposal says… | The question |
|---|---|
| “Flight-plus would cover all flights bought together with accommodation, car hire or other significant holiday elements.” | What is meant by a “significant element”? What if a customer takes car hire but only for two days of the holiday? |
| ‘“A consumer may delay purchasing a second holiday element…it seems reasonable to have a time limit after which a ‘flight-plus’ holiday would not be created.” | What time period would be deemed reasonable between purchases? |
| “…affiliate sales [or ‘click throughs’] need to be included in the ATOL scheme to provide greater clarity and consistency for consumers. We also aim to prevent companies structuring holiday purchases as ‘click through’…as a way of avoiding financial protection responsibilities.” | How will legislation define if firms linked by a ‘click through’ have common ownership, bonding or control? There could be a data protection issue as companies will have to share details once a second element is bought and the £2.50 APC becomes payable. |
| To implement ‘flight-plus’ for tour operators and agents (measure 1), and for airlines (measure 2) | Measure 1 would require secondary legislation and could be in place by spring 2011, the latter primary legislation. How long would this take? Is inclusion just a “sop” to convince the trade the regulation is moving towards a level playing field with airlines? |
Definitions
ATTF: The pot of money the CAA uses to pay out on ATOL claims. Its debt doubled from £20 million to £40 million after the collapse of XL Leisure Group in 2008.
APC: ATOL Protection Contribution payment of £2.50 per passenger on all ATOL package holidays – implemented in April 2008 originally at £1 but raised due to the cost.