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Comment: Firms should beware new CMA powers

The government intends to radically reform enforcement of consumer law, says Fox Williams’ Rhys Griffiths

Proposals published in April would radically reform the way in which consumer law, including the Package Travel Regulations (PTRs) are enforced, with the Competition and Markets Authority (CMA) given new powers to impose fines of up to 10% of global annual turnover on travel companies which do not comply with the rules on package travel, unfair contract terms and misleading marketing practices.

The reforms are aimed at putting compliance on a par with the General Data Protection Regulation (GDPR) and competition law.

Historically, the CMA had to take a company to court to obtain a remedy for non-compliance. It could not impose orders or sanctions or impose fines. As we saw during the pandemic, CMA enforcement means obtaining a court order or undertakings from a company to take remedial action, making the process of enforcing consumer law slow and burdensome.

The government proposals will see the CMA given new powers to sanction travel companies which breach consumer law. The CMA will be able to decide for itself whether a company is compliant with the law and, when it considers there is non-compliance:

• Fine the company up to 10% of global annual turnover.
• Require the company provide redress to consumers, such as compensation.
• Require other action to end the infringement.

The CMA has become increasingly active in the travel sector over the past five years, beginning with a review of the marketing practices of hotel booking platforms in 2017 which led to platforms undertaking to change their marketing approaches.

The authority also took enforcement action against various travel companies during the pandemic over non-payment of refunds.

The next time it takes such action it will have significantly more draconian powers and will be able to impose penalties without going to court.

The CMA will also be given new powers to sanction travel companies if they breach undertakings to the authority.

It 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 turnover until the breach is resolved. If companies fail to comply with CMA information requests, they could face fines of up to 1% of global annual turnover plus an additional daily penalty of up to 5% of daily turnover until the breach is resolved.

The impact of these new rules can’t be overstated. The importance of complying with consumer law and the dynamics of dealing with a CMA investigation are going to be radically overhauled.

The government does intend to give companies full rights to appeal to the High Court, which could look again at a matter and substitute its own decision for that of the CMA.

The CAA and Trading Standards won’t gain the new enforcement powers. However, they will gain powers to apply to court for an order that a travel company pay a fine for non-compliance in line with those the CMA can impose.

Travel companies will need to ensure their marketing practices, terms and policies comply with the regulations as non-compliance will bring significant and painful enforcement activities intended to send a message to the industry.

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