Changes affect UK-based businesses selling cross-border, explain Fox Williams partner Rhys Griffiths and associate Phyllis Acheampong
Our previous articles in this series explored how consumer protection is set to change dramatically in the UK, with new rules and eye-watering fines of 10% of global annual turnover on the way.
In this article, we look at similar changes being made in the EU with the introduction of the New Deal for Consumers.
These new rules will apply to any business targeting consumers in an EU member state, including all UK-based businesses selling cross-border.
A failure to comply with these new rules could result in large GDPR-level fines of up to 4% of annual turnover.
What is the New Deal for Consumers?
The New Deal for Consumers is designed to modernise and enhance consumer laws across the EU, such as the laws dealing with unfair contract terms and unfair commercial practices.
All EU member states must implement these new rules into their national laws by November 28, 2021, which must then come into force by no later than May 28, 2022.
Key areas for travel companies to address
For travel companies, there are three areas which are likely to be of concern:
(1.) Sanctions
In order to encourage compliance with consumer law, such as that dealing with unfair contract terms and unfair commercial practices, the New Deal for Consumers will introduce severe sanctions for businesses which do not comply with these rules. Non-compliance will mean that travel companies face fines of up to 4% of their annual turnover or, if annual turnover cannot be determined, then fines of up to €2m may be issued.
This means that travel businesses must take extra care to ensure that their customer terms and conditions are fair, and that their booking journeys are fair and not misleading in any way.
(2.) Booking journeys and marketing materials
Travel companies will need to ensure that they provide consumers with more information about matters which might influence their decision to purchase a holiday online. There will be new rules which address matters such as:
- Search results – Consumers must be provided with information about how search results are ranked and why certain results are given prominence. Are the results listed by price (lowest/highest), customer ratings or have higher rankings been paid for?
- Online marketplaces – in order to avoid consumers wrongly thinking that they are buying a service from an online marketplace, the online marketplaces must clearly inform consumers about the identity of the party with whom they are concluding a contract, and whether this party is a consumer or a business.
- Consumer reviews and endorsements – Travel companies will not be allowed to submit or commission someone to submit fake reviews. Travel companies will also need to set out the procedures they have put in place to ensure that customer reviews, endorsements and other consumer-generated content are genuine. In other words, companies must be able to demonstrate that they are taking steps to avoid displaying fake customer reviews.
- Personalised pricing – Consumers must be informed if the price shown to them has been set on the basis of profiling (e.g. by looking at the customer’s recent purchasing history or other personal details held by the company about the consumer), or through an automated decision-making mechanism (i.e. algorithms which measure individual consumers’ behaviours).
- Ticket resales – Companies will no longer be able to purchase tickets (in bulk) using automated software (i.e. “ticket bots”) and then resell those tickets.
(3.) Collective redress
The EU is also seeking to encourage class-action type litigation, whereby a consumer organisation or an independent public body will be able to bring legal action on behalf of all affected customers. This will allow individual consumers to enforce their rights without having to act alone – they will be able to form part of a larger group of consumers whose claim will be undertaken by a “consumer champion”. These new collective redress mechanisms must be incorporated into national law in each EU Member State by 25 December 2022 and must then take effect from 25 June 2023.
Conclusion
Our three-part series has shown that travel companies selling into the UK and EU are about to face significantly enhanced consumer protection laws. These new obligations will go hand-in-hand with significantly increased fines for non-compliance, which may be up to 10% of global annual turnover. If you would like to discuss how best to prepare for these new regulations, then please do not hesitate to contact a member of the Fox Williams travel team.