The Competition and Markets Authority (CMA) has threatened Teletext Holidays with court action over the company’s failure to pay more than £7 million in refunds to customers for holidays cancelled due to Covid-19.

The CMA had previously warned Teletext of potential legal action if it did not commit to pay the refunds on March 24.

The authority launched an investigation into the company’s actions on February 4 “after receiving hundreds of complaints”.

The CMA sought formal commitments or ‘undertakings’ from Teletext that it would refund affected consumers and ensure compliance with the Package Travel Regulations (PTRs) in future.

However, confirming the legal action today, the CMA reported: “Teletext has not agreed to provide undertakings that are sufficient to address the CMA’s concerns.”

The CMA warned it will launch proceedings if Teletext “does not repay the outstanding refunds or commit to do so without unnecessary delay”.

CMA chief executive Andrea Coscelli said: “There must be no more delays to Teletext refunding customers. It is unacceptable that many have already waited months for the refunds they are legally entitled to.

“We take very seriously the failure of Teletext Holidays to meet its obligations. The firm must now comply with the law and commit to refunding its customers.

“If it does not, we will not hesitate to pursue this case in court.”

In a statement, Teletext Holidays apologised to customers but said: “[We] have consistently stated our commitment to refund all customers as quickly as possible.

“We have been in continuous dialogue with the CMA providing evidence of why the refund process has been delayed.

“We have also provided real time plans on how and when we can refund all customers. We are extremely disappointed with today’s CMA announcement that seemingly ignores the reality of the challenges we face.

“The business has refunded the vast majority of customers and the proposals submitted to the CMA detail when we can complete the remaining refunds.”

The company conceded: “Some of our customers are still awaiting refunds from us.”

But it said: “As an online travel agency we book holidays for our customers and money for flights must be paid at the time of the booking.  We therefore do not retain a significant proportion of the value within our business.

“Airlines are required to refund consumers within seven days of a cancellation and travel organisers like Teletext Holidays within 14 days of a cancellation. We are experiencing very long delays in the collection of refunds from airlines.

“We are committed to repaying all our customers whose holidays were cancelled due to the pandemic, we have committed to refunding all new customers within 14 days of any new booking, and we will continue to work with the CMA.”

The CMA has previously secured refund commitments from companies including LoveHolidays, Lastminute.com, Virgin Holidays and TUI UK.

Teletext Holidays is the trading name of Truly Travel Ltd, a subsidiary of Truly Holdings Ltd.