Consumer Law Update: CMA willing to take court action to enforce refund commitments from holiday providers for COVID related cancellations

Following our article on Cancellations and Refunds in the Time of Covid-19 | Fieldfisher earlier this year, the Competition & Markets Authority ("CMA") has been actively investigating suspected breaches of consumer law in a number of sectors, including the package holiday sector.

Over several months, the CMA has secured undertakings from We Love Holidays, Virgin Holidays, TUI UK and Lastminute.com, as well as accommodation providers, Sykes Cottages and Vacation Rentals. This has resulted in thousands of customers receiving long awaited refunds for cancellations arising as a result of the COVID-19 pandemic.

However, the CMA today announced that Lastminute.com had failed to meet certain refund commitments and that it had notified Lastminute.com that it would be willing to take court action if Lastminute.com did not meet its obligations in relation to outstanding refunds within the next 7 days.

1.            What is the purpose of these investigations?

As mentioned in our earlier article, the unexpected nature of the COVID-19 pandemic and associated government restrictions resulted in unprecedented cancellations in respect of holidays, accommodation, flights and transfers leaving consumers struggling to obtain refunds and being misled about their statutory consumer rights.

Following thousands of consumer complaints, the CMA has been investigating companies in the package holiday market to identify failures to comply with refund rights under package travel laws and engaging in unfair commercial practices in respect of holiday cancellations arising due to the COVID-19 pandemic, including:

• delays in making refund payments to customers;
• pressure to accept vouchers in place of refunds;
• misleading information about consumer rights;
• cancellation charges and lost deposits; and
• difficulties in asserting consumer rights e.g. customer service issues - lines cutting off or long wait times.

2.            What types of undertakings has the CMA secured?

The CMA has been working with package holiday companies to seek undertakings that reflect realistic and achievable commitments. The undertakings largely relate to refunds to customers who have had their holidays cancelled due to the COVID-19 pandemic and future compliance commitments:

• We Love Holidays committed to refunding over £18 million to 44,000 customers by the end of March 2021. It has also agreed to issue refunds within 14 days for eligible cancellations in 2021.
• Virgin Holidays committed to refunding £203 million to its customers (having received 53,000 refund requests from customers who had been subject to unreasonable delays, with some being told that they would need to wait 120 days for a refund). It has also agreed to ensure that people who are entitled to a refund for a holiday cancelled on or after 1 November 2020 will be paid within 14 days.
• TUI UK worked co-operatively with the CMA. It issued many refunds and rebookings during the CMA’s investigation and committed to issuing remaining refunds by 30 September 2020. TUI UK also agreed to contact customers who had may have accepted refund credit notes to let them know that any unused credit notes could be converted to a refund to be paid within 14 days.
• Lastminute.com committed to refunding over £7 million to more than 9,000 customers whose package holidays were cancelled on or before 2 December 2020 due to the pandemic with a deadline of 31 January 2021 at the latest (with half to be paid by 16 December 2020). It also agreed to refunding anyone entitled to a refund for a holiday it cancels on or after 3 December 2020 within 14 days.

The companies all committed to meet specific payment deadlines and also agreed to reporting regularly to the CMA in respect of the timing of their refund commitments.

3.            Consequences of failing to comply with the undertakings

During the course of the investigations and in the formal undertakings obtained by the CMA, the CMA made it clear that it would pursue court action (including obtaining enforcement orders) in the event that the companies were to breach their undertakings.

The CMA has today informed Lastminute.com that it will take court action if it does not repay the outstanding refunds within 7 days. To avoid court action, Lastminute.com must also ensure that customers who book their package holidays from now on will receive a full refund within 14 days where they are legally entitled to their money back following the cancellation of their package holiday.

4.            Current investigations

The CMA is currently investigating Teletext Holidays. Following hundreds of complaints from customers that they had not received refunds for cancelled package holidays arising due to the COVID-19 pandemic (including refund dates being pushed back), the CMA is looking into whether Teletext Holidays has breached any consumer laws.

However, the CMA has made it clear that it is in the early stages of its investigation and it should not be assumed that companies under investigation have breached any consumer laws until the investigation is complete and the CMA has confirmed its findings.

The CMA is also looking into group travel and has written to certain companies specialising in package holidays for groups (e.g. schools, social groups, universities etc.) explaining its stance on when consumers should be offered a refund. This follows complaints that many of these businesses are incorrectly claiming to fall outside the scope of the Package Travel Regulations.

5.            Key Takeaways

In summary:

• failures to issue refunds due to COVID-19 related cancellations can amount to breaches of consumer laws, including sector specific laws, such as package travel laws;
• the CMA is actively pursuing package travel companies to ensure compliance with consumer laws and obtaining undertakings to issue refunds to consumers who are entitled to them;
• the undertakings require companies to meet specific payment deadlines and regularly report back to the CMA;
• the CMA is willing to pursue court action to enforce any breached undertakings (including commitments to issue refunds by certain dates); and
• the CMA is continuing to investigate additional companies. However, the instigation of a CMA investigation does not automatically render a company under investigation in breach consumer laws. The purpose of the investigation is to identify whether such breaches have taken place and if so, to secure appropriate undertakings from the company to remedy such breaches.

This article was authored by Sonal Patel Oliva from our Advertising & Consumer Protection group. If you have any queries or would like any further assistance about consumer law matters, please do not hesitate to get in touch with Sonal or another member of our Advertising & Consumer Protection group.