RE: CAR Travel Trade Consumer Protection Projects 19th May 2017 Work Stream 2: Impact of Package Travel Directive (2015/2302/EU) Directive (EU) 2015/2302 on Package Travel and Linked Travel Arrangements (the “Directive”)

Alan W. Gray
Managing Partner
Indecon Economic Consultants
Indecon House
4 Fitzwilliam Place
Dublin 2
September, 2017

RE: CAR Travel Trade Consumer Protection Projects 19th May 2017

Work Stream 2: Impact of Package Travel Directive (2015/2302/EU)

Directive (EU) 2015/2302 on Package Travel and Linked Travel Arrangements
(the “Directive”)

Dear Alan,
Further to your meeting with various members of the board of the ITAA and myself on the 16th August, 2017, I am furnishing you with a note of the issues which we covered during the course of our meeting, for the purposes of informing the report you are preparing.

A:
We mainly focused on the aspects of the Directive where Member States have a modicum of discretion in their implementation.
The ITAA has identified the following provisions in the Directive, which allow Member States to diverge from the provisions of the Directive.

1. Article 2 (b) Scope
The Directive excludes from its scope packages offered, and linked travel arrangements facilitated, occasionally and on a not-for profit basis and only to a limited group of travellers.

The ITAA was very disappointed at the inclusion of Article 2(b) in the Directive and firmly subscribes to the view that consumers should be offered effective protection, irrespective of the type of organiser.

Having regard to Recital 21, it is the position of the ITAA, that the Irish government should apply the provisions of the Directive to packages and linked travel arrangements that are offered or facilitated on a not-for-profit basis.

Failing the above, it is submitted that the provisions of S.I. of 271 of 1995 Package Holidays and Travel Trade Act, 1995 (Occasional Organisers) Regulations, 1995, should be amended so as to apply with similar effect to Packages and Linked Travel Arrangements as defined in the Directive.

With reference to the text contained in Recital 19, consideration should be given to the maintenance of a register of entities offering packages or facilitating linked travel arrangements on a non-for -profit basis.

Any person, association, society, firm or organisation or charity offering packages or facilitating linked travel arrangements should be required to register with the appropriate regulatory body with the register being easily accessible by the public.

This would ensure that both traders and travellers are properly informed that such packages and linked travel arrangements are outside of the scope of the Directive.

2. Article 12 Termination of the package travel contract and the right of withdrawal before the start of the package

Article 12(5) provides: –
‘With respect to off-premises contracts, Member States may provide in their national law that the traveller has the right to withdraw from the package travel contract within a period of 14 days without giving any reason.’

Travel services, airline seats, cruises and package holidays, are sold on a real – time availability basis, with payment requirements being immediate and cancellation charges applicable, usually from the time of booking.

Travel services, airline seats, cruises and package holidays, are sold on a real – time availability basis, with payment requirements being immediate and cancellation charges applicable, usually from the time of booking.

Supplier restrictions can make it very difficult for organisers to unbundle the travel services and attempt to resell same. This is particularly the case, where the booking is made close to the date of departure.

Organisers would be exposed to losses, in cases where they have passed on money to suppliers with little likelihood of reselling the travel services to a different traveller.

Whilst the volume of off-premises contracts, concluded currently, is perceived as being very small, the implementation of this provision would most likely result in traders not concluding such contracts, thereby diminishing and possibly eliminating the opportunities for consumers to make such bookings.

The ITAA is of the view that the implementation of Article 12(5), would result in the imposition of a disproportionate burden on organisers, in the absence of any evidence of there being an appreciable level of consumer detriment in this regard.

3. Article 13.1 Responsibility for the performance of the package

The first paragraph of Article 13.1 clearly sets out that the organiser is responsible for the performance of the travel services included in the package travel contract.

However, the second paragraph of Article 13.1 goes on to provide that Member States may maintain or introduce in their national law provisions under which the retailer is also responsible for the performance of the package.

Directive 90/314 EEC gave discretion to Member States to determine whether retailers, organisers or both should be liable for the proper performance of a package.
The Irish government saw fit to fix the organiser with liability to the consumer for the proper performance of the contract [see Section 20 of the Package Holidays and Travel Trade Act, 1995].

“The Act in general ensures that the tour organiser rather than the retailer is responsible to the consumer for any breach of duty that occurs. This is supported by subcontractors (such as airlines, hotels etc.), which is dealt with in section 20 of the Act. This is further supported by the fact that the tour operator/organiser is a professional entity, expert in dealing with the organisation and supervision of such travel packages and so the imposition of such apparently harsh liabilities is justified.”

[extract: Holiday law in Ireland, by Johnathan Buttimore – page 21]
It is submitted that this clarity in terms of the party responsible for the proper performance of the contract has provided certainty for consumers and traders.
Recital 22 of the Directive states that the main characteristic of a package is that there is one trader responsible as an organiser for the proper-performance of the package as a whole.

It is the position of the ITAA that to also fix retailers with responsibility for the proper performance of the package seems at odds with the intent of Recital 22.
The terms organiser and retailer are clearly set out in the Directive and specifically fixes the retailer with certain obligations.

The ITAA contends that there is no evidence of consumer detriment under current regime that warrants making the retailer liable in addition to the organiser.
To do would result in retailers having to incur additional costs including insurance costs (resulting in both retailers and organisers insuring the same risk).

It is noted that the Department of Business, Energy and Industrial Strategy had indicated in its consultation paper, published on the 14th August, 2017, that it will not be making retailers liable for the proper performance of the contract.

A stated objective of the Directive, set out in Recital 4, is to enable traders to benefit fully from the internal market, with the removal of measures resulting in legal fragmentation which ‘leads to higher costs for businesses and obstacles for those wishing to operate cross-border’.

In so far as the United Kingdom would be an obvious market for exploitation for traders in Ireland, Irish traders would be placed at a competitive disadvantage in having to bear the costs of carrying liability for the proper performance of the contract.

B: Bonding & Regulation

Some discussion was also had in relation to the appropriate bonding arrangements having regard to the definitions of linked travel arrangements, package and travel services in the Directive and the appropriate administrative arrangements.

The ITAA expects that, in general terms, the new footprint of the licensing and bonding arrangements will be similar to the existing arrangements.

The ITAA holds the view that existing arrangements should accommodate the majority of packages which include an overseas travel service and most linked travel arrangements which include an overseas travel service.

So as to align the existing licensing and bonding framework with the Directive, adjustments will need to be made to respond to the requirements of Article 17(3), whereby the organiser’s insolvency protection should benefit travellers regardless of a traveller’s place of residence, the place of departure or the where the package is sold.

The current licensing and bonding arrangements do not, however, capture carriers offering packages or facilitating linked travel arrangements. This is a gap which will have to be addressed.

The emphasis which the Directive places on the need for financial security arrangements to respond to foreseeable risks, was also discussed. The ITAA would contend that, payments by travellers where there are no foreseeable risks (for example when suppliers, particularly air carriers are paid instantly and tickets issue immediately), do not require financial protection and should be excluded from calculations of necessary cover.

Further, a preference was expressed at the meeting for a single bond to cover all packages, rather than the current situation, where travel companies are required to take out a separate bond for non-licensable packages.

The matter of the over-lapping protection between the bonds maintained by organisers and the charge back facility, available under the terms credit card schemes and certain debit card schemes, was also raised.

The ITAA is firm in its view that this overlap, leads to a duplication of costs for traders and confusion on the part of consumers.

The exclusion of credit card and debit card turnover from bonding requirements, is sought by the ITAA.

Failing such an exclusion, steps should be taken to minimise this overlapping.

Finally, as regards appropriate administrative arrangements, the ITAA calls for a single regulator of all regulated business, in the travel trade sector. The current division between the Commission for Aviation Regulation and the Consumer and Competition Protection Commission is unsatisfactory. A single regulator for the travel trade is preferable in terms of responsibility, oversight and enforcement.

Conclusion

The ITAA looks forward to contributing further to the process, including responding to the consultation paper and impact assessment.

Yours sincerely,
Cormac Meehan
President
ITAA

Author Information

Travel Agent: Irish Travel Agents Association