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Airtours, Thomson and First Choice give consumers fairer contracts

PN 64/02    2 October 2002

MyTravel Group plc (trading as Airtours Holidays), TUI (UK) Ltd (trading as Thomson Holidays) and First Choice Holidays plc have agreed to change their contract terms to give consumers a fairer deal, following action by the OFT.

The OFT had a number of concerns with the three companies' existing booking conditions. They have all agreed to make the changes in the next reprints of their brochures and not to enforce the disputed terms in existing contracts. The terms in question concerned surcharging, cancellation rights and rights to compensation.

John Vickers, Director General of Fair Trading, said:

'Holidaymakers with Airtours, Thomson and First Choice now have greater peace of mind that they will get fair treatment. I welcome this move. The OFT is still working with a number of other operators to change their terms.'

Details of the contract terms which the tour operators have agreed to change following intervention from the OFT are set out as follows:

ANNEXE TO PRESS NOTICE 64/02

The OFT had concerns about Airtours terms that:

• allowed the imposition of a surcharge if the company's costs rose, but denied a reduction if they fell. The Package Travel, Package Holidays and Package Tours Regulations (PTRs) 1992 give consumers this right. Change - the term allowing surcharges will be deleted entirely
• gave no cancellation rights after a holiday had started where there was a change to the holiday arrangements if the company offered a 'suitable alternative'. The PTRs give consumers the right to transport back to the place of departure if the consumer has good reason to reject the alternative. Change - the contract will comply with this requirement
• excluded payment of compensation for significant changes to a holiday before departure above a set scale, even if a consumer could prove a greater loss. (conflicts with the PTRs). Change - the contract will now allow for greater compensation if the consumer can show greater loss
• denied liability for complaints received more than 28 days after the holiday had ended. Change - exclusion will be removed
• prevented the transfer of bookings to another person where the consumer is prevented from travelling, on certain types of holiday. The PTRs allow this providing the consumer meets the tour operator's additional costs and other relevant conditions. Change - contract to be amended to give this right
• allowed the imposition of cancellation charges within eight weeks of departure where the consumer wishes to transfer a booking to another where he/she is prevented from travelling even if the cost of making the change was less than the cancellation charge. Change - no more than the actual costs of making the change will be charged
• limited liability for lost or damaged baggage to £400 per person. The PTRs require limitations to be reasonable. Change - liability to be increased to £1,000 per person
• excluded liability for the non-availability of facilities outside the peak season (conflicts with the PTRs). Change – compensation will now be offered to consumers, where appropriate, if there is a significant change to the brochure's description of the facilities.

The OFT had concerns about TUI terms that:

• allowed the imposition of a surcharge if the company's costs rose, but denied a reduction if they fell (conflicts with the PTRs). Change - revised term will allow for reductions
• did not comply with the PTRs requirement that TUI should meet the first 2% of any surcharge. Change - revised term will comply
• did not comply with the requirement that if a significant surcharge ( stated in the contract as more than 10% ) was imposed and the consumer cancels, TUI should offer replacement holidays of equivalent/superior quality, if able to, as well as the option of a full refund (as required under the PTRs). Change - revised term gives effect to the PTRs
• required consumers to take out insurance but refused to refund premiums when the consumer cancelled the holiday following a significant surcharge (conflicts with the PTRs). Change - the contract will no longer exclude the refund of premiums where the consumer can show loss
• offered compensation for only certain named significant changes made to the holiday before departure (conflicts with the PTRs). Change - revised term removes the exclusion
• required the consumer to pay the difference in price on taking a more expensive substitute holiday when the original holiday was cancelled through no fault of the consumer or when TUI significantly altered the holiday (conflicts with the PTRs). Change - requirement to pay difference removed
• excluded payment of compensation for significant changes to a holiday before departure above a set scale, even if a consumer could prove greater loss. Change - the contract will no longer preclude the possibility of higher compensation than set out in the scale.

The OFT had concerns about First Choice terms that:

• allowed the imposition of a surcharge if the company's costs rose, but denied a reduction if they fell (conflicts with the PTRs). Change – revised term will comply
• did not specify that the PTRs require that no surcharge should be made within 30 days before departure. Change – revised term will comply
• did not comply with the requirement that if a significant surcharge (stated in the contract as more than 10%) was imposed and the consumer cancels, First Choice should offer replacement holidays of equivalent/superior quality, if able to, as well as the option of a full refund (as required under the PTRs). Change - revised term will comply
• required consumers to take out insurance but refused to refund premiums when the consumer cancelled following a significant change to the holiday. Change – revised term will no longer exclude refund of premium
• offered compensation for only certain named significant changes made to the holiday before departure (conflicts with the PTRs). Change - revised term removes the exclusion
• excluded payment of compensation for significant changes to a holiday before departure above a set scale, even if a consumer could prove greater loss. Change - the contract will no longer preclude the possibility of higher compensation than set out in the scale
• failed to provide the consumer with the option of taking a replacement holiday of equivalent/superior quality, if available, or a full refund, as required by the PTRs, where building work had a significant effect on the consumer's enjoyment of the holiday. Change - the contract will now meet the PTR requirement.

NOTES

1.   The Unfair Terms in Consumer Contracts Regulations (UTCCRs) came into force on 1 October 1999 and replaced the 1994 Regulations. The regulations implement an EC Directive (EC Directive 93/13) in the UK. UTCCRs apply to standard contract terms used with consumers in contracts made after 1 July 1995. The Regulations say that a consumer is not bound by a standard term in a contract with a seller or supplier if that term is unfair. They also give the Director General of Fair Trading and other Qualifying Bodies powers to stop the use of unfair standard terms, if necessary by obtaining a court injunction. Ultimately only a court can decide whether a term is unfair.

2.  The Package Travel, Package Holidays and Package Tours Regulations 1992 (PTRs) implement an EC directive (90/314) on the same subject. The PTRs control the sale and performance of packages sold or offered for sale in the UK. They set out what information must be given to the consumer before the contract is concluded (including information to be in brochures) and information that must be given to the consumer before the package starts. They lay down terms that must be included in the contract and prescribe the circumstances in which price revisions may be made. They also set out the steps that the tour operator must take where there is, before departure, a significant alteration to an essential term of the contract and set out the steps to be taken where, after departure, a significant proportion of the services contracted for cannot be provided. They also entitle the consumer to transfer the booking to another in certain circumstances. They provide that the tour operator is liable to the consumer for the proper performance of the obligations under the contract, irrespective of whether such obligations are to be provided by the tour operator or other suppliers of services. They also provide that the tour operator/retailer should be able to provide sufficient evidence of security for the refund of money paid and for the repatriation of the consumer in the event of insolvency.

3.  In this press release the functions of the Director General of Fair Trading (DGFT) under the Regulations are for simplicity described as the functions of 'the OFT'. The Enterprise Bill proposes to replace the office of the DGFT with the OFT, to which would be transferred the DGFT's functions.

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