Over the past year, the government has been engaged in consultations looking at potential reforms of competition and consumer policy.
The proposed reforms are wide reaching but one of the more notable aspects for the travel industry is that they proposed providing greater powers to regulatory bodies like the Competition and Markets Authority (CMA) and the Civil Aviation Authority (CAA) to enforce breaches of consumer law.
Following the consultation, the government’s proposed reforms have now been published and they are set to drastically change the way that consumer law is enforced in the UK.
Historically, if the CMA considered that a business was acting in breach of consumer law, it was not able to sanction that business itself. Instead, it was required to either seek undertakings committing the business to change its behaviour or take the matter to court and seek an enforcement order or prosecution. This was a cumbersome process that could take years to conclude.
Going forward, if the government’s proposals are enacted, the position will be very different.
This is because the government has stated that it intends to legislate to give the CMA the power to enforce consumer law directly. In practical terms, this means that the CMA will (among other things) have the power to:
- On its own account (i.e. without being required to seek the judgement of a court) decide whether a business is acting in breach of certain consumer protection legislation.
- If it considers a business is acting in breach of consumer law, take various steps including: (a) directing the business to stop the infringement; (b) awarding redress (compensation) to consumers; and/or (c) imposing penalties against the business up to a value of 10% of global annual turnover.
- Impose turnover-based or fixed monetary penalties, where it determines that a business has breached an undertaking to or direction from the CMA. In such circumstances the CMA will be able to impose both a penalty for non-compliance, up to a value of 5% of global turnover; and further daily penalties of up to 5% of daily global turnover, while the non-compliance continues.
The potential penalties that the CMA will be able to impose are significant and should be given due regard, however, it is perhaps the first item in the list above that is the most notable. The CMA will no longer be obliged to seek a court order – and have a court find in its favour – before enforcement action can be taken against a business. Instead, the CMA will simply be able to make its own decision as to whether a breach has occurred.
While the government does propose providing a right to appeal monetary penalties via the High Court – and suggests that penalties will be suspended while such an appeal takes place – it is nevertheless the case that the proposed reforms could have a significant impact upon the travel industry.
The CMA has had a particular focus on the travel industry for the past half decade, with attentions intensifying over the past two years as the impact of the COVID-19 pandemic compounded with the legal obligations imposed on travel companies by way of the Package Travel Regulations and consumer law more broadly.
Should this level of scrutiny continue, and there is no suggestion to say that it will not, the risk profile to travel companies of dealing with CMA investigations and actions will change significantly,
Travel companies would therefore be well advised to carry out a robust review of their operations to ensure that they are acting in compliance with both travel specific and wider consumer protection legislation.
Finally, it is worth noting that the government’s proposals contain no immediate plans to grant the CAA similar direct enforcement rights to those which will be granted to the CMA. The government does, however, state that it will keep this position under review.