4 Package and assisted travel arrangements
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(35257)
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COM(13) 513
(b)
(35192)
12257/13
COM(13) 512
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Commission Communication: "Bringing the EU package travel rules into the digital age"
Draft Directive on package travel and assisted travel arrangements, amending Regulation (EC) No. 2006/2004, Directive 2011/83/EU and repealing Council Directive 90/314/EEC
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| Legal base | (a) —
(b) Articles 114 and 169 TFEU; co-decision; QMV
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| Documents originated | 9 July 2013
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| Deposited in Parliament | (a) 23 August 2013
(b) 17 July 2013
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 2 August 2013
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| Previous Committee Report | None
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| Discussion in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information awaited
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Background
4.1 Tourism plays a central role in Europe's economy, with
1.8 million businesses (mostly small and medium sized enterprises
(SMEs)), employing 5.2% of the workforce, and accounting in all
for around 10% of EU GDP. Council Directive 90/314/EEC created
important rights for those purchasing package holidays, typically
comprising passenger transport and accommodation. In particular,
it ensures that consumers receive essential information before
and after signing a package travel contract; provides that organisers
and/or retailers are responsible for the proper performance of
the package, even if the services are provided by sub-contractors;
and regulates what happens if there are changes to the package
travel content. It also ensures that travellers receive a refund
of pre-payments, and are repatriated in the event of the insolvency
of an organiser and/or retailer.
The current documents
Commission Communication
4.2 Despite this, a recent Commission Communication (document
(a)) says that, although the existing regime has served consumers
and traditional package tour operators well, providing valuable
reassurance on a complicated product often delivered abroad, the
structure of the travel market in 1990 was much simpler that it
is today. For example, the Internet (where travel products are
now one of the most popular purchases) did not exist: also, although
a ruling[13] by the European
Court of Justice in 2002 clarified that the term "pre-arranged
combination" also covers travel services combined by a travel
agent at the customer's express request just before the conclusion
of a contract between the two, it remains unclear to what extent
modern ways of combining travel services are covered by the Directive.
4.3 The Commission also points out that a report
in 1999 on its implementation highlighted significant differences
in the laws transposing it, due to the broad discretion given
to Member States and ambiguities in the text. It says that this
has in turn led to a number of problems, including an uneven regulatory
environment where traditional package organisers are subject to
a level of regulation which many of their competitors are not,
and and an inhibition on cross-border trading due, in some cases,
to a lack of mutual recognition of the systems in place to meet
the Directive's requirements, and their varying conditions.
Draft Directive
4.4 Against this background, as well as requests
from the co-legislators, the European Economic and Social Committee,
the European Consumer Consultative Group, and a large part of
the industry and consumer organisations, the Commission has now
put forward this proposal in document (b) for a new Directive
(which was also explicitly mentioned in the European Consumer
Agenda and in the Single Market Act II).
4.5 The aim of the proposal is to clarify and
modernise the scope of the protection available to travellers
when purchasing combinations of travel services for the same trip
or holiday by bringing within its scope different forms of on-line
and assisted travel arrangements, and by ensuring that purchasers
are better informed about the services, and the remedies available
if something goes wrong. It also seeks to remove some outdated
elements from the present Directive, whilst maintaining its essential
characteristics (in terms of pre-contractual information, the
liability of the organiser, the refunding of prepayments, and
repatriation in the event of insolvency).
4.6 More specifically, the proposal would:
- extend the coverage of the
regime by expanding the definition of package arrangements to
include those facilitated by two or more entities within a single
booking process, or where a single entity (such as a web-based
operator) facilitates the creation of a "package" by
providing consumers with a choice from a range of services from
different providers under an inclusive price or by means of an
exchange of data which enables the second provider to take payment:
these arrangements would all be subject to the full range of protections
in the Directive, including the provision of pre-contractual information,
liability on the organiser for all of the services provided under
the contract, and cover against the insolvency of the organiser;
- make a distinction between the extended definition
of a package and arrangements where commercial connections are
looser (for example, where the opportunity to "click-through"
from an airline site at the end of the booking process to an accommodation
provider offering accommodation on the dates of travel under an
entirely separate contract being charged under a separate price):
these are characterised in the proposal as "Assisted Travel
Arrangements", and it is proposed that they should provide
protection only against the insolvency of any of the providers;
- propose information requirements which would
make the level of protection attached to the different arrangements
covered by the Directive clear to consumers, so as to better facilitate
informed choice, and also allow businesses a degree of flexibility
in choosing how to provide services (and hence the level of protection
required of them), the Commission maintaining that this will provide
for a much fairer regime in terms obligations on competing entities;
- seek to rationalise and clarify the information
to be provided prior to contracts being agreed (or in some cases
prior to the date of departure): this would not differ significantly
from the information currently required for brochures, but would
be extended to cover information provided, irrespective of the
medium by which businesses choose to market their products and
services; and
- seek, in respect of contractual obligations and
rights, to set a limit of 10% on the extent to which a price can
be increased (post agreement), and provide an explicit right for
the consumer to withdraw from the contract: also, although the
trader would — as is the position now in many package contracts
— be entitled under normal circumstances to charge a proportion
of the cost of the arrangements on a scale depending on how soon
the arrangements were due to begin, the consumer would be entitled
to a full refund in relation to force majeure situations, thereby
reflecting in large part the approach in the current Directive
in the event of changes to contracts and promised services.
4.7 On the other hand, the Commission does not
propose to regulate all travel arrangements, and those separate
arrangements which consumers choose to make themselves (and which
do not involve any "coordinating" by a trader) will
remain subject to general consumer protection regulation, as at
present. It has also identified elements which should relieve
burdens on businesses currently subject to the regime. Thus:
- it intends to remove brochure-specific
information requirements which necessitate regular updating when
prices change, and to require mutual recognition of the means
of protection (particularly against insolvency) which Member States
remain free to organise for themselves: this should remove an
existing barrier to developing cross-border sales activities,
as should the maximum harmonisation nature of the proposal, which
would mean that consumers could expect the same levels of protection
irrespective of the Member State in which the business is established,
and that businesses could be clear about what is required of them
if they choose to expand into another Member State's market;
- the proposal excludes business travel arrangements
which have been made by a specialist travel arranger under contract
to business employers (although those business travellers who
choose to make their arrangements through the usual consumer-facing
service providers will continue to benefit from the protections);
- the proposal also simplifies the organiser/retailer
roles within the regime by making only the organiser responsible
for the performance of the contract and for providing the financial
protection elements, whilst applying the information provisions
to both, and ensuring that, where a retailer is the point of purchase,
they should also be a point through which the consumer could seek
to have contractual issues addressed by the organiser;
- in the case of consumer protection against insolvency,
the proposal would maintain the current position as regards Member
States' freedom to put in place their own systems to enable businesses
to meet their obligations, but it would seek to clarify that any
such systems must take into account the actual financial risk
represented by an individual trader's activities and must be capable
of refunding or repatriating all consumers affected by an insolvency;
and
- the proposal would apply requirements in the
Consumer Rights Directive on cost only charges for methods of
payment, explicit consumer agreement to "add-ons" not
forming part of a main contract, and the provision of basic rate
telephone lines to contractual matters, where the business chooses
to communicate by telephone.
The Government's view
4.8 In her Explanatory Memorandum of 2 August
2013, the Parliamentary Under-Secretary of State for Employment
Relations and Consumer Affairs (Jo Swinson) says that the UK is
one of the main markets for leisure travel and holiday arrangements,
and is the country of establishment for major package travel and
other organisers. She believes that action at EU level is the
only way of setting consistent rules to provide consumers with
the confidence to shop across borders, and the legislative certainty
to encourage cross-border trading by businesses in this sector.
She suggests that the explicit requirement in the proposal for
mutual recognition of each Member State's provision for the financial
protection of consumers in the event of the insolvency of the
seller is likely to be of particular importance, and should enable
a business to rely on its compliance under the requirements of
the Member State where it is established. She adds that the proposal
is also one of maximum harmonisation in most respects, preventing
Member States from regulating further in respect of matters within
its scope, thus further underlining its internal market rationale.
4.9 In welcoming the publication of the proposal,
the Minister observes that this is an area on which successive
UK administrations have lobbied the Commission (which has been
considering the matter for some six years, carrying out extensive
research and consultation). She also comments that the length
of time taken by the Commission to reach conclusions reflects
the complex way in which the leisure travel market has developed
since the 1990, and the consequent difficulty in deciding how,
and to what extent, the Directive should be modified and expanded,
consistently with maintaining and developing consumer confidence,
convenience and choice in a sector which has remained comparatively
vibrant and resilient during the current economic down-turn.
4.10 The Minister says that the Government considers
it desirable that requirements should be updated to reflect the
modern market and methods of trading. This includes clarifying
its coverage in relation to arrangements which now go to make
(or which appear equivalent to) packages, bearing in mind that
there are now as many package-like arrangements sold as there
are traditional, protected packages, and that the Commission's
evidence suggests that the first of these are a source of more
consumer detriment than the second. She also notes evidence of
considerable degrees of consumer and trader confusion over whether
arrangements are covered by the Directive (with consumers often
assuming that a non-package arrangement is protected when it is
not): and she says that the Government is therefore generally
supportive of the Commission's overall objectives of increasing
clarity for consumers and business, providing the conditions for
increasing consumer confidence, providing a more level playing
field for competing businesses, not placing burdens where protection
is not necessarily expected, removing unnecessary burdens, and
better enabling cross border purchasing and trading.
4.11 As regards the increased scope proposed,
the Government's initial view is that this represents a reasonable
attempt at addressing these issues, but it will be seeking evidence
from stakeholders to help decide whether the Commission has reached
acceptable conclusions on where the Directive should apply, or
whether the balance of application should be moved one way or
the other. In addition, there is uncertainty as to the precise
meanings of the relevant definitions in the proposal which makes
it very difficult at present to provide an indication of how many
of the new arrangements will be brought within the full coverage
of the Directive: in particular, it is essential that the proposed
differentiation between a Package and an Assisted Travel Arrangement
is clear, and that there is no scope for business to circumvent
these definitions (unless they are simply providing or acting
as agents for single travel services).
4.12 The Minister also says that the possible
effects of the financial protection provisions as drafted give
cause for some concern, particularly in relation to the mutual
recognition requirements and the UK arrangements which currently
apply, essentially to packages sold or offered for sale in the
UK and to making available flight accommodation in the UK. The
new regime appears to require Member State arrangements to cover
products sold in a Member State which is not that in which the
businesses is established, and, whilst the Government supports
the effort to make cross border commerce less burdensome, it has
some concerns about the practicalities and potential costs both
from the consumer's perspective, and from that of the UK taxpayer.
Consequently, this is a matter on which clarification as to a
Member State's liability in the event of their system not providing
full coverage in all conceivable circumstances would be helpful,
and a matter the Government is likely to explore further.
4.13 The Minister also highlights two issues
of particular concern to the UK:
Air Travel Organisers Licensing Scheme (ATOL)
4.14 In order to provide an added degree of security
for those who bought a product or booked via a method which looked
like a package, the UK introduced this modification to the regime
which provides for financial protection against insolvency in
respect of flight-inclusive packages, and had the effect of extending
the financial protection elements to what are known as "flight-plus"
arrangements.
4.15 The Minister says that the expansion of
the application of the Directive appears to reflect in large part
the scope of the current Directive and this additional "flight-plus"
coverage. Consequently, the issue is not so much how many businesses
will be subject to providing extra protection for consumers in
this sector for the first time, but how many of those currently
falling within the flight-plus coverage of ATOL will be subject
to the additional requirements of the Directive (notably, responsibility
for the delivery of all elements of the arrangements, and additional
contractual constrictions). She adds that there may be a portion
of the sector which will, for the first time, be subject to this
additional regulation because their activities will fall into
what the proposal terms "assisted travel arrangements",
the definition of which probably covers some activities not currently
caught by the flight-plus coverage of the ATOL Scheme. Again,
until some further clarity on the relevant definitions is achieved
it is not possible to say how many, if any, businesses this will
include.
4.16 She comments that the Department for Transport
is currently seeking evidence from stakeholders on the future
shape of the ATOL Scheme, and that the final scope of the proposed
Directive will have a direct impact (being likely, as drafted,
to lead to changes). She adds that this exercise is exploring
the possibility of changes to how this protection is organised
and paid for, with a view to ensuring the least exposure for the
UK tax payer, and to making the system clear and cost effective
for consumers and business. She suggests that, when a new package
travel Directive is implemented, this work will inform the Government's
options for implementing the relevant provisions, which will in
turn provide the opportunity to ensure that adequate, effective
and cost proportionate solutions are pursued, and will, at the
very least, ensure that the system can be simplified as far as
possible.
Impact on the domestic package travel market
4.17 The Minister says that, as part of the Government's
Red Tape Challenge, it has been committed to lobbying the Commission
in relation to the possibility of limiting burdens on the domestic
package travel market (holidays booked and taken within the UK),
and that there are signs in the proposal that this has had a small
effect. However, she suggests that there is scope for seeking
a better outcome, particularly in relation to packages which comprise
just accommodation and another tourist service, and that it remains
the Government's view that packages of (for example) a stay in
a hotel which includes access to local amenities, such as a golf
course or a theme park or other attractions, probably do not expose
consumers to the same level of risk as the other arrangements
covered by the Directive (such as including transport and cross
border travel).
4.18 She also says that the Government acknowledges
the domestic tourism industry's concerns that the application
of the current Directive has a restricting effect on providers'
desire to promote growth in the domestic market by innovating
in the way services and amenities are presented as a part of holiday
or short break deals. It is minded, therefore, to continue to
press in negotiations for clarity on the issue of when "other
tourist services" are considered significant enough to form
a part of a "package" which otherwise simply incorporates
accommodation, or possibly to seek a derogation in respect of
these domestic arrangements when sold within a Member State. This
is an issue on which it will seek views and evidence from stakeholders.
Conclusion
4.19 It is evident from the time it has taken
for the Commission to produce these proposals — not to mention
the length of this Report — that this is a complex area,
and that it is no easy matter to find solutions which are appropriate
to all the many different types of package holiday now on offer.
However, we note that the Government considers it desirable to
update the existing requirements, and in particular to clarify
their coverage, and that its initial view is that the scope now
proposed represents a reasonable attempt to address the various
issues which have been identified.
4.20 At the same time, we also note that the
Government will be seeking views on whether the balance of application
proposed needs to moved; that it sees a need to clarify certain
of the definitions, in order to determine more precisely the impact
of the proposals on UK travel providers; that it will wish to
look further at the implications of the financial protection provisions;
and that it has highlighted the need to consider both the relationship
between the measures now proposed and the UK Air Travel Organisers
Licensing Scheme and their possible impact on the domestic package
travel market.
4.21 Consequently, although we are drawing
these documents to the attention of the House, we think that,
in view of these uncertainties, it would be right to hold the
documents under scrutiny, pending further information from the
Government on the extent to which the consultations it is carrying
out help to clarify the position.
13 Club-Tour Case C-400/00. Back
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