House of Lords - European Union

Select Committee on European Union Third Report

Chapter 4: Regulatory issues

31. In considering the regulatory issues raised by traditional timeshare products and by holiday club products, we considered other related factors—the introduction of the Unfair Commercial Practices Directive[7] (UCPD), the review of the consumer acquis[8] which might lead to a possible future directive on consumer contractual matters, and the possible application to timeshare and similar products of existing EU consumer legislation. We also considered whether holiday clubs should be regulated together with timeshare, or separately.

The Timeshare Directive and the Unfair Commercial Practices Directive

32. The UCPD, adopted in 2005 and due to come into force by December 2007, is intended to tackle unfair, misleading and aggressive business practices, including misleading omissions and the use of harassment, coercion and undue influence.

33. The UCPD applies to commercial practices in general and is not specifically intended to target the timeshare and holiday club sectors. However, the Committee considered evidence presented to it that dealt with the relationship between the UCPD and the Timeshare Directive.

34. The view of Dr Christian Twigg-Flesner (University of Hull) was that the two Directives were complementary. While the UCPD was a regulatory tool which could be used by enforcement bodies to tackle businesses behaving badly or to get them to withdraw from the market altogether, the Timeshare Directive was intended to protect individual consumers by giving them key information and the right to change their mind and to withdraw from the contract (Q 139).

35. Dr Twigg-Flesner and Professor Geraint Howells (University of Lancaster) also told us that the UCPD introduced some additional obligations, including the regulation of misleading omissions, and that the OFT would be able to seek an undertaking from companies or an injunction in respect of future behaviour (Q 141).

36. Although one company argued that the UCPD meant that there was no case for European timeshare legislation (pp 100-101), Mike Haley of the OFT pointed out that the UCPD does not provide rights, such as a cooling-off period, which he said were essential to timeshare and holiday club purchases (Q 82). The Minister also told us that the UCPD will help to ban high-pressure selling but is not enough on its own (Q 127).

The review of the consumer acquis

37. The consumer acquis, which consists of eight EU consumer protection Directives, is currently being reviewed by the Commission, with a view to its simplification and greater consistency. The acquis covers Directives relating to: Injunctions[9]; Sales Away from Business Premises (sometimes known as the "Doorstep Selling" Directive)[10]; Distance Selling[11]; Package Travel[12]; Unfair Terms in Consumer Contracts[13]; Consumer Guarantees[14]; Price Indication[15]; and the Timeshare Directive itself. The review in part follows from the adoption of the UCPD.

38. Professor Howells and Dr Twigg-Flesner warned that the timing of the proposed new timeshare directive was unfortunate in that the review of the consumer acquiscould result in a new horizontal directive dealing with general contract laws which could harmonise rights of withdrawal and cooling-off periods. In their view, a new contract law directive would not preclude a new timeshare directive, but the two would need to be consistent (pp 54-59). Some of the provisions of the proposed timeshare directive might need to be amended or abandoned if there is a new horizontal directive or regulation on contractual issues (Q 132).

39. Professor Howells cautioned that the review may take several years to come to fruition and, therefore, whilst the broader context needs to be borne into account, one would not want real concerns to be delayed in being addressed (Q 131). The Minister also told us that "the timeshare industry has very specific needs and we wanted to get a revised directive agreed as soon as was possible" (Q 106). The OFT said that the Doorstep Selling Directive could be amended to tackle pressure selling in the holiday club and timeshare sector (Q 82). Citizens Advice and the OTE suggested that the Unfair Contract Terms Directive could also be used (pp 72-76, Q 66).

40. Professor Howells and Dr Twigg-Flesner were less convinced that there would be any additional benefit to consumers if the Doorstep Selling Directive were to be extended to cover timeshare contracts, as the Timeshare Directive provided essentially identical rights (pp 68-70). However, they did see a case for reviewing the current exclusion of flights and holidays in the Distance Selling Directive (pp 69-71).

Common Frame of Reference

41. The Commission is currently working with academic lawyers to produce a Common Frame of Reference (CFR). Its final form is yet to be decided, but Professor Howells told us that he expected it to be a "tool kit" and point of reference for the drafting of EU and possibly national legislation, providing greater consistency to the terminology and structure of such legislation. The academic group will submit a draft to the Commission by the end of 2007, and a revised or extended draft will be submitted in 2008, to be considered by the Commission during 2009 (Q 131).

42. Professor Howells went on to explain that the CFR is a broad project, largely focused on consumer contracts. He told us that "it is envisaged that review of the consumer acquis will be based on the CFR principles, but, as the CFR principles are not yet in place and only in draft form, there is a difficult point of timing between those two projects". He said that one possibility would be to have a broad horizontal directive on consumer contracts, which could include the modalities of withdrawal, and might be regulated in a common way for the whole plethora of consumer contracts; vertical legislation like the Timeshare Directive could stay in place (Q 131).

43. Professor Howells also referred to the Consumer Compendium "which is trying to map exactly what has been done in the area of the eight Directives which are under review in the Green Paper" and described the CFR, the Green Paper on the review of the consumer acquis and the possible horizontal directive, and the Compendium as "the three European pieces of the jigsaw into which this proposal has to fit" (Q 131).

44. Commenting on the relationship between the CFR and the acquis, the Committee concluded, in a report published in April 2005,[16] that "We would be concerned were the CFR to delay the making of much needed improvements to the acquis. We urge the Government to make it a priority to ensure that any reforms which are not dependent on the CFR are taken forward without unnecessary delay". While we believe, in line with this conclusion, that it would have been preferable to have had the reviewed acquis in place first, we do now recognise the need to move ahead urgently with a new directive to address the specific problems of timeshare.

The right type of legislation?

45. The industry and The Association of Timeshare Owners Committees (TATOC) generally supported measures to deal with holiday clubs but argued that holiday clubs should not be regulated under an expanded timeshare directive. The OTE said that problems with new products such as discount travel membership clubs should be dealt with through better enforcement of existing laws (pp 13-16). TATOC said that bringing the two under one legislative measure would be "detrimental to the genuine timeshare product and its owners" and commented that many of the problems around resale were due to poor enforcement of existing law (pp 101-106).

46. However, the OFT pointed to the complex relationship and "grey line" between the two, with some holiday clubs providing unused timeshare accommodation (Q 78). The TCA said that long-term holiday products "look similar to timeshare, smell similar to timeshare, are sold in an identical manner to timeshare and are priced the same as timeshare so the consumer is confused" (Q 1). The Minister also referred to "a whole series of similarities between the way in which holiday clubs are sold and the way in which timeshares are sold" (Q 98).

47. Professor Howells and Dr Twigg-Flesner noted that an industry that has attempted to clean up its act risks being damaged "by association with actors accused of tactics that their industry used to be known for" but concluded that on balance related actors should be regulated under the timeshare directive: they doubted whether the public's opinion of timeshare would be affected (pp 54-59).

Conclusions and Recommendations

48. We believe that the Commission has set out a good case for a new broader timeshare directive, and that existing horizontal EU consumer protection legislation including the Unfair Commercial Practices Directive is insufficient to deal with the specific problems associated with the timeshare and long-term holiday club sectors. (paras 34-36)

49. We conclude that, while timeshare and holiday clubs have different characteristics, they have many similar features and are marketed in a similar way, in similar situations and often to similar target groups. Both exhibit characteristics which require the same type of consumer protection measures, and we see no major difficulties in regulating both within the one directive as proposed by the Commission. (paras 45-47)

50. We believe that it would have been preferable for the Commission to have proposed a new timeshare directive together with other legislative proposals following from the review of the consumer acquis, but we recognise that changes to the Timeshare Directive are overdue and we urge the Council and the European Parliament to seek early agreement. (paras 39 and 44)

51. We recommend that the Commission, in considering any new proposal in the field of consumer contract law, bear in mind the need to keep consequent amendments to the new timeshare directive to a minimum. (para 38)

52. We recommend that the Commission have regard to the issues arising in the timeshare and long-term holiday product markets during its review of the various elements of the consumer acquis. (para 40)

7 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market. (OJ L 149 11.6.2005 p.22-39) Back

8 Green Paper on the Review of the Consumer Acquis, COM (2006) 744, 08.02.2007. The term acquis refers to the body of adopted Community legislation. Back