9th June , 2020

Posted by. Stirling

“Let this be a warning shot”. The law on refunds.

Top lawyer on the Competition and Markets Authority (CMA) taskforce, Jonathan Compton, puts us straight on holiday refunds following Formal Undertakings by Vacation Rentals.

“By investigating one of the leading businesses in the sector and by getting them to agree Formal Undertakings, the CMA is serving notice on those businesses of whom it has received complaints, that it is prepared to take enforcement action.” says Jonathan.

“Many other UK holiday businesses have so far not made the Formal Undertakings given by Vacation Rentals.

“This is a warning shot.”

The background to this issue

The Competition and Markets Authority (CMA) reacted to the Covid emergency by setting up its Covid-19 taskforce (C19TF), which was formed on 20th March.

Its remit is to monitor businesses during the emergency, cracking down on harmful sales and pricing practices.

There has been a great deal of consumer concern focused on the travel and holiday sectors.

The Covid-19 pandemic has caused what many regard as a crisis in the sector, with holidays and flights being cancelled.

Ryanair has, in particular, come in for some criticism on its refund policy.

Consumer concern has concentrated on travel businesses and airlines offering vouchers, or offering to re-schedule flights and holidays in place of offering a full refund.

The CMA has received some 4,500 complaints [source CMA 09.06.2020] from consumers regarding the domestic holiday sector, and in particular, UK holiday rental companies.

Of these complaints, a very significant percentage centred on Vacation Rentals.

Vacation Rentals operate Hoseasons and Cottages.com.

What is the law on refunds?

Where a contract is not performed as agreed, the CMA considers that consumer protection law will generally allow consumers to obtain a refund.

In most consumer contracts the law provides (and the CMA or court would expect) a consumer to be offered a full refund where:

(i) a business has cancelled a contract and failed to provide ANY of the goods and or services un that contract; or

(ii) no goods or services can be provided because of the Government measures (including Health measures); or

(iii) a customer has to cancel the contract because of government policies

Naturally, there are exceptions…

(i) where the consumer has already received part of the goods and or services (where a partial refund is applicable) and

(ii) where the business has incurred costs in relation to that contract. NB, the business cannot recover other costs. So if a business has incurred the cost of a flight to Barbados, that business may deduct a contribution to those costs.

As a result of the Investigation, Vacation Rentals have voluntarily given Formal Undertakings to give customers the option of a full refund if their vacation is cancelled because of the Covid-19 emergency [source: CMA 09.06.2020].

The undertakings may be summarised as follows:

· offer a full refund to customers who booked holiday homes but could not stay in them due to lockdown restrictions

· communicate its new policy clearly on its website and via social media

· provide the CMA with monthly reports on how many refund offers have been made and accepted

[source CMA formal undertakings, enforcement actions 09.06.2020]

Jonathan Compton is a partner at law firm DMH Stallard and one of the UK’s leading experts in competition law.