Airline Ticket Selling Websites EU Enforcement Results. Questions and Answers

MEMO/09/238

Brussels, 14 May 2009

Airline Ticket selling websites – EU Enforcement Results. Questions and Answers

SECTION 1: THE SWEEP - CONTEXT AND PROCESS

What is a Sweep?

An "EU - sweep" is a joint EU enforcement action to check for compliance with consumer protection laws.

The first Sweep –airline ticket selling websites

The first such sweep exercise was carried out in September 2007 to check websites selling airline tickets.It was carried out by the Member States' enforcement authorities (the Consumer Protection Enforcement Network – CPC, which came into being at the end of 2006) and was co-ordinated by the European Commission.Authorities from 15 MemberStates and Norway participated in this first joint exercise (Austria, Belgium, Bulgaria, Cyprus, Denmark, Estonia, Finland, France, Greece, Italy, Lithuania, Malta, Portugal, Spain, Sweden).

The EU airline ticket investigation focused on three key practices:

Clear Pricing: the price first advertised on a website should be a final price

Availability: Any conditions to the offer, particularly limitations on the availability of an offer, should be clearly indicated. Practices used to lure consumers in with attractive officers with no or very limited availability are illegal.

Fair Contract Terms: General Contract Terms must be clearly indicated, easily accessible and fair. Unfair practices include mandatory insurance attached to an offer, some countries prohibit situations where consumers have to explicitly opt-out of an insurance clause, rather than opt-in. Contract terms and conditions must be available in the language of the consumer.

Participation in this sweep was on a voluntary basis. 386 sites were checked for misleading or deceptive messages and/or information, of which 137 were flagged as in some way not respecting consumer protection law. Fifty five were cross border cases and were mostly flagged for follow up action through the CPC network by co-operation between national authorities in different EU member states. The rest were followed up at national level.

The focus of this EU sweep exercise was to obtain enforcement. Because consumer rights must exist in reality and not just on paper, they have to be enforced. This is a whole new way of boosting consumer rights.

(See MEMO/08/287for results of the mid-term report)

The sweep process

Two steps to sweep action

-The first step is the co-ordinated sweep action where participating Member States systematically check for practices on different websites which breach consumer protection law. For instance, it is against consumer protection rules not to clearly indicate the total price. It is also against consumer protection rules not to clearly indicate the conditions which apply, for instance if a special offer is limited in availability. This step took place in September 2007.

-The second step is the enforcement action. National authorities have to focus enforcement resources in order to be effective. The enforcement phase involves verification of suspected breaches. If theseare confirmed, the sites are then subject to enforcement action by national authorities to ensure the non compliant sites are corrected and/or closed. National authorities will investigate and take enforcement actions for national cases. Where it is a cross border case enforcement authorities will request assistance from colleagues in other authorities (e.g. where the trader operates from another country). This is done via the Consumer Protection Co-operation Network of national enforcement authorities from 27 MemberStates and NorwayIceland. During this enforcement phase the companies have a right of reply and an opportunity to correct practices which are illegal. Those who fail to do so could face enforcement procedures or even legal action leading to fines or closure of their Web sites. The enforcement phase has been ongoing since September 2007 and will continue until all cases have been handled in one way or the oher.

SECTION 2: THE RESULTS OF THE 2007 AIRLINE TICKET SELLING SWEEP

The table below shows the results of the enforcement procedures undertaken by enforcement authorities in the MS since September 2007.

Enforcement is now at 81.3%. resulting a 94% compliance level against the standards then.Of the 145 websites (137+8 further cases reported after the mid-term report) investigated representing about 80 companies, 118 have now been corrected (the summary table below shows the enforcement data as of end March 2009)

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Table 1: Summary of results of the 2007 Airline Sweep

SUMMARY OF RESULTS OF THE 2007 AIRLINE SWEEP
Websites investigated in 2007. Total / Reported with confirmed irregularities in 2007 / Reported with confirmed irregularities in 2009 / Irregularities investigated as a result of the sweep.
Total / Reported corrected in 2008 (1stphase) / Reported corrected in 2009 (2nd phase) / Corrected as a result of the sweep. Total / Reported as under on going enforcement procedures. Total
Number of websites / 447 / 137 / 8 / 145 (34,4%) / 56 / 62 / 118 (81,3% of the confirmed irregularities) / 27 (18,7% of the confirmed irregularities)
(6,3% of the total number of websites investigated)

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SECTION 3: THE EUROPEAN COMMISSION STUDY ‘HEALTHCHECK’.

The Commission contracted a study on the airline and travel industry websites, following the coming into force of two new pieces of legislation and a discussion with the industry of what these rules mean for airline websites. The study,carried out by a private contractor,analyzed the content of web pages of airlines, air carriers,travel agents and tour operators and checkedit against the provisions of the existing legislation as laid out in the checklist which was drawn up by the Commission and the travel industry as a guideline to assess compliance(See Annex 1). It examined the different stages in the booking process up to the point just before the actual transaction was concluded.

A report on the results was submitted to the Commission in April. This health check provides only an indication of suspected problems where a full investigation might be appropriate. Only the Member States' enforcers (CPC Network) have the power to conduct an investigation and to determine whether or not a breach of the rules has in fact been committed. Thereport has been sent to Member States for them to consider if there is a case for further investigation.

Resulting in a process of engagement and dialogue

As a result of the study, the Commission has now set up a process of engagement and dialogue with the airlines concerned. These companies have been contacted and invited, as appropriate, to make a series of commitments:

-i) to make any necessary corrections to their site

-ii) to commit to maintaining their sites at the correct high standard

The Commissionis determined to promote a discussion with the industry and in collaboration with the enforcement authorities in the Member States to explore ways to transform these commitments into an ongoing process to secure a consistentlyhigh standard. This approach builds on the success of similar initiatives in other areas of consumer policy; see IP/09/783 for details of results to date.

SECTION 4 - THE ENFORCEMENT

How long does an enforcement action normally take?

Enforcement is resource and time intensive; it involves legal work which can be complex and lengthy. There is no "standard" time for an enforcement action, each case is different depending on the nature of the investigation and the enforcement action undertaken. Cases referred to court can take one year or more. Cross border cases where one national authority has to request the assistance of another MemberState authority are relatively new and we are evaluating with MS what constitutes an appropriate benchmark for a response time as we gain experience with each ‘Sweep’.

SECTION 5: LEGAL BACKGROUND

Two new pieces of legislation have come into force since this investigation began:

The new Regulation on Air Services (EC) No 1008/2008 entered into force on 1st November 2008. The Air Service Regulation provides clear rules on the obligations for the travel industry to provide an "all-inclusive" final price at the beginning of the booking process, a breakdown of the final "all inclusive" price which is to include the fare or rate,the taxes, the airport charges and other charges and a clear distinction between unavoidable and optional charges. The Regulation also prescribes how this information must be presented to consumers: for instance, optional charges must be offered in an "opt-in basis".

These rules apply to fares and rates published on the Internet. Airlines and tour operators selling airline tickets for air services departing from an EU airport are under the obligation to comply with these provisions since 1st November 2008.

Together with the above, the most relevant legislation to apply is the following:

The Unfair Commercial Practices Directive 2005/29/EC which came into force on 27 December 2007, has introduced important provisions on how pre-contractual information shall be provided to consumers. Price is one of the key parts to which the concept of misleading information, produced either by the information provided or by the omission of the necessary information, would apply. Obligations regarding the final "all inclusive" price information are also clearly stated in the Directive.

Unfair terms in consumers' contracts and Article 1 (10) of Regulation 889/2002 (annex referred to the air carrier liability for passengers and their baggage)

SECTION 6: NEXT STEPS

-Enforcement work within the network will be intensified and outstanding cases will be concluded, The Commission will encourage MS to get to a final decision on every on- going case.

-Results of the 'Health- check' will be followed up by the national enforcement authorities where necessary.

-The Commission will continue the dialogue with the air travel industry in order to monitor compliance with EU law

-The Commission will collaborate with enforcers to develop instruments to ensure compliance in the long term with an added value for consumers, a sort of 'Consumer Pledge'

-The Commission will bring forward in June 2009, a Communication on enforcement, which will look at ways to strengthen the work of the CPC enforcement network after its first two years of operation. The Communication will also examine how the Commission can further assist and complement the work of national authorities by for instance monitoring the impact of enforcement.

What are you doing to ensure that people know that the irregular practices discovered have been corrected?

The most efficient tools of enforcers are prevention and publicity. The former engages business the latter alerts consumers and may warn competitors. Through the news coverage given to today's results, people will be better able to understand their rights and what they should expect to find on such websites – they can access our webpage demonstrating good and bad examples of website practice and they can check the results on national websites as the exercise continues.

Will there be another sweep?

Yes, preparations for the next sweep in 2009 are quite advanced, as is work on several joint enforcement actions with smaller groups of Member States.

ANNEX 1

Check List for website's compliance with Consumer Rights Legislation in the Airline Sector

(Including the references to the applicable legal bases)

1. Do prices include all applicable, unavoidable and foreseeable taxes, charges, surcharges and fees? (Article 23 Air Services Regulation). In particular,

-a. are all applicable, unavoidable and foreseeable booking fees included in the price?

-b. are all applicable, unavoidable and foreseeable payment fees per persona and segment or other administrative fees included in the price?.

-c.if there are different foreseeable and unavoidable fees that are applicable for different payment methods, are they indicated?

-d.are all applicable, unavoidable and foreseeable check-in fees included in all prices?

2. Are all the optional price supplements of the flight offered on an "opt in basis" without the need for the consumer to remove a tick from any box to opt-out? (article 23 Air Services Regulation)

3. a) Where tickets are described and sold as free by air carriers, does this mean that consumers do not have to pay anything other than the unavoidable cost of responding to the offer or paying for the delivery or collection of the ticket? (Annex I, point 20, UCP Directive) (This also applies to frequent flyer programmes)

b) Where tickets are described as free by air carriers but purchased through a distinct intermediary, does this mean that consumers do not have to pay anything other than the unavoidable cost of responding to the offer, the paying for the delivery or collection of the ticket, or the charges for the distinct intermediary's services ?

4. Are the limitations or conditions attached to the offer clearly displayed? (article 7.1 (material information) and 7.2 (hidden information) UCP Directive + article 23 Air service Regulation).

5. Are the identity of the company and its contact details clearly indicated? (article 7.4 (b) UCP Directive + article 5(1) of E-commerce Directive).

6. Is the same language used throughout the selling process, including advertising and the standard contract terms and conditions? (article 7.2 (clear and intelligible information) + Annex I point 8 UCP Directive and Annex point (i) of the UCT Directive)

7. Is access to air fares granted without any discrimination based on nationality, place of residence, or establishment of the air carrier's agent or ticket seller within the community? (Article 23 Air Services Regulation)

8. Is it stated whether the relevant flight is a non-stop service or whether the flight is operated with a stop at an intermediate point? (Article 7.1 (material information) and 7.4 (a) (main characteristics of the product) UCP Directive).

9. Where certain charges cannot be calculated in advance (e.g. luggage fees), are consumers clearly informed that such charges may be payable and of the manner in which they will be calculated? (Article 7.1 and 7.4 (c) UCP Directive).

10. Are the airports of departure and destination clearly indicated by including the full and official name of the airport and not by making reference only to the capital or the best known city nearby? (Article 7.2 (non ambiguous information) UCP Directive).

11. Are all the standard contract terms and conditions, including the limitations to special offers and the conditions for cancellation and modification of the tickets written in a clear manner using readable characters? (Article 5 and Annex point (i) of the Unfair Contract Terms Directive +Air Services Regulation).

12. Are the standard contract terms available to the consumer before the ticket is bought? (Annex point (i) of the Unfair Contract Terms Directive )

13. Can the consumer retain (print-out or save otherwise) a copy of the company's standard terms and conditions at the time of purchase (Article 10 of the E-Commerce Directive)

14. Does the website include the unmodified Annex of the Regulation 889/2002 on air carrier liability governing liability for passengers and their baggage (Article 1.8 and 1.10 of Regulation 889/2002 on air carrier liability)

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