Opinion: Expanded package definition leaves less room for manoeuvre
Stephen Mason is senior partner at specialist law firm Travlaw and co-author of the book Holiday Law 2012
The draft new Package Travel Directive recently published by the European Commission has certainly divided opinion.
Some have warned it means a thorough overhaul of the industry, others have claimed it means little change, especially for agents, who will be left in peace. Who is right?
What is a package?
Under the existing Directive/Regulations, in force since 1992, there is one definition of ‘package’: in essence there must be at least two out of three elements, namely transport, accommodation or other significant tourist services, sold as a “pre-arranged combination at an inclusive price”.
It has been the requirement for an ‘inclusive price’ which has enabled Abta and then Travel Republic to win their cases against the CAA, enabled the development of our dynamic packaging OTAs and resulted in the introduction of Flight-Plus to bring financial protection (though nothing else) to these arrangements.
The choice of elements (now called travel services) has increased from three to four, as car hire has been added as a distinct category of its own.
So the old conundrum ‘can Fly-Drive be a package?’ is resoundingly answered ‘yes’.
Under the new Directive there are no less than six ways in which what you sell will be a package if at least two of these services are combined:
i. Services put together by one trader (by his or herself or at the consumer’s request) before a booking for all the services is concluded; the traditional package, in fact.
The other definitions of package apply regardless of whether the consumer’s actual contracts are with individual providers of travel services (eg hotels, flights etc).
ii. The second is where the services are purchased from a single point of sale within the same booking process.
Surely this is what happens when you go on to the website of many OTAs and when you visit a travel agency? Such transactions become ‘packages’.
iii. The third definition of ‘package’ is where the services are offered at an inclusive or total price.
It won’t make any difference in future if services are shown with broken down prices, but then the total price is asked for – that is a package.
iv. Fourth, it’s a package if you call it a package ‘or similar term’. Is ‘holiday’ a similar term, I wonder?
v. Fifth, it’s also a package if the contract entitles the consumer to choose among a selection of types of travel service and the trader (principal or agent) combines them later.
vi. Sixth, a click-through is a package if the consumer’s name and other details needed to make a booking are transferred to a second site when the first booking is made.
So it can be seen that many more bookings, or combinations of services, will become packages.
Some have tried to argue there are in fact only two definitions of packages and that for the second definition every one of points two to six above must apply.
That is not what the draft directive says and a moment’s reflection shows that it would be a nonsense if all you had to do was avoid calling a holiday a package or similar and you could avoid the entire regime.
The draft also makes clear that there can be more than one organiser responsible for the same package if they have each fulfilled the criteria above.
Any trader who combines and sells packages either directly or through or with another trader is an organiser.
What is an ‘Assisted Travel Arrangement’ (ATA)?
An ATA is Europe’s version of a Flight-Plus, which gives the consumer financial protection but the trader does not take responsibility for the quality or safety of the trip.
In my view, the new definition of package is so wide it doesn’t leave much room for ATAs.
Only retailers can sell an ATA. For this purpose, a retailer is a trader who is not an organiser, who assists the consumer in making separate contracts for travel services with separate providers.
An ATA is where two separate bookings are made on a single visit or contact at the point of sale, or where there is a targeted click-through but the consumer’s name and details are not transferred across.
But note, a sale can only be an ATA if it is not already caught as a package.
If you can avoid being caught as a package, an ATA can be any combination of the four travel services (e.g. rail plus car hire, hotel plus tourist services etc) so it is much wider than Flight-Plus, which (obviously) must include a flight.
The “24 hour” rule which applies to Flight-Plus has not, however, been included in the meaning of an ATA.
Other new proposals
The new Directive proposes many other novelties, such as:
- A new right for consumers to cancel holidays where there is a force majeure event at or in the immediate vicinity of the destination which significantly affects the trip (an illness outbreak, a terrorist threat, a hurricane?)
- As for surcharges, the current rules require a trader to absorb the first 2%; that rule will go and be replaced by a maximum rise of 10%. But the trader must also reduce the price if, for example, currency or fuel moves in its favour.
- It will be a legal requirement (reminiscent of the Atol Certificate) to tell consumers exactly (and accurately) the legal status of the arrangements sold – eg is it a package?
- The consumer will lose all rights to compensation if he or she fails to complain if it was reasonable to do so.
- If there is justified delay in bringing consumers home, the maximum payment required from the trader is €100 per night for three nights (the ash cloud continues to throw a shadow).
- The precise legal methods for providing bonds/security/trust accounts are left to member states, which fits precisely with the DfT’s current Call for Evidence.
What everyone needs to know is that ‘package’ is a much extended concept – so wide that, in our view, there is only a small space left for ATAs to occupy.
The protection offered by packages, especially the legal responsibility for quality and accidents, will be borne by traders who currently think of themselves as mere agents.
But it must be borne in mind that this is a draft directive and it may well be changed or clarified during consultation – so if you don’t like it, get lobbying.