Fair’s fair – A response to the ‘Small Print, Big Difference’ campaign

Posted: 17th May 2019

In April 2019, the Competition and Markets Authority (CMA) launched a new campaign to raise awareness about unfair terms and conditions within the travel sector.

The campaign aims to “help holiday and travel businesses improve the clarity of their terms and conditions”, making sure that they are “upfront and clear with their customers”, especially when it comes down to charges, fees and cancellation terms.

After all, countless holiday-makers rely on businesses like these to ensure their trips go off without a hitch – and if a hitch does materialise, they assume the businesses will be able to appropriately respond, offering refunds, alternative arrangements and other reparations.

If a firm were to suddenly turn around and say that they aren’t able to provide this because of the terms and conditions signed during the run-up to the holiday, it’s pretty obvious that trust will be eroded. It’s unlikely that a holiday-maker will return to their packaged deal provider if, for example, they don’t offer refunded deposits for a beach-side villa becoming inaccessible due to natural disaster, a rented car breaking-down due to owner negligence or a long night spent waiting in a terminal for a plane that never takes off.

All nightmare scenarios for the flip-flop-wearing, cabin-bag-carrying travellers that spend an estimated £81 billion on travel, of course.

The word from the CMA

Consumer law allows businesses to recoup their losses from cancellations – caused by personal circumstance or external events – by charging small cancellation fees, but this must be in proportion to the costs that the businesses face.

But while this is largely expected by travellers, customers have wildly varying opinions on what constitutes a fair cancellation fee. A national survey by Ipsos Mori released by the CMA highlighted that 89% of travellers feel they should get all, or most, of their money back if the business cancels and resells their booking, and 85% thought it unfair that they would have to pay part of the cost of a cancelled booking. 66% of travellers felt that the business they booked with does not always make it easy to cancel, and a fifth of them believe they had been treated unfairly.

But, as we have previously discussed in terms of pricing structures within the insurance sector, ‘fairness’ is a fluid, subjective concept, and hardly simple to describe in certain terms. The CMA defines ‘fair’, in this regard, as ‘any legal term that would give a business unfair advantage in a transaction’. This could be, for example, a travel agent requiring a large, upfront and non-refundable deposit, regardless of the risk to the business.

These terms are more likely to be fair if the terms of cancellations and refunds are clearly explained, and customers have a good idea of how the cancellation would impact them.

The CMA’s dedicated website for the ‘Small Print, Big Difference’ campaign provides a guide for businesses that outlines its ideals of fairness. By using the basest legal framework from the Consumer Rights Act 2015, the CMA sets something of a base from which travel firms can build the fair terms and contracts that will keep customers returning for all their holiday needs.

• Legally binding terms – travel firms (and those in sectors further afield) must realise that contract terms are not legally binding if they are determined to be unfair through a ‘fairness test’.
• Non-refundable deposits – Terms that say deposits are non-refundable are likely to be unfair.
• Automatic Renewals – While contracts of all sorts are able to roll over or be automatically renewed at the end of term, customers must be properly informed before signing the initial contract that this automatic renewal will take place. They must also be allowed to cancel the contract ahead of this.
• Unclear language – ‘legalese’ and jargon has no real place in a customer’s contract. If firms rely on unclear or complex language, the contract could be considered unfair.
• Changes to terms and conditions – if customers are going to be on a contract for a while, firms often wish to allow for adjustments to the contract at a later date. However, if the terms allow a change to something agreed, firms need to be upfront to their customers at the very beginning of a contract.
• Tick boxes – Tick boxes that ask customers to confirm they’ve read terms and conditions are there to bind customers to the terms of a contract. This can be open to objection if there is no reasonable chance of the ‘terms’ being read and understood.

The winding road towards fairness

The FCA, the regulator of the financial services industry, has discussed pricing discrimination in great length, joining its voice with the CMA and Citizens Advice who, last year, began working through a super-complaint related to the ‘loyalty penalty’ paid by longstanding customers of various services.

From all of this work, we have come to see the journey to fairness as a winding road rather than a direct path. Different businesses will have different commercial pressures, of course, but underlying all contract and pricing considerations should be the identification of the potential for customer harm. The FCA, for example, provides a few evidential questions firms could review in this regard:

• How much are individuals harmed?
• How significant is the pool of people harmed?
• How are firms price discriminating?
• Is the product / service essential?
• Does society view the unfair pricing as egregious?

Not all questions need to be answered to decide whether action over pricing is required, and there is no minimum or maximum number of questions that need to be satisfied in order to act.

In a free and competitive market, regulators aren’t considered arbitrators of ‘fairness, but they will be looking to ensure that customers are not unduly harmed by unfair contract terms or pricing strategies. They will wish to ensure that customers have all the information they need available to them to make informed choices. While holiday comparison and booking sites have made this available to a large extent, complicated terms and conditions are holding back the fair outcomes that all customers deserve.

Firms must play a large part in bringing this into reality. It will take some shifts in culture – aided, ideally, by specialist governance consultants and learning experts – as well as a healthy amount of bravery to take those big steps and emerge as companies at the forefront of their industries.