CMA launches enforcement proceedings over package holiday cancellations

The CMA announced it was opening an investigation into Teletext Holidays after receiving consumer complaints they had not received refunds for holidays that were cancelled due to the Covid-19 pandemic.

The CMA said some Teletext customers had reported that they were promised refunds by a certain date, only to have that date pushed back. The authority will now engage with Teletext to gather further evidence on whether the company has broken consumer protection law.

The action against the company follows the CMA’s announcement of its investigation into the package holidays sector last July. It has already obtained commitments from a number of holiday companies to ensure that consumers are refunded in a timely manner.

Competition and consumer law expert Richard Snape of Pinsent Masons, the law firm behind Out-Law, said where the CMA is unable to obtain voluntary undertakings from a company, it can open enforcement proceedings as it has against Teletext Holidays.

“Ultimately, following consultation with a company, if the CMA considers a breach of consumer protection law has occurred it can take court action to require the business to sign undertakings to remedy its behaviour and to commit to refund customers,” Snape said.

The CMA’s investigation is following a similar pattern to its enforcement action in the care homes sector, where a number of care homes voluntarily committed to refund certain ‘upfront fees’ which the CMA considered to infringe consumer protection rules. Those which refused are now in court proceedings.

The CMA said early in the pandemic that businesses unable to deliver services to customers should offer a refund of payments already received. It said 80% of complaints received by its Covid-19 taskforce, which was set up in March 2020, had concerned cancellations and refunds.

Consumer law expert Angelique Bret of Pinsent Masons said: “This latest development exemplifies the CMA’s continued intention to protect consumers during the Covid-19 crisis. In its draft Annual Plan 2021/22, the CMA highlights one of its key objectives as ‘protecting consumers and driving recovery during and after the coronavirus pandemic.’ Therefore, businesses should be mindful of their actions as the CMA has shown that it is willing to take enforcement action where required.”

Bret said the CMA was also seeking enhanced enforcement powers which would negate the need to go to court and give it the ability impose mandatory fines on businesses. These issues are being considered in the Penrose Review which is due to set out proposed reforms to the UK’s consumer and competition enforcement regime.