Consumer versus Travel Industry. CHOICE asks the ACCC to increase pressure and compliance. Part 1: An industry pushing the boundries

A complaint to Australia’s competition watchdog could have an impact on corporate airline contracts, with the airlines’ fare rules under attack.

Australian consumer advocacy group CHOICE issued a call, in Dec-2016, to the Australian Competition and Consumer Commission (ACCC) for "urgent enforcement action" to ensure that the airline industry is compliant with the Australian Consumer Law. The group issued a formal complaint to the ACCC, identifying the most "problematic" terms in the Conditions of Carriage and Fare Rules, as well as problematic application of airlines’ policies and remedies.

CHOICE has asked the ACCC to determine whether a market study into the airline industry is warranted to investigate and assess systematic consumer protection issues. This should include investigating the true cost of cancellations, reasons for delays and cancellations, internal complaints handling processes and remedies available to consumers.

The ACCC has also been asked to take action against airlines that refuse to remove prominent, blanket “no refund” claims in the booking process.

In a series of two articles, we will look at the essence of CHOICE’s complaint including what obligations the airline industry and travel management companies have under Australian consumer laws; the need to balance cost and flexibility for both suppliers and consumers; and what the stakes are for non-compliance.

Part 1: An industry pushing the boundries

At the heart of the CHOICE campaign is a call for urgent enforcement action to ensure that the airline industry is compliant with the Australian Consumer Law (ACL).

The call is backed by claims of excessive fees, unfair terms and poor complaints-handling.

“CHOICE has found that airlines push the boundaries with, and appear to breach, the consumer law with no regard and little consequence. For example, while businesses across the country are clearly banned from making blanket ‘no refund’ claims, consumers are told that flights are not refundable when booking with three out of Australia’s four major airlines”.

The claim specifically identifies no-refund clauses in many fare types:

Airline Refund Policies

Source: CHOICE

CHOICE points out that each airline clearly tells consumers that they are, in many circumstances, not entitled to a refund – despite a consumer’s right to refund under the consumer guarantees and the airlines’ acknowledgement of this in their Conditions of Carriage.

It further argues that while the airlines do disclose terms and conditions, booking time limits make it difficult for the consumer to digest them before accepting and paying for a flight.

“When a consumer purchases a flight, they enter into a standard form contract with the airline. This contract is referred to by airlines as the Conditions of Carriage. This contract outlines how a passenger can obtain a refund and the airline’s obligations under the ACL. The Conditions of Carriage are available on each airline’s website, at the checkout in the online booking process and via a link in the passenger’s e-ticket upon purchase."

“A link to the Conditions of Carriage is made available to the consumer during the booking process. Passengers also must agree to the Conditions of Carriage at the point of sale by checking a small box before payment. Consumers can read the Conditions of Carriage by clicking the hyperlink to the full document. The link to this document is also often bundled with links to other relevant sections of the airlines’ websites, such (as) information for passengers with disability or other special needs."

“Consumers need to complete their booking within the website’s booking time limit. It would be impossible to read the Conditions of Carriage in full and purchase their ticket within the time allotted.”

Conditions of Carriage - length of contract.

Source: CHOICE

CHOICE contends that current “no refund” claims cause two kinds of consumer detriment: risk-averse consumers may purchase flexible fares (at a higher value) believing that they will not be entitled to a refund under any circumstances, even if those circumstances include major or minor failures caused by the airline. Similarly, consumers purchasing sale or low cost fares may not be claiming for refunds for major or minor failures (for example, after a flight is cancelled and the booking not fulfilled), as they did not read beyond the very prominent “no refund” claim made in the fare rules at the time of booking.

In Part 2 of this series, we look at how the Australian Consumer Law applies to corporate travel; the need to balance cost and flexibility as well as the cost of compliance for both the airlines and travel managers.