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The Australian Consumer Law Guide for the Travel and Accommodation Industry

Anthony J Cordato, Travel Lawyer, Sydney

Disappointed holidaymakers complain about bookings made based on misleading advertising; ask for price reductions for consumer guarantees which are not fulfilled; and ask for refunds for cancellations.

If the travel or accommodation provider fails to deal with the complaint, the holidaymaker might take the complaint to a government body.

The Guide

Drawing upon complaints received and requests received from industry bodies for guidance upon the law, the Australian Competition and Consumer Commission (the "ACCC") has developed An industry guide to the Australian Consumer Law for the travel and accommodation industries (the "Guide"). It has prepared the guide in conjunction with ASIC and the Consumer Affairs / Fair Trading / Commerce Departments of the States and Territories around Australia. The Guide was published on 16 August 2013.

The Guide contains general information as well as examples to guide travel and accommodation businesses on their obligations under the Australian Consumer Law. As such, it contains some very useful insights into the current consumer protection policy applied by the ACCC.

The Guide highlights three broad areas:

  1. Travel Advertising
  2. Consumer Guarantees
  3. Refunds for cancellations

The commentary which follows is based on the Commonwealth of Australia material in the Guide. The Guide can be accessed on the ACCC website.

Travel Advertising

The ACCC requires single pricing advertising, also known as component pricing.

There are two aspects:

  1. The first aspect is that the advertiser must show a single (total) price which includes any tax, duty, fee, levy or charge imposed. An example is airport taxes payable on the overseas flight component which should be included in the single price advertised for a package holiday.
  2. The second aspect is that the single price must be prominent so as to stand out. It must be in comparable size and colour to the price components advertised.

The ACCC has identified advertising practices which could mislead or deceive the traveller. For example:

  • The hotel/resort should not mislead consumers about its prices, quality, location or amenities in its marketing.

Illustration Photos of a deluxe two-bedroom suite on a hotel's website show separate sleeping areas, but when the guests arrive, they are shown to a room with two beds right next to each other. The cost is $500 for a room upgrade with separate sleeping areas.

The ACCC's advice is that the hotel would need to provide the room upgrade at no extra cost for the website, otherwise the website would be misleading.

As a rule, the ACCC advises that the supplier should: warn of the possibility that some rooms have substantially different layouts or views; include tags or titles on the photos of the room type shown on the website; and clearly disclose if a quality 'star' rating advertised is self-rated. These items should appear on the marketing material – the website, the print advertisement, the brochures, and be available at the time of booking.

Consumer Guarantees

The ACCC provides these examples in the guide:

  • The hotel/resort must provide accommodation which is fit for the specified purpose.

Illustration An accommodation supplier accepts a booking from a family, with a baby, and a baby’s cot is requested.

The ACCC's advice is that if the cot is not provided within a reasonable time after arrival, the consumer may terminate the booking and ask for a full refund, or choose to accept a price discount.

  • Where vouchers or coupons are sold, they must be fit for purpose. In particular, limitations on their use should be clear and the coupons should be reasonably available for use.

Illustration A voucher is purchased as part of an online buying group for six nights' accommodation in a 'beach view' room at a resort, valid for use within 12 months of purchase. One month later, a booking is attempted, and no 'beach view' room is available for the times requested, or at any time within the 12 months validity period.

The ACCC's advice is that this is a major failure, and as a result, the resort is liable to provide a full refund, unless the consumer agrees to accept an alternative room, with any necessary price adjustment.

Similar issues arise where there are 'hidden extras' to be paid for, such as meals, if the impression given is that they are included in the price.

Refunds for cancellations

Travellers will usually be entitled to a refund of the price paid if the supplier cancels the travel or the accommodation. In some circumstances, if the traveller cancels, they will be entitled to a refund.

The ACCC is concerned about cancellation fees charged by the travel and accommodation industry where a refund is to be made.
The ACCC points to the prohibition against unfair contract terms in the Australian Consumer Law. It asks these questions:
Do the terms cause a significant imbalance of rights?
Are the terms not reasonably necessary to protect the business?
Could the terms cause financial or other detriment to a consumer?

The ACCC recommends a clear cancellation policy be included in the booking conditions, which should provide for:

  • Cancellations because of an event outside of the supplier's and the traveller's control.

The ACCC gives examples of natural disasters, such as brushfire or floods, where the accommodation has been destroyed, access roads have been closed, or access to an area is unsafe.

The ACCC's advice is that the traveller is entitled to a refund, subject to any reasonable expenses incurred.

The ACCC recognises that holidaymakers are not entitled to a refund due to poor or less than ideal weather, such as no snow at a ski resort, and rain at a beach getaway, unless there is a specific contractual term which covers refunds.

  • Cancellations because the consumer is unable to go ahead by illness or change in circumstances, and the accommodation supplier is entitled to charge a cancellation fee.

The ACCC's advice to accommodation suppliers on the amount of the cancellation fee to be charged is that they are entitled to keep a deposit of up to 10% of the total price of the accommodation. If the supplier desires to retain any more, the supplier must justify it based on actual or reasonable costs incurred, and take into consideration its ability to re-book the accommodation at the same time at the same price.

The ACCC provides some advice on debiting credit cards - if the cancellation fee is to be debited from a credit card, then the consumer must be advised of this possibility at the time of booking. Also, the refund is not to be by way of a credit note unless the consumer agrees.

  • Transfers or modifications of bookings by the supplier

Circumstances to be covered for transfers or modifications might include - if the new date is in high season and is more expensive, if the consumer makes repeated requests for new dates, and if the request relates to a function, such as a wedding, to be held on the premises.

The consumer must be given the right to a refund, if the consumer is requested to pay extra costs because of the transfer or modification. The consumer will need to be compensated for their loss if the cancellation is the initiative of the supplier.

Conclusion

The Australian Consumer Law protects consumers who purchase travel and accommodation services for personal use to any value - even a luxury cruise. It also protects businesses if the cost is up to $40,000.

Travel and accommodation businesses need to review their advertising and their booking conditions to ensure they comply with the Australian Consumer Law, as outlined by the ACCC in the Guide. They also need to exclude liability for consequential or associated loss, and may limit liability for personal injury if they are a recreational service provider.

The Guide should be read in conjunction with - The Australian Consumer Law Guide for the Rental Cars Industry, published by the ACCC.

 


EXTRA CHARGES FOR FLYING: HOW AIRLINES ARE PROFITING


Do you find on-line booking fees, excess baggage fees, seat selection fees, food and beverage charges and entertainment charges by airlines to be annoying? Many passengers do, especially if they have selected the basic fare to save money and find these extra charges are ‘drip fed’ as they click through the booking screens to make an on-line booking; and to eat and drink and watch the in-flight entertainment when they board.

Budget airlines have a business model in which they charge separately for everything - it is called component pricing. The air traveller pays the basic air fare for a standard seat on the plane. The passenger pays extra service charges for anything extra.

Australian budget airlines are ‘world-class’ in charging for extras. Tigerair ranks 6th in the world with 23.6% of its income being ancillary revenue in 2013. Jetstar ranks 7th in the world with 20.6% of its income being ancillary revenue in 2013. For Jetstar, this was $US31.60 per passenger per flight.

If it wasn't for ancillary revenue, we wouldn't be making money in our business at the moment. It's that important. according to Bruce Buchanan, former Jetstar Group Chief Executive (2011).

The ACCC has taken an interest to compel airlines to disclose one of these extras - the on-line booking fees up front, when the air fare is quoted.

In June 2014, the ACCC took action against Jetstar and Virgin to bring forward the disclosure of their on-line booking fees of $8.50 for Jetstar and $7.70 for Virgin from the last screen in the on-line booking process where payment is requested to an early screen where details of the air fare are displayed, in the interests of greater ‘price transparency'.

The ACCC has succeeded and the on-line booking fees are now disclosed with the air fare.

But has the ACCC gone far enough? Should the ACCC force airlines to avoid misleading the travelling public by displaying the other extra fees early in the booking process and on their websites, rather than allowing the airlines to ‘drip price’ these?

 



THE SIX LESSONS THE WORLD LEARNED FROM THE TITANIC DISASTER


Anthony J Cordato, Travel Lawyer, Sydney

The world was in shock when the ‘unsinkable’ Titanic sank on her maiden and final voyage in the early hours of 15 April 1912.

What went wrong, and what could have been done differently, was the subject of a US Senate Inquiry instigated by Senator William Alden Smith and a British Inquiry presided over by Lord Mersey, the Wreck Commissioner. It was also the subject of many private law suits.

I was very fortunate to be privy to a legal presentation on The Sinking of R.M.S. Titanic by Joseph A. Kilbourn from the New York law firm of Bigham Englar Jones & Houston, who were the lawyers who acted for the cargo insurers handling claims from the loss of the R.M.S. Titanic. The presentation was drawn from the original legal files for the Titanic law suits which are kept securely in its safe.

These are the six lessons the world has learned:

Lesson One – The bulkheads should be watertight

Bulkheads on a ship are like canisters – they are lined up inside the hull, side by side, so that if water enters from a breach of the hull, the bulkhead fills up with water, not the whole hull. In this way, the ship maintains its buoyancy.

The Titanic had fifteen bulkheads, the tops of which extended up above the waterline. The bulkheads were built to comply with current maritime standards. The problem was that the standards did not require the bulkheads to be capped. It was like a canister without a lid.
 
After the collision with the iceberg, five of the bulkheads on the starboard bow gradually filled with water. As they filled, the ship listed and because the bulkheads were not capped. The water slopped over the tops into the other bulkheads. Soon the other bulkheads started to fill with water and the ship sank ever more rapidly.

The Inquiries found that the main reason that the Titanic sank was the fact that the bulkheads were not capped, and therefore not watertight.



Lesson Two – The double hull could have been better designed

The Titanic had been designed with an outer hull, and with an inner hull between 63 and 75 inches inside, to provide extra protection if the outer hull were breached, such as by grounding. The fact that the double hull extended up the sides of the hull was the main reason why the Titanic was considered by its owner to be ‘unsinkable’. Or as the owner put it – the whole ship was a lifeboat.

The poor design lay in the fact that around the turbine and engines, the inner hull had not been extended above the waterline, to where it had been extended elsewhere on the hull.

Once the ship started listing, and water filled the gap between the double hull to the waterline, slopping over the inner hull near the machinery space, where the pumps were unable to contain the flooding.

Lesson Three – Not enough lifeboats

The Titanic was designed to carry 32 lifeboats, which could have carried 2,160 passengers. There were 2,201 passengers on board, and so 32 lifeboats would have almost been enough.

A lifeboat is attached to a davit, which consists of two steel arms with ropes and pulleys to allow the lifeboat to be lowered into the water. The davits on Titanic were Wehlin double-acting davits - designed for two lifeboats per davit.

The owner of the Titanic, the White Star Line, chose to fit one lifeboat per davit instead of two lifeboats per davit. Therefore it carried 16 lifeboats, one for each of the 16 davits, plus four collapsible lifeboats, which meant that there was capacity for 1,178 passengers. This complied with current maritime standards. The standards were based on tonnage, not numbers of passengers!

At the Inquiries, the question was asked – Why did you not fit two lifeboats per davit? The official answer was that maritime standards did not require it. But the unofficial answer was that the extra lifeboats were not fitted because they would have cluttered up the Boat deck – was this to provide more room for the deckchairs on the Titanic to be re-arranged perhaps?




Lesson Four – Iceberg warnings should not be ignored


Although the Titanic took the winter route (or southern track) across the Atlantic Ocean because it was freer of any ice, it was still a route where icebergs had been sighted in April. During the day of April 14, four separate ice warnings were received from other ships warning of icebergs within 5 miles of the track the Titanic was taking. Captain Edward Smith heeded these warnings and steered a more southerly course.

The last of these ice warnings was from the Californian which was about 5 miles away at 10:00 pm, and was given about an hour and a half before the accident occurred – ‘We are stopped and surrounded by ice.’

This ice warning was infamously ignored by the radio operator - it was not passed on to the bridge. The radio operator was too busy sending personal messages for the first class passengers – his reply was ‘Shut up. I’m too busy.’

Lesson Five – Full Speed can be dangerous

The official policy of the White Star Line was that in clear weather, ships should be navigated at full speed, day and night. This policy of sailing ‘at a fair clip’ could have originated from the days when the White Star Line was sailing clippers to Australia in the 1860s.

In any event, J Bruce Ismay, the managing director of the White Star Line was on board, and he wanted to show that his newest and most luxurious ship could cross the Atlantic fast! His instructions to Captain Edward Smith were - in clear weather, whether it be day or whether it be night, there should be no reduction or need be no reduction in the speed, although the master of the ship knows that he is in the ice region.

The night of 14 April 1912 was clear, the seas were calm, the stars were out, but there was no moon. The Titanic was proceeding at full speed ahead at 22 knots, its maximum speed. At 11:40 pm one of the lookouts in the crow’s nest struck three blows on the gong, an accepted warning of danger ahead. Despite turning the wheel ‘hard-a-starboard’ and telegraphing the engine room ‘Stop. Full speed astern.’ the Titanic could not avoid the iceberg less than a minute later.

The British Inquiry (somewhat unbelievably) exonerated Captain Edward Smith (who admittedly had gone down with his ship) but added - ‘What was a mistake in the case of the ‘Titanic’ would without doubt be negligence in any similar case in the future.’

Lesson Six – Lifeboat drills are important

The first and second class passengers had easy access to the Boat deck by staircases and elevators. The third class passengers had to take a more difficult route to reach the Boat deck – they could take staircases to the C deck, and then reach the Boat deck by ladders on the port and starboard sides, or pass through emergency doors to a passageway and then take stairs to the Boat deck.

There were no lifeboat drills held on the Titanic.

Shortly after midnight, Mr Thomas Andrews, the Managing Director of Harland & Wolff, the builders of the Titanic reported to Captain Smith that it was a mathematical certainty that the ship would founder. The stewards were ordered to awaken each passenger and to tell them to come to the Boat deck dressed in a life jacket. Under order of ‘women and children first’ the lifeboats began to be filled and then lowered from 12:45 am until 2:05, by which time all 16 lifeboats and 2 of the 4 collapsible boats had been lowered. The lifeboats were just over half filled when launched. Out of 1,178 places available in the lifeboats only 706 were filled.

The lack of a lifeboat drill therefore had fatal consequences – there was a lack of familiarity with emergency procedures and with the access routes to the Boat deck, accentuated by the fact that it has been estimated that 500 of the passengers may not have been English speaking.

The Titanic disaster shocked the world into making passenger ships safer. All of the lessons were heeded. Two years afterwards, in 1914 the International Convention for the Safety of Life at Sea was agreed.

Today, countries around the world have laws for safety on shipping, and international conventions extend these laws to sailing on the high seas.

© Copyright 2017 Cordato Partners