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Fairer deal for holidaymakers

Air Miles changes terms after OFT action

PN 130/03     13 October 2003

Travel operator Air Miles Travel Promotions Ltd has agreed to change its contract terms to provide fairer deals for customers following action by the OFT.

The OFT was concerned that some of Air Miles' terms and conditions were potentially unfair under the Unfair Terms in Consumer Contracts Regulations 1999 and under the Package Travel, Package Holidays and Package Tours Regulations 1992. Of particular concern were the company's assertion of an absolute right to terminate a consumer's Air Miles account in certain situations, its right to pay compensation in miles rather than cash and the provision for surcharges.

Air Miles is a wholly owned subsidiary of British Airways with more than six million members who collect miles by shopping at high street stores and online. The miles can be used for full or part payment of travel.

OFT Chairman John Vickers said:

'We are pleased that Air Miles has agreed to amend its terms to ensure fairness for consumers. Holidaymakers must be able to book travel with confidence that their rights will be protected. The OFT will continue to work with other companies to ensure that for consumers.'

Details of the contract terms that Air Miles has amended are set out in the following annexe.

ANNEXE

• Term provided that the company has the absolute right to terminate a customer's account if they were earning or spending miles in a manner detrimental to the company or their distributors. Change – now provides that the right to terminate the account will be exercised reasonably.
  
  
• Term reserved the company's right to pay any settlement or compensation due in miles. Change – wording deleted.
  
  
• Term provided that while an additional charge might be levied for special requests, the request was not guaranteed. Change – revised to provide that if the supplier is able to confirm the special request, an additional charge may apply.
  
  
• Price revision clause failed to comply with Regulation 11 of the PTRs with regard to changes in prices for package holidays, and failed to provide the consumer with the options they are entitled to in the event of a significant price increase. Change – revised to clarify the circumstances in which the prices of packages could be revised, to provide for both upward and downward revision of prices, and to provide that in the event of a significant price increase the consumer will be entitled to the options set out in the paragraph above.
  
  
• Term provided that miles could not be replaced if they were lost by the consumer. Change – now provides that miles cannot be replaced if lost, unless the consumer can provide the serial numbers of the lost miles and they have not already been spent
  
  
• Term provided that the company did not accept liability for unauthorised use of consumers' miles by another person in possession of their details. Change – revised to provide that the company did not accept liability for unauthorised use of a consumer's miles as a result of the consumer not taking appropriate care of their account details.
  
  
• Term failed to provide the consumer with the options they are entitled to under Regulation 13 of the Package Travel Regulations 1992 (the PTRs) in the event of a significant change to or cancellation of a package holiday by the company. Change – revised to provide that if a package is cancelled or subject to a significant change, the consumer will be entitled to a substitute package of equivalent or superior quality at no extra cost, a substitute package of lower quality and receive a difference in price if applicable, or receive a refund of all monies paid.
  
  
• Term provided that the company was not required to take any action if a change or cancellation to a package holiday was due to circumstances out of the company's control, which conflicts with the consumer's rights under Regulation 13 of the PTRs. Change – the exclusion of liability has been deleted, and the definition of force majeure has been revised to more closely reflect the definition provided in the PTRs.
  
  
• Term provided that the company and its suppliers were not liable for circumstances which caused the consumer to cancel or amend their package holiday, whereas under the PTRs the company could have been liable in some situations, such as where the company cancels the holiday. Change – wording deleted.
  
  
• Term provided that cancellation of car hire or hotel bookings within 14 days of departure would be subject to a 100 per cent cancellation charge, which might have exceeded a genuine pre-estimate of the net losses incurred by the company as a result of cancellation. Change – revised to provide for lower cancellation charges.
  
  
• Term provided that the company would only be liable for direct losses arising from their failure or improper performance of the contract where they were acting as the tour operator. Change – revised to provide that the company will be liable in respect of package holidays for damage caused as a result of the failure or improper performance of the obligations under the contract by the company or its suppliers.
  
  
• Term provided that the contract was subject to the jurisdiction of the English Courts. Change – revised to provide that the contract is subject to the jurisdiction of the English Courts unless the consumer lives in Scotland or Northern Ireland, in which case the local courts will have jurisdiction.

NOTES

1. The Unfair Terms in Consumer Contracts Regulations (UTCCRs) came into force on 1 October 1999 and replaced the 1994 Regulations. The regulations implement an EC Directive (EC Directive 93/13) in the UK. UTCCRs apply to standard contract terms used with consumers in contracts made after 1 July 1995. The Regulations say that a consumer is not bound by a standard term in a contract with a seller or supplier if that term is unfair. They also give the OFT and other Qualifying Bodies powers to stop the use of unfair standard terms, if necessary by obtaining a court injunction. Ultimately only a court can decide whether a term is unfair.

2. The Package Travel, Package Holidays and Package Tours Regulations 1992 (PTRs) implement an EC directive (90/314) on the same subject. The PTRs control the sale and performance of packages sold or offered for sale in the UK. They set out what information must be given to the consumer before the contract is concluded (including information to be in brochures) and information that must be given to the consumer before the package starts. They lay down terms that must be included in the contract and prescribe the circumstances in which price revisions may be made.

They also set out the steps that the tour operator must take where there is, before departure, a significant alteration to an essential term of the contract and set out the steps to be taken where, after departure, a significant proportion of the services contracted for cannot be provided. They also entitle the consumer to transfer the booking to another in certain circumstances. They provide that the tour operator is liable to the consumer for the proper performance of the obligations under the contract, irrespective of whether such obligations are to be provided by the tour operator or other suppliers of services. They also provide that the tour operator/retailer should be able to provide sufficient evidence of security for the refund of money paid and for the repatriation of the consumer in the event of insolvency.

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