11 November 2009

UPDATED: ATOL action demanded as Travel Republic is cleared of all charges

Thomson and First Choice have strongly criticised a ruling which cleared Travel Republic of alleged breaches of ATOL regulations.

All 19 charges against the Travel Republic were dropped following a three week hearing at Statford magistrates court.

Some sectors of the industry have called for the break up of regulator the Civil Aviation Authority for not updating consumer protection rules earlier and for bringing the case in the first place.

Travel Republic managing director Kane Pirie said: "We welcome the clear judgment from the court and the dismissal of all charges against Travel Republic and me. Our position has been vindicated.

"This confirms that it is perfectly legal to sell more than one travel product at the same time.

"Travel Republic has always, and will always, act within the law, including the ATOL regulations, in their current, and any future form.

"The whole process has been an expensive, unpleasant and gruelling diversion for the whole company and for me personally.

"I am now looking forward to being able to focus once again on driving the ongoing growth of the business."

The company stressed that all Travel Republic bookings are protected by its "Total Financial Protection" insurance.

But Christian Cull, communications director for Thomson and First Choice Holidays responded by saying: "Travel Republic insist they don’t sell packages, but if something looks like a duck, waddles like a duck and quacks like a duck, then it's a duck.

"We are incredibly disappointed that the courts have not recognised this.

"The ATOL system is confusing enough for consumers and we hope that those who book with Travel Republic will be made aware that their money is not financially protected in the way it is when they book with other businesses such as ourselves.

"This judgment emphasises the need for government to act, both here in the UK and in Europe, and to give us the new regulatory framework that this industry so desperately needs"

He added that parent company TUI Travel would continue to campaign for regulatory change both in the UK and at the European level.

"[Chief executive] Peter Long will be taking those same messages to Brussels when he meets with Commissioner Kuneva next week," Cull added.

ABTA chief executive Mark Tanzer said: "The failure of the CAA's case against Travel Republic marks a low point in the administration of the travel industry's system of financial protection.

"The uncertainty that surrounds this area has led to the initiation of expensive and ultimately futile proceedings against a prominent ABTA member

"The case for reform of the ATOL scheme and the Package Travel Regulations is now irrefutable.

"ABTA initiated discussions with the Department for Transport at the beginning of this year with a view to bringing all holiday arrangements within a single scheme of financial protection, and I am pleased that this idea has been taken up within the DfT's forthcoming consultation.

"The opportunity to remove the uncertainty for ABTA members and their customers must not be missed."

The Association of ATOL Companies described the decision as a major step backwards in the battle for consumer protection.

"We are dismayed but not entirely surprised at the outcome’ said AAC chairman David Mortimer.

"Regrettably this opens the door to more consumers wrongly believing they are protected when they are not.

AAC legal advisor Alan Bowen added: "For AAC members this is a major opportunity to emphasise that they always protect package holiday sales through the ATOL scheme.

"The AAC has always strongly supported the view that customers should be protected by an ATOL licence when buying an air based holiday but this outcome simply adds to the confusion.

"Many customers of failed companies such as the XL Group last year and Freedom Direct in 2009 thought they had protection when in fact they didn’t’

"Bringing clarity to financial protection must be a priority for the entire industry, this decision, whilst only a magistrates decision, is likely to encourage more agents to dynamically package without explaining the consequences to their customers."

Association of Independent Tour Operator’s chairman Derek Moore said: "This result only serves to highlight the current confusion over the ATOL regulations."

AITO described the decision as "meaningless" as everything will alter because of changes in law relating to ATOL regulations in the next few months.

"By the middle of next year, we will have new ATOL regulations. Whether the CAA won or lost this case thus makes no difference at all."

AITO added: "The public is the loser as a result of the inability of the Inland Revenue to clarify the difference between a principal and an agent, i.e. if it wasn’t for the tax advantage connected with being an agent rather than a principal, nothing like this would have happened in the first place."

The association stressed that any new legislation must concentrate solely on benefits for the consumer and not whether a company will save tax or not.

"Our priorities as an industry must be to look after our customers," a statement said.

Todd Carpenter, founding director of Travel Trust Association, said: "The decision in the Travel Republic case means that rafts of consumers who would have been legally protected in the future will now not be afforded that opportunity, until this situation is rectified.

"The only good thing to come out of the ruling is the Judge’s recognition of the CAA's ATOL arrangements with the TTA as a commendable scheme.

"The whole point of the Travel Republic case was to establish certainty as to when an ATOL is required.

"TTA urges the CAA to address this particular issue as quickly as possible rather than go through a complete rewrite of the ATOL regulations.

"Anything else would just create more uncertainty for a longer period of time. Reform of the ATOL regulations will be required in order to close this loophole or the CAA will have to appeal the decision or perhaps both."

On Holiday Group CEO Steve Endacott said the ruling demonstrated that ATOL regulations were fundamentally outdated for retail agents.

"The problem is that the agent atkes whole liability when an airline collapses," he said.

He backed calls for ATOL reform but warned about what will happen while the estimated year to 18 month process takes place. Insurance schemes could fill the gap,

Bob Atkinson, travel expert at travelsupermarket.com, said: "Today’s ruling in favour of Travel Republic in the CAA’s test case has made it clear that the online agency has not been selling package holidays outside of the rules set by the CAA's ATOL scheme.

"However, the underlying issue for the industry as a whole remains - consumers are still exposed to the risks of purchasing unprotected holidays and travel arrangements online and in high street agencies with no financial backing from the official scheme which was designed to protect the consumer.

"Beyond Travel Republic’s customers, this ruling means that agents can continue to dynamically package holidays on behalf of the consumer and expose them to the financial risk of all or part of the trip going wrong due to company collapse.

"In light of a number of high profile collapses such as XL, the industry needs to wake up and work harder to ensure innocent holidaymakers are protected.

"Travel Republic do indeed have their own protection scheme in place, making a mockery of the point of the ATOL system and confusing the customer even further as to what cover they have.

"Consumers should remember that if they are booking a holiday or travel arrangements which are not ATOL protected, the prudent thing is to book using a credit card or visa debit card at all times.

"Given today’s ruling, which may still be appealed, travelsupermarket.com is calling on the EU commission to review the outdated Directive on Package Holidays and for Government to reform the current ATOL scheme.

"They should ensure that however consumers book and pay for their holidays, flights and accommodation, they are adequately protected."

Rochelle Turner from Which? Holiday said: "It’s really disappointing that there is still no clarity around what a ‘package holiday’ is, which would make it is easier for people to know exactly what they are buying.

"Instead, travel agencies are still free to bundle up separate elements of holidays without it being clear that they are not selling a ‘package holiday’, so holidaymakers may not be financially protected in the way they think they are.

"Anyone booking a holiday should do so through an ATOL provided agent, or pay on a credit card so that they are financially protected should anything go wrong."

*The AAC will discuss the outcome in detail at its seminar ‘Is this the end of Consumer Protection as we know it?’ at World Travel Market today (Thursday).

by Phil Davies

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Your Comments (9)

It's consumer protection we need

We don't need regulation, we need consumer protection, If we create a criminal offence for selling travel components without a consumer insurance policy then that is ALL we need, trading standards can be the prosecuting authority if anyone steps out of line and we can disband the whole CAA ATOL section and save us and the nation a fortune, The insurance industry will judge different business's and make judgements of risk and levy the correct premium, ditto with the credit card companies who already have a joint responsibility with the merchants under the consumer credit act. why complicate things further,we are paying through the nose to keep a group of pampered bullying civil servants in place to distort the market and give competitive advantage to larger players in our industry

By Paul Dendle, Friday, November 13, 2009
The CAA should appeal

In his judgment, Evans said the prosecution had failed to prove that Travel Republic did anything other than "sell components of holidays separately, but at the same time". Which is exactly what the package regulations state you need an ATOL licence - this judge is an idiot..

By Kev james, Thursday, November 12, 2009
Judge did CLARIFY the issue with his verdict.

Appears to me that we are all jumping to some hasty conclusions about the implications of this verdict. Whilst we must agree that the whole issue is a bit of a minefield for consumers, the rest is clarified. If a consumer books and is invoiced for separate travel items he is not ATOL protected so the CAA have no obligation with repatriation or holiday money or any form of reimbursement on that holiday. If the holiday is booked with a licensed ATOL holder then the CAA have obligations and cannot sidestep or pussy-foot any potential claim issues which may arise if a failure or a problem occurs. What the judge had to decide was whether ATOL could be enforced. He said it was not, so in essence the implication is that consumers ultimately have to live with the consequernces of the choices they make. If some consumers are willing to take risks, then so be it, they remain susceptible to agent, airline, hotel or tour operator failure. If they want cover on these they can either rely on insurance and/or credit card protection. Other, more cautious consumers, who prefer not to take any risks, should make sure they only book ATOL packaged holidays with legitimate, bona-fide ATOL license holders. What the CAA must now do is regulate companies that operate and sell both type of holidays, ensuring that all ATOL licencees are lawful and fully compliant, whilst warning that they have no liability whatsover for those who book separate travel items. In fact if holiday invoices cleary reflected ATOL or NOT-ATOL protected, consumers would quickly learn to distinguish between the two choices they can make.

By Helder Lemos, Thursday, November 12, 2009
Who is responsible for the decision to prosecute

Well, what I would like to know is who within the C.A.A. chose to prosecute a case that they had already lost twice. Why is tax payers money being wasted on a case that was, almost certainly, going to fail. Is it not the case that someone in the C.A.A. should be held accountable for this?? If this were a commercial organisation, heads would roll for this

By Johnson Michael, Thursday, November 12, 2009
Confusing the issue

Christian Cull and the CAA are just not grasping the issue. I agree with Mr Cull, a duck is a duck but a duck and a goose is not a wildfowl park. Just like a TV and a DVD player is not a TV/DVD combi, a car and a caravan is not a motor home or a washer machine and a tumble dryer is not a washer/dryer...need I go on? The package holiday regulations are for package holidays and as we've all pointed out for years, the Government needs to update this or introduce new regulations for ALL travel components.

By Ian Raine, Wednesday, November 11, 2009
The protection racket

Whilst all these large companies protest and bicker, largely to maintain their own self-interest, the rest of us - i.e. smaller, specialist companies - have to observe these expensive and, to us, usually irrelevant, rules and regulations. We, for instance, deal almost wholly with individuals, most of whom pay with credit cards; yet, we have to take out expensive insurance policies to protect customers (twice over effectively) for an eventuality that will not occur, especially as we do not provide flights. To have to have an ATOL license for providing flights on scheduled airlines seems daft enough anyway; but I have no doubt that all of this will culminate on yet more onerous regulation that is entirely irrelevant to us but will satisfy the powers that be and help the large companies that can afford it. Christopher Knowles WORLD WALKS

By C Knowles, Wednesday, November 11, 2009
Quack Quack . . .

Offering consumers financial protection should be a benefit that ATOL holders can leverage to increase sales, but only if the public know when they are and are not protected. This court ruling is a blow to all of us who both support and pay for the current ATOL system. I agree entirely with the comments of Christian Cull and hope the CAA appeal this decision and convince a more enlightened judge that something that looks, waddles and quacks like a duck is indeed a duck.

By Guy Novik - USAirtours, Wednesday, November 11, 2009
Futile from the start

Kane Pirie and all at Travel Republic are to be applauded for standing up to the CAA. However, the CAA had no business even bringing this case to court as they had failed to act upon the modern wave of business that is not only here to stay but will eventually be the "norm". They failed in their duty to update their own system and processes to protect consumers. They have failed even now to bring clarity to the market and failure of such magnitude should lead to the breaking up of the CAA and should lead to what the industry should have done from the outset, simply insure the risk. Travel Republic insured the risk to protect their clients once again sending a clear message that this modern world has no place for antique methods. But it's the potentiial buyers of Travel Republic that I feel sorry for because as of yesterday, Travel Republic's value should hit new levels and I for one sincerely wish them well with it. Likened to days of old, can we now assume the power brokers within the CAA will now fall upon their own rusty swords?

By Kenny Picken, Wednesday, November 11, 2009
Well done Mr Pirie for standing your ground!

I would just like to congratulate Kane Pirie and Travel Republic on being cleared of ATOL breaches! Travel Republic clearly sells holidays that are individually priced to the consumer. They have chosen to act as an agent and earn commission on the products that they sell and not sell packages which include net rates and a mark up. Although some may argue that they are selling holidays, it is not the fault of Travel Republic or Kane Pirie that the CAA and the government have failed to get a clear and consistent consumer financial protection scheme in place! Hopefully this case will send a clear message that the travel industry needs one scheme in place that protects all consumers. While I understand that trying to implement a new scheme that covers all is quite a task, I do feel that this would be better use of the CAA's time, rather than trying to bully Travel Republic into getting an ATOL, when the rules clearly state that they do not need one when pricing the products individually. Well done Mr Pirie for standing your ground!

By Adam Greghni, Wednesday, November 11, 2009