Consumer law and your advertising

Disappointed holidaymakers complain about bookings made based on misleading advertising; consumer guarantees that 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.

Drawing upon complaints received and requests received from industry bodies for guidance upon the law, the Australian Competition and Consumer Commission has developed An industry guide to the Australian consumer law for the travel and accommodation industries. 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 and 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:A

(1) Travel advertising

(2) Consumer guarantees

(3) Refunds for cancellations

The commentary that follows is based on the Commonwealth of Australia material in the guide.

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 that includes any tax, duty, fee, levy or charge imposed. An example is airport taxes payable on the overseas flight component that 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 that could mislead or deceive the traveller in the accommodation industry. For example:

• The hotel/resort should not mislead consumers about its prices, quality, location or amenities. Example 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, to include tags or titles on the photos of the room type shown on the website and also to clearly disclose if a quality star rating advertised is self-rated. This advice should appear on the website and be available at the time of booking.

Consumer guarantees – The hotel/resort must provide accommodation that is fit for the specified purpose.

Example: 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.

Example: 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.

The cancellation policy should cover these circumstances:

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

The ACCC’s advice is that the traveller is entitled to a refund, subject to any reasonable expenses incurred. The ACCC gives examples of natural disasters, such as bushfire or floods, where the accommodation has been destroyed, access roads have been closed
or access to an area is unsafe.

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 that 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 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 credit card advice – 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, modifications or cancellations of bookings by the supplier

Circumstances to be covered for a transfer or modification 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.

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.