Airline Ticket selling website - EU Enforcement Results - guide

08 May 2008
by eub2 -- last modified 08 May 2008

The European Commission today published the mid term report on an EU wide enforcement investigation - involving 15 EU national authorities as well as Norway – against misleading advertising and unfair practices on airline ticket selling websites. The report shows that there are "serious and persistent consumer problems" throughout the airline industry as a whole. 1 in 3 websites surveyed (137 out of 386 originally checked by the 13 reporting countries) have had to be followed up with enforcement action over the last 7 months for breaches of EU consumer law. Over 50% of those websites have been corrected during this time.

SECTION 1: THE SWEEP - CONTEXT AND PROCESS

What is a Sweep?

An "EU - sweep" is a joint EU enforcement action to check for compliance with consumer protection laws.

The first such sweep exercise was carried out in September 2007 to check websites selling airline tickets.

It was carried out by the EU Member States' enforcement authorities (the Consumer Protection Enforcement Network – CPC, which came into being at the end of 2006) and was co-ordinated by the European Commission.

Authorities from 15 Member States and Norway participated in this first joint exercise (Austria, Belgium, Bulgaria, Cyprus, Denmark, Estonia, Finland, France, Greece, Italy, Lithuania, Malta, Portugal, Spain, Sweden).

The EU airline ticket investigation focused on three key practices:

Clear Pricing: the price first advertised on a website should be a final price

Availability: Any conditions to the offer, particularly limitations on the availability of an offer, should be clearly indicated. Practices used to lure consumers in with attractive officers with no or very limited availability are illegal.

Fair Contract Terms: General Contract Terms must be clearly indicated, easily accessible and fair. Unfair practices include mandatory insurance attached to an offer, some countries prohibit situations where consumers have to explicitly opt-out of an insurance clause, rather than opt-in. Contract terms and conditions must be available in the language of the consumer.

Participation was on a voluntary basis. 447 sites were checked for misleading or deceptive messages and/or information, of which 226 were flagged as in some way not respecting consumer protection law. Sixty three were cross border cases and were mostly flagged for follow up action through the CPC network by co-operation between national authorities in different EU member states. The rest will be followed up at national level.

The focus of this EU sweep exercise is to obtain enforcement. Because consumer rights are no good if they are just on paper, they have to be enforced. This is a whole new way of boosting consumer rights.

The sweep process

Two steps to sweep action

• The first step is the co-ordinated sweep action where participating Member States systematically check for practices on different websites which breach consumer protection law. For instance, it is against consumer protection rules not to clearly indicate the total price. It is also against consumer protection rules not to clearly indicate the conditions which apply, for instance if a special offer is limited in availability. This step took place in September 2007.
• The second step is the enforcement action. National authorities have to focus enforcement resources in order to be effective. The enforcement phase involves a second screening of the websites flagged to verify if suspected breaches are confirmed. These sites are then subject to enforcement action by national authorities to ensure the non compliant sites are corrected and/or closed. National authorities will investigate and take enforcement actions for national cases. Where it is a cross border case enforcement authorities will request assistance from colleagues in other authorities (e.g. where the trader operates from another country). This is done via the recently established Consumer Protection Co-operation Network of national enforcement authorities from 27 Member States and Norway & Iceland. During this enforcement phase the companies have a right of reply and an opportunity to correct practices which are illegal. Those who fail to do so could face legal action leading to fines or closure of their Web sites. The enforcement phase has been ongoing since September 2007 and will continue until all cases have been handled.

SECTION 2: THE MID TERM REPORT – THE RESULTS

The mid term results:

The Commission's mid term report is based on the available reports from 13 participating Member States. It provides a "snap shot" of the state of play of the enforcement work on Feb 22^nd 2008 and the overall trends – particularly with regard to the 137 websites subject to enforcement action by these countries.

The main results are as follows:

1 in 3 of the web sites checked in Sept 2007 required follow up enforcement action for confirmed breaches of consumer law (386 websites checked for 13 reporting Member States, 137 required enforcement action)

Table 1: Sites checked by the sweep and confirmed irregularities

What were the main problems found in the sector?

Many websites seem to have multiple problems – i.e. breaches of the law on several fronts. The figures for problems found represent the number of times the problem was encountered - and clearly there are more problems than sites, as many sites has several problems. The main findings are set out below.

The biggest problem found concerned the information given on the final air ticket prices (58%). A widely spread practice reported by authorities consists in dividing the final price of an air ticket into different components, using the airfare for advertising purposes and so attracting consumers to a given ticket selling site with what seem cheap flights. For the consumers, the final price to pay when actually booking the ticket is generally higher due to a series added charges that vary from so called “airport charges” to handling fees, booking fees or charges related to credit card payments, priority booking, luggage, fuel etc.

Authorities found that websites did not always contain sufficient information concerning the actual availability of seats and/or the conditions attached to the advertised prices (15% of the total of findings). Particularly attractive offers are often used to lure consumers into certain sites only to discover that no seat could be booked to the promotional tariff or only exceptionally.

Regarding the general terms of the contract (49%), the practice of using pre-checked boxes to offer additional services with the purchase of the air-ticket, (e.g. travel insurance), ranks among the most frequent irregularities found by the authorities. In these cases, consumers must be careful to notice the pre-checked box and explicitly un-tick it if not interested in the services offered. The sweep also revealed in a surprisingly frequent number of cases that websites did not display the general terms of the contract or not in the language of the website

Are the problems just in the low fare part of the airline industry? Or is it also the more traditional airlines?

First, the artificial distinction between low fare and traditional airlines no longer exists – this is now a grey area with, for example, many so called traditional airlines with sections competing in the low fare market.

Our results indicate that the problems are broadly consistent throughout all parts of the sector (see table below). The basic trends are the same.

How many companies are affected?

We count close to 80 different companies affected by irregularities

Is just a problem with several very big global airlines with bad webites which are breaking the law in many countries? Or is it really a problem in companies throughout the sector?

The clear evidence is that these problems are wide spread within the industry across big and small companies. Most countries are not making public the names of sites and companies concerned but Norway and Sweden publicized the list of sites investigated and this gives a good picture of the range of companies involved.

Did any companies refuse to correct their site?

We know that some companies did not agree with the findings of the investigation and appealed their case. These cases have been followed up either in administrative or legal proceeding by the enforcement network. Proceedings are ongoing.

THE ENFORCEMENT

How many sites have been corrected at this stage?
Seven months after intensive investigative and enforcement work undertaken by the national authorities the available data indicates that over 50% of the sites with confirmed irregularities (following verification by the authorities) have been corrected.
The tables in the mid term report present information as it stood on Feb 22^nd 2008. Since then, enforcement work has continued and further corrections have been made. Lithuania for example has reported that all the sites it flagged with confirmed irregularities have now been corrected, an additional 13 sites. This data puts the level of corrections, at the end April, at over 50%.

Mid term report – summary table - enforcement per country (Feb 2008)

The report includes detailed data from the 13 (out of 16) participating countries which were in a position to provide the results of their enforcement action so far. Norway informed about the status of cross-border cases handled via the CPC only. Portugal submitted its data too late to be in the summary report but its country fiche is presented.

Summary of enforcement results per country (February 22^nd 2008)

*Percentages in grid based on 386, i.e the total number of websites checked by the 13 reporting countries. See country fiches in Report Annex for detailed breakdown of enforcement per country.

**Norway checked 31 sites but reported only on the three cross border cases that it sent to the CPC network. Of these, 2 were corrected. Norway data are therefore not included in the enforcement report.

*** Portugal sent results later and are not included in the aggregate Report. It reported, 11 sites with confirmed irregularities, all national, of which 8 are under enforcement procedures.

How long does an enforcement action normally take?

Enforcement is resource and time intensive; it involves legal work which can be complex and lengthy. There is no "standard" time for an enforcement action, each case if different depending on the nature of the investigation and the enforcement action undertaken. Cases referred to court can take one year or more. Cross border cases where one national authority has to request the assistance of another Member State authority are new and we are waiting to evaluate what would be an appropriate benchmark for a response time.

Why are not all sites with confirmed irregularities not followed up?

A few countries have established priorities for enforcement. For example, Finland decided to only pursue national cases and not to enforce cross border cases. Denmark decided that some flagged sites had no practical significance to users in Denmark and gave priorities to other sites.

In the 13 countries of the report there are 386 sites checked, 137 were problematic (35%) of which 132 were followed up. Five are not followed up because the relevant authority decided to concentrate on national enforcement and these cases were cross border.

What about the sites which have not been corrected? What is the state of play on those cases? Have all the companies been contacted?

Enforcement is taking time and procedures against some sites are not finished. Legal work or negotiations are requiring more time. In some cross border cases where there are different interpretations of the legal requirements by the national enforcement authorities some companies concerned may not yet have been contacted. In other cases companies have made a commitment to change a site but it will take some more time to do the work – those sites are not considered as yet to be corrected until the site is changed.

Figures for national enforcement vs cross border enforcement

National and cross border enforcement

The figures indicate a 55% enforcement rate of national sites (50 out of 90). And a 12% enforcement rate of cross border cases 5 out of 42. It is clear that more work needs to be done to make cross border enforcement more effective and quicker.

*CPC = Consumer Protection Co-operation Network – a network of national enforcement authorities from 27 Member States (and Norway & Iceland). Through this network national authorities request assistance from each other for enforcement dealing with companies based outside their country.

** Five sites with confirmed irregularities and potential CPC cases are not followed up by Finland as they decided to concentrate their effort in correcting national cases.

Why are you reporting back now? Why not wait until all the enforcement is finished?

There are already visible trends that have become apparent in this exercise. For instance, the widespread presence of irregularities, notably in what concerns pricing. It is important to start signaling to the public and to the companies that these practices are not only unacceptable but illegal and that they will be dealt with. We want to tell the public what their rights are and show the companies that we are watching them.

Publicity

You said you would name and shame companies who were breaking the law. Why can only 2 countries list the names of companies under investigation?

This EU wide enforcement action is based on a network of national enforcement authorities. Different Member States have different legal systems and constraints. They also have different traditions and cultures. These have to be fully respected.

The enforcement work has proved slower than expected and the majority of Member States have legal constraints that prevent them from publishing lists of company websites under investigation at this time. That can generally only happen when the administrative or legal procedures are closed.

For Sweden and Norway, where those constraints do not apply – they publish full lists.

What about the national country reports?

One must be very careful in comparing country reports as different Member States dedicated significantly different level of efforts to the Sweep. Countries that dedicated more resources or countries that targeted risky sites were more susceptible of finding more irregularities. Enforcement is also being followed in different ways across participants and this might translate in different rates of resolution.

National enforcement bodies press contacts are available for clarifications on the national situation. See list of press contacts in annex to the sweep report.

SECTION 3: NEXT STEPS

When will this exercise be wrapped up? When will the final results be known and how?

As soon as enforcement actions are finished, enforcement authorities may publish their results on their national websites, which can be accessed through the Commissions sweep webpage.

We will intensify our enforcement work, and, together with the Member States, the aim is to wrap up this investigation by May 1^st next year."

What are the penalties for non compliance?

For companies not complying with the law, they are being followed by enforcement authorities either in administrative or legal proceedings. The authorities have the investigation and enforcement powers necessary to apply this Regulation and exercise them in conformity with national law. The authorities can ask companies to cease the infringement or to pay fines. It is possible that a website site could be shut down where practices breaching the law are maintained.

What if a Member State is very slow or does not deal with another Member States request for assistance? Is there a time limit, is there a sanction?

The principle is that Members States agree between them on the timing required to handle the cases and there is no time limit on this agreement between MS foreseen in the Regulation. If Member States do not set the estimated timing required, there is a default time limit of two weeks. So far, in operational terms, Member States have generally worked out the estimated timing between them.

What about the new legislation from DG Transport – the so called 'Third Package in Air Transport' that comes into force later this year?

This is the Proposal for a Regulation of the European Parliament and of the Council on common rules for the operation of air transport services in the Community (COM (2006) 396), the so called "Third Package in Air Transport".

The Regulation will further clarify – what is already the common understanding among enforcement authorities under the existing consumer legislation on misleading advertising - that the final price includes all applicable fares, charges, surcharges, taxes and fees which are unavoidable and foreseeable at the time they are published. In that way the new regulation will set more explicit rules for companies to provide customers with final prices. These rules will apply to fares and rates published on the Internet. It will apply to all flights within the EU and to flights of all companies departing from an EU airport. A common position has been reached in Council and the Regulation is expected to be adopted later this year.

What are you doing to ensure that people know that the irregular practices discovered have been corrected?

The most efficient tool of enforcers is publicity, which alerts consumers and may warn business. Through the news coverage given to today's results, people will be better able to understand their rights and what they should expect to find on such websites – they can access our webpage demonstrating good and bad examples of website practice and they can check the results on national websites as the exercise continues.

Will there be another sweep?

Yes, preparations for the next sweep in 2008 are quite advanced, as is work on several joint enforcement actions with smaller groups of Member States.

Source: European Commission