Covid-19 holiday cancellations - Virgin Holidays to refund £203 million

CMA investigation

On 7 July 2020, the Competition and Markets Authority (the CMA) commenced an investigation into package holiday companies. Prior to the launch of the investigation, the CMA had received over 17,500 complaints from customers regarding the difficulties they had faced obtaining refunds where holidays were cancelled as a result of the coronavirus pandemic.

Of particular concern to the CMA were companies issuing credit vouchers (that the customer could use to re-book a holiday of the same value with the same company in a specified time frame); companies waiting too long to refund customers; and companies making it too difficult for customers to obtain refunds.

The CMA's general view is that a consumer will usually be entitled to a refund when they have paid money in advance for services or goods that cannot be provided because of the pandemic (the full statement is available here). The CMA have accordingly written to a number of (unnamed) holiday companies to set out their obligations in relation consumer refunds.

On 16 September 2020 TUI UK undertook to the CMA that customers awaiting refunds for holidays cancelled due to coronavirus would receive them by the end of September 2020. Customers who had accepted credit vouchers are entitled to swap them for cash refunds if they wish to do so.

Virgin Holidays previously told customers that they would experience delays receiving refunds. As stated in a press release by the CMA on 23 October 2020, Virgin Holiday have undertaken that:

• customers who cancelled holidays before 1 September 2020 will be repaid by 30 October 2020
• customers who cancelled between 1 September and 31 October 2020 will be repaid by 20 November 2020

The CMA process

When considering whether a business has infringed consumer rights, the CMA usually takes four standard steps.

1. Investigate whether a company in a given sector is complying with applicable consumer law.
2. If the CMA concludes that a company has breached consumer law, commence consultation with them.
3. If consultation does not resolve the matter, the CMA may make an application for enforcement to Court.
4. The Court will consider the matter and may accept an undertaking or issue an enforcement order.

An undertaking may be agreed with the CMA in step 2 or with the Court in step 4. So far, holiday companies have issued undertakings direct to the CMA. The undertakings are given to ensure that the infringing conduct ceases and will not re-occur. They apply to the business as a whole (and not just one specific case).

Summary

It appears that a trend may be forming where companies providing package holidays are required to refund customers who cancelled holidays as a result of the coronavirus pandemic. The extent to which this may be applicable to other industries isn't yet clear, but the CMA continue to update information available to businesses on their webpage.

In our experience, customers are willing to do what they reasonably can to support businesses in this challenging time. It is always open for companies to reach out to their customers and seek a solution that is suitable to both parties.

If you would like further information about the cancellation of bookings or events as a result of Covid-19, please get in touch.