CMA cancellation & refund update

The Competition and Markets Authority has published further detail on its views on the law in relation to cancellations and refunds during the pandemic

The CMA remains of the view that a consumer will generally be entitled to a refund when they have paid money in advance for services or goods that cannot be provided because of the coronavirus pandemic.

Given the evolving situation, the CMA has provided more detail on issues such as the difference between lockdown laws and government guidance, and their impact on cancellations and refunds.

Lockdown laws

These are pieces of legislation such as the various Health Protection Regulations across the UK. If contracts cannot go ahead because of lockdown laws then, for most consumer contracts, the CMA would expect a consumer to be offered a full refund.

If contracts are partially affected by lockdown laws then, depending on the circumstances and the scale of the impact, consumers may be entitled to a refund or a price reduction.

Government guidance

The government has issued guidance in place of or in addition to lockdown laws. As these are guidance and not law, whether a consumer is entitled to a refund will vary according to the specific circumstances.

For example, if a package holiday is cancelled in light of Foreign and Commonwealth Office advice against travel to the relevant country, there are specific protections which mean that consumers should be entitled to a full refund.

In other situations, it will not always be the case that a full refund is due because government guidance does not create legal restrictions and will not necessarily mean that a contract cannot be performed.

But even where that is the case, it is important for businesses and consumers to follow government guidance and it is the CMA’s view that businesses should treat their customers fairly and responsibly, including trying to find a mutually acceptable solution.

The CMA has also written to certain package travel companies involved in group trips to explain its view on when customers should be offered a refund.

This follows complaints about some package travel organisers advising customers that they are not entitled to a refund as their contract was between the company and a group, such as a school, rather than made directly with the customer. It is the CMA’s view that the Package Travel Regulations apply to these group travel packages, and that individual customers should be entitled to a refund if they have paid money in advance for a group trip that is cancelled because of the pandemic.

The CMA’s statement on consumer protection law, setting out its views, is designed to help consumers understand their rights and to help businesses treat their customers fairly. Ultimately only a court can decide how the law applies in each circumstance.

The main part of this statement is as follows:

In some circumstances, due to lockdown laws, a contract cannot go ahead as agreed or at all, and is therefore ‘frustrated’. A contract will be frustrated as a matter of law if, due to no fault of the parties, something happens after the contract was entered into which means it can no longer be performed at all or performance would be radically different to what was agreed.

As a result, the contract comes to an end and, where consumers have paid money in advance for services or goods that they have yet to receive, they will generally be entitled to obtain a refund.

CMA would expect a consumer to be offered a full refund where:
  • a business has cancelled a contract without providing any of the promised goods or services
  • no goods or services are provided by a business because this is prevented by the lockdown laws
  • a consumer is prevented from receiving any goods or services, because, for example, lockdown laws in the UK or abroad have made it illegal to receive or use the goods or services
Examples of legal restrictions in lockdown laws include:
  • restrictions imposed under the original lockdown laws in the early stages of the pandemic
  • restrictions imposed by local lockdown laws
  • specific restrictions imposed by local authorities under their legal lockdown powers
  • mandatory self-isolation following a direction from a public health officer
  • mandatory self-isolation when returning to the UK from certain countries which may affect the consumer’s ability to use a service during the self-isolation period (provided that the requirement to self-isolate was imposed after the consumer had entered into the relevant contract and was not reasonably anticipated by the consumer)

With local lockdowns likely to continue, it is important that tourism businesses are aware of this statement and modify their terms and conditions and customer service accordingly.

Head of the CMA’s Covid-19 Taskforce Will Hayter said:

Our view is that consumers will generally be entitled to a refund when they have paid in advance for services or goods that cannot be provided because of legal restrictions as a result of the pandemic.

If complying with government guidance adversely impacts consumers, our message to businesses is that they should treat their customers fairly and responsibly – including trying to find a mutually acceptable solution.

In the case of package holidays, including some group trips, if these are cancelled because of the pandemic, for example because of changing Foreign Office travel advice, our clear view is that individual customers who have paid in advance should be entitled to a full refund.

The updates come as part of wider CMA work on cancellations and refunds, which has included commitments from major holiday lets firms Sykes Cottages and Vacation Rentals to offer people refunds for cancelled bookings.

Read The CMA’s statement on contract cancellations and refunds due to coronavirus (COVID-19)

Correct as of 1 September 2020