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In a modern world, advertising constitutes an essential part of any contract formation. In case offered goods or services are accepted by a potential consumer, they engage in agreement. Since the latter forms an important basis for further legal relations between the offeror and the offeree, the former is often required to be bound by the conditions he or she has set out or advertised. Also, growing competition in the service sector in the past decades has set indisputable pre-requisites for the improvement of advertising standards.
In particular, tourism as one of the most dynamic service sectors has been growing at an enormous pace with the rising interest of people in different regions and destinations inside Australia and internationally. With the growth of competition in this sector, consumers continue demanding better service and become more aware of laws regulating their rights.
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Therefore, application of the legally binding business practices and lawful sales techniques, that would comply with the current consumer protection laws, often helps tourist companies avoid complaints, costly court disputes, and prosecution.
The current paper takes a deep insight into one of international travel companies that has to deal with frequent complaints from its customers, in order to examine its holiday brochure for compliance with Australian contract legislation, and to indicate any cases of its breach. In addition, the company will be given necessary precautions and recommendations.
Australia is a member of Commonwealth of Nations. Contract law of Australia is accrued from England its former metropolis. Federal contract law is still in line with the English contract law. Since advertising is an important part of contract legislation, Australian federal acts regulating any means of advertising comply with their English peers. Although specific states of Australia also adopt additional consumer protection acts, these acts vary from state to state only in terms of penalties for illegal practices, but still stay in line both with each other and with federal legislation in terms of definitions and principles.
Like any other service sector, tourism is bound by the main federal consumer protection law the Competition and Consumer Act 2010 (CCA). The objective of the CCA is to ensure fair trading, promote competition and, as a result, provide for consumer protection (Australian Government Commonwealth Legislation 2012)
The CCA regulates in general companies operations, both financial and industrial issues: mergers and acquisitions (M&As), price monitoring, collective bargaining, as well as industry codes and product safety. The CCA also deals extensively with unfair business practices, including, but not limited to restrictive trade practices, such as price-fixing and restrictions of output, and restricting access to services (Australian Government. Business 2013).
Consumer rights are additionally bound by the Trade Practices Act (TPA) 1974, general for all Commonwealth countries. In case of particular states, one most often refers to the Fair Trading Acts (FTA). Apart from governing unfair business practices and sales techniques, these acts also regulate advertising in particular, that makes an indispensable part of business practices of any tourism company. They also assign penalties for misleading or deceptive behavior in relation to services in general, and for this matter, they are also important to learn for any service provider (Australian Legal Information Institute 2014; Victorian Legislation 2011).
Brief Description of the Company
Thomas Cook Group (London Stock Exchange: TCG) is a British-based travel company, which operates world-wide. It has been on the international market for seven years, since 19 June, 2007 the date of its enlargement and listing on LSE. The company still organizes trips to several parts of the world, including, apart from Europe, Asia and the Middle East.
Since its foundation, the Thomas Cook Group has acquired a tour booking web-site Hotels4U.com, as well as several tour operators and charter airlines. As a result, it currently serves clients all around the world, including Northern America and Australia (Thomas Cook Group 2014).
However, since 2011 the company has received numerous complaints about its services in Europe. On 22 November, 2011, its LSE index went about three quarters down, as a result of the rumors about the increase in the Group indebtedness and closure of 200 of its 1,200 offices (London Stock Exchange 2014).
In August, 2013, Thomas Cook Group really stopped using one of its means of advertising – in-paper advertising – by closing its publishing business (Calder 2013).
The brochure can be structured in fiveparts by its contents. The first part is introductory with advertisement of the company. The second one gives full information of its by-services and special services. The third part contains details on resorts available for accommodation at each destination. The fourth part of the brochure gives a detailed flight schedule for the company flights. Finally, the fifth part, which includes Holiday information and Booking conditions, gives the summary of terms and conditions on Thomas Cook travel services.
It should be noted that there are some of the in-flight services presented in the second part: namely choose-your-seat and extra-luggage allowance. The first one gives a possibility to select the seat on the aircraft according to the passenger’s preferences, and the second one – an allowance to carry up to 20 kg of luggage on return flights with the Group airlines.
In the third part, to the left side to resort information, the details on the availability of some special services are included again. It is noted for most resorts that passengers using Thomas Cook airlines only can enjoy the in-flight benefits for their return flights. However, the conditions under which the client may be redirected to the carrier different from one of Thomas Cook are not stated. This means that the given information is incomplete.
The other piece of information that is of interest in legal terms concerns prices. Tables in the third part give data on accommodation prices for each resort. This data accounts for seasonal variations, the most popular accommodation types, minimal costs, reductions and additional charges in case children are present. However, below each table there is still a stipulationtelling that the final prices are subject to change. It is stated that they are known only to the company travel agents and that they are available on the company web-site. This actually means that the client can consult any of these two sources of information in order to enter into an agreement, and thus, can potentially be misled.
As an excuse, it must be noted that sub-section Brochure & Website Accuracy offers an option of cancellation and promises a refund in case any price is mistakenly given to the potential consumer.
The third ambiguous sub-section is Surcharges of the fifth part of the brochure. The section makes the clients aware of possible changes in price after the booking. It actually gives information on the threshold to which these changes are limited, and gives the consumer an option to receive the refund in case he or she won’t agree to the price change or to accept a change to another holiday, but only if the company is able to offer one at the time of the change. In case the client chooses to be refunded, he or she will still be deprived of amendment charges.
Compliance with Laws. Law Breach
The company business practices stated in its brochure are generally in line with the CCA, since it provides herein equal access to the services complying with Part IIIA of the Act. The Group also doesn’t apply restrictive trade practices by price-fixing, or allocating specific territories or customers corresponding to Part IV of the CCA (Australian Government Commonwealth Legislation 2012).
The brochure doesn’t discriminate the potential clients on any attributes listed in the Equal Opportunity Act 2010, and thus, gives equal access to the company services in compliance with the Act (Victorian Legislation 2011).
However, the Group still seems to use unfair terms and conditions in consumer contracts. Thus, it wouldn’t give the customer a full refund in case he or she refuses to accept a price increase, even if this change occurs after the booking has been made. In this way, the company limits its liability and penalizes the client, but not itself, for violating of contract conditions. This trade practice falls under the category of unfair under Part 2 of the FTA, and also violates its information requirements under Part 3 in Division 3 Recall of goods, which gives the client the right for a full refund in case of the recall or cancellation made in less than 12 months after the actual supply of goods or services (Victorian Legislation 2011).
The company brochure also misrepresents the special services, namely, choose-your-seat and extra-luggage allowance, since it gives vague information about them. This falls under the Section 11 of Part 2 of the FTA. Due to the fact that the brochure also advertises the services that may not actually be provided, it may also fall under the Section 56 of TPA being bait advertising, and cause penalties under correspondent sections 13 and 17 of the FTA, in case the consumer claims this from the consumer commission or from the court (Victorian Legislation 2011).
Since the brochure redirects the reader to Thomas Cook web-site apropos tour prices, this source of information has also been consulted for the reader to be able to judge if price details are in line with the lawful selling techniques.
Firstly, a section Pricing Terms and Conditions of the web-site gives information on the conditions of the tour price change. It states that prices for flights or cruises are subject to change any time. It also says that these changes are allowed until the final price is confirmed (Thomas Cook 2014). It doesn’t indicate clearly the date or period, when or during which this final price is expected to be confirmed. This fact may mislead the customer who thus can take any further price change for the final one. In its turn, the trade representative or the travel agent of the company may fail to offer services to its clients for the advertised prices and in a reasonably expected period just because the correspondent information would not be provided to the purchaser fully before a holiday agreement is signed in paper. Although the company promises to cancel the booking and give back the money sent by mistake, this can still be inconvenient for a customer, cause additional expenses, and, finally, result in complaints.
In general, because of the vague information on pricing conditions, advertising on a web-site and in the brochure doesn’t meet requirements for the sales agreements that are not conducted in person, under paragraph 1 and 3 of the Section 69 of the FTA, requiring the company to provide a customer for the total consideration of price due to payment, and to give him or her a clear information on this matter, even if their agreement is not conducted in writing. The advertisement also falls under the Section 17 of Part 2 of the FTA, namely Bait advertising and is subject to penalty of 120 penalty units in case the private person makes a complaint, and of 240 penalty units in case this would be a corporate body (Victorian Legislation 2011).
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In case the customer, being misled by this incomplete information, makes the payment, and the travel agent accepts it, this conduct will fall under the Section 19 of Part of the FTA, namely Accepting payment without being able to supply as ordered and can be subject to even higher penalty: 240 units for a private person, and 600 penalty units for the entity.
The above-mentioned section of the web-site also complements Section B of the fifth part of the brochure informing the customers on the structure of accommodation prices. It is quite clearly indicated that prices for tours include pre-payable taxes and charges, which is still in accordance with the Section 69 of the FTA that requires the company or its agent to provide the full cost of the accommodation with regard to any applicable taxes or fees. However, the web-site also states that at selected hotels local taxes may be payable on check out and arrival/departure taxes may apply in some destinations (Thomas Cook 2014). Since the meaning of selected hotels and some destinations is not clearly indicated, both on a web-page and in the brochure, all the information on the price structure still cannot compile with the Section 69 and can be subject to penalty since it also meets the definition of bait advertising under the Section 17.
All in all, the company uses proper business practices according to the federal legislation on competition, but still takes advantage of unlawful selling and advertising techniques, according to the Commonwealth and State Acts. These techniques include misleading representation of its services, bait advertising, and breach of information standards. The above-mentioned violations can result in penalties if the correspondent complaint is received by court or consumer commission.
It is thus recommended to change the brochure by removing the information on the correspondent special in-flight services and on any amendments made to recall refunds. It would also be handy to include the direct link to the periodically updated web-page, where one can get more exact and up-to-date price information.