TNW pick of the week: CPA - new code mooted

A new CPA Code of Conduct, as proposed by the airline industry, will affect travel agents acting on behalf of the airline.

The South African airline industry is applying for a Code of Conduct to be approved by Trade & Industry minister, Rob Davies, to reduce legal uncertainties and regulate the relationship between airlines and consumers with regard to the Consumer Protection Act.

The Airlines Association of Southern Africa (Aasa) and the Board of Airline Representatives in SA (Barsa) are leading the move. Barsa ceo, Allan Moore, says:  “The code will exempt the industry from the generic application of the Act but will not alleviate the airlines’ responsibilities to the consumer. It will rather co-ordinate and harmonise jurisdiction over consumer matters to ensure consistent application of the principles of the CPA.” He says where travel agents act on behalf of an airline this will have implications for them.

Allan says the proposed code of conduct has been submitted to the minister on approval by the Commissioner of the Consumer Commission but he expects the approval process to be protracted.

The code is necessary, he says, because the CPA potentially affects virtually all facets of an airline’s business operations. Allan says non-compliance with the CPA could result in the National Consumer Tribunal imposing an administrative fine, which may not exceed R1m or the greater of 10% of turnover of the company concerned in the financial year preceding the fine. “If you charge for your advice (e.g. travel agent service fee) you are liable for anything you say – or don’t say”, he warns.

To protect themselves, he says airlines and travel agents must negotiate indemnities from:
- third-party service providers;
- marketing partners; and
- alliance partners.

The CPA affects the following airline and travel agent operations:

* Direct marketing: Any transaction resulting from direct marketing can be rescinded without reason or penalty within five business days. The supplier has 15 days to return the payment. This could affect database and on-board duty-free marketing.

* Cancellation/delay/refund policy (e.g. overbookings): Refund full price, with interest and costs unless the consumer accepts a comparable offer;

* Right to quality service: Remedy the defect or refund a reasonable portion of the price paid;

* Right to delivery of service: Consumers may accept an alternative or cancel without penalty;

* Right to cancel advance bookings: There is no longer such a thing as a non-refundable ticket in SA. Consumers are entitled to a refund less a reasonable cancellation charge based on:
* the nature of the service;
* length of notice;
* potential to find an alternative;
* industry practice.
Taxes and charges collected on behalf of other authorities are fully refundable but airline surcharges are different because they are imposed by the airline.

* Loyalty programmes: Airlines must cater for anticipated demand and black-out periods may not exceed 40 days a year;

 * Baggage liability: The supplier is liable for loss resulting from failure to exercise a reasonable degree of skill, care and diligence;

* Bait marketing: ‘Fly to JNB for R299’ is legal bait marketing but suppliers must expressly state limitations of availability. ‘Subject to availability’ is too vague.

* Ring-fencing of pre-payments: All vouchers are valid for three years, no matter what is written on them. A ticket is valid for travel on a certain date. If you cannot meet the contract on that date, the residual value of the ticket is valid for three years, but the residual value of the ticket may be naught.

“Where you as a travel agent need to take a deposit, you may not treat it as your property and (unless it is flown) must refund it if needed,” Allan advises.
“Specify your upfront fee (not deposit) for travel agent services rendered and divorce it clearly from any deposit due to a tour operator.”