Australia: The Travel Industry and Consumer Protection

The Case for Reform of an Out-Dated Scheme
Last Updated: 13 March 2011
Article by Bridget Edghill

Following months of consultation, PricewaterhouseCoopers ("PwC") has released its Review of consumer protection in the travel and travel related services market ("Report"), highlighting the incontrovertible need for reform of the existing travel agent licensing legislation and the associated compensation arrangements.

1. Background

The Report was prepared in November 2010 for the Standing Committee of Officials of Consumer Affairs to assess consumer protection in the travel and travel related services market, with a particular focus on the role of the Travel Compensation Fund ("TCF").

Currently, the key travel industry-specific legislation that applies in Australia is embodied in the Travel Agents Acts that are in force in each State and Territory of Australia. Those Acts form part of the National Co-operative Scheme for the Uniform Regulation of Travel Agents ("National Scheme") that was introduced in 1986.

While the basic concept of the National Scheme - being to promote uniform industry standards across the nation - has merit, 25 years later, the National Scheme and the corresponding legislation and approach taken in respect of the travel and travel related services market has become out-dated. In particular, the existing regime is not sustainable or relevant to an industry that is now characterised and driven by fundamental changes to the operation and offering of travel services including, without limitation:

  1. the advent and prolific use of new technologies throughout the industry, particularly the Internet;
  2. the increasing globalisation of the travel industry and the ability for overseas operators to enter the domestic market without establishing a physical presence;
  3. the availability and acceptance of electronic payment systems; and
  4. an increase in the diversity of the travel industry and the shift in the supply chain to one where: (i) consumers are now able to transact instantaneously with suppliers, such as airlines (who are not subject to the licensing and compensation regime), and (ii) some participants are merely intermediaries who facilitate transactions between consumers and suppliers.

The inability of the National Scheme to adapt to the evolving nature of the travel industry means that the traditional travel agents must deal with an unjustifiable financial and administrative burden to comply with the regime, entrants to the industry are forced to contort their operations just so they can be subject to such unjustifiable financial and administrative burdens, and consumers are wrongly led to believe that the regime provides support and protection whenever they purchase travel goods and services.

It is in this context that the Ministerial Council on Consumer Affairs agreed to examine the effectiveness of consumer protection measures in the travel and travel related services market and directed the Standing Committee of Officials of Consumer Affairs to undertake the review, in consultation with industry and consumer stakeholders.

2. Scope of the Review

To assess the role of consumer protection in the travel and travel related services market, PwC was appointed by the Standing Committee of Officials of Consumer Affairs to undertake the review and was given the responsibility of:

  1. identifying and reviewing the effectiveness of, or need for, consumer protection measures in the travel and travel related services market, particularly in relation to consumer prepayments for services;
  2. considering the relevance, effectiveness and viability of the current travel agency regulatory scheme, with a particular focus on the operation of the TCF; and
  3. identifying and considering regulatory and non-regulatory options within a cost/benefit framework to address the identified consumer protection issues at a Commonwealth and State/Territory level.1

As part of its review, PwC considered travel agents regulation in other jurisdictions, conducted surveys of travel agents and consumers, engaged in a consultation process with stakeholders, and received 32 submissions from stakeholders and interested parties representing prominent industry participants such as the Australian Federation of Travel Agents, Flight Centre Limited, the TCF and Wotif.2

3. Focus on Reform

The recommendations of PwC set out in the Report make one thing abundantly clear: the existing regulatory framework that is embodied by the travel agent licensing legislation and the associated compensation arrangements administered by the TCF must be reformed.

The Report recognises that the travel agents consumer protection framework first introduced 25 years ago has served a good purpose, but exposes the measures within that framework as now being, "duplicative, obsolete, disproportionate and/or poorly targeted to achieve desired consumer protection outcomes"3. For this reason, the Report recommends significant reform, with PwC asserting that the appropriate objectives for regulatory reform in the travel industry are:

  1. relying on the existing consumer protection measures in the Australian Consumer Law as the primary means for ensuring consumer protection;
  2. implementing and endorsing a voluntary accreditation scheme through the National Tourism Accreditation Framework;
  3. abolishing the out-dated travel agents licensing regime and replacing it with a single, national registration scheme for travel agents that reduces the financial and administrative burden on travel agents while still ensuring consumer benefits; and
  4. reforming the existing compensation arrangements administered by the TCF so that the arrangements appropriately reflect the nature of the travel industry and the risk of consumer detriment.4

The Report also details a number of options for achieving the much needed reform without eroding consumer protection measures. The Report can be viewed at: Click here.

4. Further Steps

Reviews of the National Scheme conducted in the last decade have also highlighted the need for reform, but failed to provide the impetus for reforming the regulatory framework of the travel industry. However, as the need for reform becomes increasingly apparent and the existing regime is criticised by those who operate within it, it is very important that the regulators not lose their momentum.

In this regard, the Standing Committee of Officials of Consumer Affairs has announced that it is conducting a consultation on consumer protection in the travel and travel-related services market and has issued a Consultation Regulation Impact Statement (RIS) which sets out options for consideration. The RIS can be viewed here:

The consultation process closes on 1 April 2011. Following the consultation, the Standing Committee of Officials of Consumer Affairs will make recommendations to the Ministerial Council on Consumer Affairs.

1. PricewaterhouseCoopers (February 2010), "Issues Paper. Review of consumer protection measures in travel and travel related services market in Australia" (page 2)

2. PricewaterhouseCoopers (November 2010), "Review of consumer protection measures in travel and travel related services market in Australia" (page 151)

3. Ibid, (Executive Summary, page vii)

4. Ibid, (Chapter 6)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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