Introduction

In 2013 visitor expenditure in the tourism industry exceeded $98.5 billion.1 In light of the continued economic downturn in the mining industry, the tourism industry is set to be a major focus for economic growth nationally.2 This is reflected in government policy at the Federal and State levels.3 Interestingly, the tourism industry in Australia is seeing major reform to the legal regime which protects travel consumers with the disbanding of the Travel Compensation Fund (Fund) and the associated licencing regimes established in participating States and Territories.

Some in the industry are concerned that these government led reforms have created major uncertainty around the accountability regime for travel agents and will potentially leave consumers, particularly international tourists, vulnerable.

While many in the industry recognise the need for removing burdensome “red tape”, some are concerned that voluntary accreditation schemes may not provide adequate standards of protection for consumers.

The current regime

Although the travel industry in Australia is subject to consumer protection measures contained in theCompetition and Consumer Act 2010 (Cth) (CCA), travel agents are also governed by industry specific consumer protection.

In 1986, the National Co-operative Scheme for the Uniform Regulation of Travel Agents (National Scheme) was introduced to promote national industry standards. Participating States and Territories enacted uniform legislation in accordance with the National Scheme and participated in a national compensation scheme for aggrieved travel consumers, the Fund. The Fund, which was also established in 1986, is operated by a Board of Trustees.

In Queensland, for example, the National Scheme was implemented through the Travel Agents Act 1988 (Qld) which provides a licencing regime for travel agents and requires them to participate in the Fund. A consumer could seek compensation from the Fund where a travel agency failed to account for their funds, for example in circumstances of insolvency. Equivalent schemes were implemented in the other participating States and Territories through the Travel Agents Act 1986 (Vic), the Travel Agents Act 1986 (NSW), the Travel Agents Act 1985 (WA), the Travel Agents Act 1986 (SA), the Travel Agents Act 1987 (Tas) and the Agents Act 2003(ACT) (Travel Agents Legislation).

The current regime is particularly advantageous for international consumers who may be aggrieved whilst travelling in Australia but may not be aware of alternative legal remedies such as competition and consumer law (including the CCA).

The reform agenda

In 2009, the Council of Australian Governments (COAG) Legislative and Governance Forum on Consumer Affairs commissioned a review of consumer protection measures in the travel and travel related services market, including the role of the Fund. The review was undertaken by PricewaterhouseCoopers during the course of 2010.

By 2011, it was agreed that there was a need for reform of travel industry regulation in Australia given significant change in the tourism industry, the adoption of the National Tourism Accreditation Framework to administer “T-QUAL Accreditation” and the commencement of the Australian Consumer Law.

A draft plan was published during the course of 2012 and, following public consultation, COAG adopted the Travel Industry Transition Plan (Transition Plan) in December 2012. The Transition Plan provided key recommendations for reform to be implemented by participating governments including:

  • the repeal of Travel Agents Legislation;
  • increasing reliance on general consumer protection legislation (including the CCA), corporations law, industry-specific remedies and oversight mechanisms;
  • winding up the Fund; and
  • introducing voluntary industry accreditation and an industry-specific dispute resolution scheme.

COAG’s reform agenda was informed by a number of considerations including:

  • the increasing use of online and direct access travel-related transactions which have pushed many travel consumer transactions out of the scope of the existing regime;
  • the availability of credit card consumer remedies;
  • concerns about regulatory duplication;
  • the risk that the Fund may not be able to guarantee to compensate travel consumers in the event of a major business collapse; and
  • the compliance costs associated with the Fund.

Participating States and Territories have already begun to implement these changes which are scheduled to take effect on 30 June 2014:

  • in Victoria, the Travel Agents Repeal Bill 2013 (Vic) was assented to 18 March 2014, which repeals theTravel Agents Act 1986 (Vic);
  • in Queensland the Construction and Tourism (Red Tape Reduction) and Other Legislation Amendment Bill 2014 (Qld) was introduced into the Queensland Parliament on 18 March 2014 with the same intention; and
  • in New South Wales, the Travel Agents Repeal Bill 2013 was introduced into Parliament on 14 November 2013 and is currently before the Legislative Council.

In its submission in response to the COAG Legislative and Governance Forum on Consumer Affairs consultation in respect of the draft Transition Plan, the Australian Federation of Travel Agents (AFTA) proposed itself as the appropriate body to develop and administer the voluntary accreditation scheme and industry code of conduct. In doing so, AFTA pointed to its longstanding reputation as the peak body representing Australian travel agents and its role in handling complaints. AFTA subsequently received a COAG grant of $2.8 million (taken from the Fund’s reserves of over $30 million) to assist in funding the new scheme – the AFTA Travel Accreditation Scheme (ATAS). AFTA had initially formally requested $6 million to establish ATAS.

While AFTA are still in the process of finalising the development of ATAS, AFTA has stated that ATAS is intended to commence from 1 July 2014. AFTA has also indicated that applications for ATAS accreditation will open in May 2014. While AFTA has revealed some information as to how ATAS will operate, including a set of “frequently asked questions”,4 AFTA has not as yet publicly released the proposed voluntary industry code  of conduct. We understand that the ATAS voluntary industry code of conduct is currently going through a process of industry consultation and will be released prior to commencement of ATAS on 1 July 2014.

The purposes of a voluntary industry code of conduct

Voluntary industry codes of conduct operate as a contract between participants who voluntarily agree to be bound by them. This is in contrast to a code of conduct which is “prescribed” by law, and which has mandatory effect on certain classes of business operator. Voluntary industry codes reflect an industry self-regulatory approach and are ordinarily designed to set acceptable standards and practices to meet industry and consumer expectations. 

The Australian Competition and Consumer Commission’s (ACCC’sGuidelines for developing effective voluntary industry codes of conduct identifies a number of key benefits of voluntary industry codes, including:

  • greater industry transparency;
  • greater stakeholder and investor confidence;
  • ensuring compliance with the CCA (including the Australian Consumer Law);
  • providing a competitive marketing advantage to participants;
  • providing greater flexibility than governmental regulation;
  • being less intrusive than governmental regulation;
  • encouraging participants to have a greater sense of “ownership”;
  • acting as quality control within an industry; and
  • providing for complaints handling mechanisms which are more cost effective, time efficient and user friendly.5

Voluntary schemes and prospects for success

Whilst governments at present seem to favour a “light touch” approach to the regulation of the industry, it is uncertain whether the purposes of an industry code of conduct would be achieved through a voluntary scheme. The ACCC has found that voluntary codes of conduct tend to be more effective where the self-regulating body has widespread industry support, comprises all of the key stakeholders and operates an effective system of complaints. Voluntary schemes present particular issues in terms of administration, enforcement and compliance.

Whilst there is a perception that a voluntary scheme would be less costly than a mandatory code or regulation by government, this is not necessarily the case in light of the substantial costs associated with implementing, administering, enforcing and promoting the scheme. In particular, costs would include the remuneration of staff administering the code, establishing and operating a complaints committee as a quasi-tribunal, the ongoing administration and management of the scheme including record keeping and managing appeals and complaints and promoting the scheme. Additionally, there would be a substantial cost involved in probity investigations conducted on candidates seeking membership to the scheme.

The ability to enforce the voluntary scheme against its participating members where there is evidence of misconduct presents further issues. Without the force of legislation, the scheme would rely on the law of contract whereby enforcement would be difficult, costly and time consuming. For example, the costs of enforcement cannot be recouped through the imposition of fines as a sanction on scheme members. The sanctions that could be provided for in a voluntary scheme would arguably lack “teeth” to compel compliance. The most the code manager could sanction would be expulsion from the scheme and revocation of the right to use a certification or accreditation trade mark. The scheme member would thus remain free to continue to operate in a manner contrary to the standards set out in the scheme, damaging the reputation of Australia’s tourism industry brand.

There is the potential to have a voluntary code prescribed under section 51AE of the CCA such that the voluntary code would be enforceable under the CCA. Whilst this option would strengthen the effectiveness of the regime in terms of enforcement, it seems unlikely that the relevant minister6 would consider prescribing the voluntary scheme at the outset. Generally, the relevant minister will only consider initiating a proposal for prescription where has been an identified market failure, deficiencies in an existing code or system enforcement issues. In order to draw these conclusions, the voluntary scheme would need to operate for a period such that evidence of its inadequacy came to light. Indeed, at the time the Transition Plan was adopted, no voluntary codes had been prescribed.

In light of the significant administrative costs of such a voluntary scheme, which may be passed onto code members, many tourism industry participants, especially the small operators which characterise the industry, may choose not to participate. Further, the accreditation process to be implemented as part of ATAS is likely to be undertaken with some rigour and at some administrative cost. Despite this, there is therefore a real risk that rogue operators will be able to avoid accreditation by choosing not to participate in ATAS with no apparent ramifications.

These apparent weaknesses in the voluntary scheme model translate into consumer vulnerability and dissatisfaction especially in the case of international tourists. There has been concern expressed in the industry that the current consumer law protection offered at the State and Federal level are insufficient to deal with the difficulties faced by foreign tourists in making complaints as well as the move towards online bookings. In the absence of the Fund to support aggrieved consumers, international tourists may find it difficult to navigate the Australian legal system to enforce their rights. The model currently being pursued does not appear to serve the interests of a first class tourism industry.

Where a voluntary industry code of conduct binds participants to standards of conduct that may contravene the competition provisions of the CCA, the voluntary industry code must be authorised by the ACCC. The ACCC will ordinarily authorise industry codes where the public benefit of a code outweighs its detriment. It is understood that AFTA will not be seeking ACCC authorisation of ATAS. Accordingly, industry participants and observers will be watching closely to see whether ATAS will have any real, market-altering effect for the benefit of the Australian tourism industry.

Conclusion

Although one of the motivations for these reforms were concerns about regulatory duplication and the availability of alternative remedies, including under the CCA, the risks presented by these reforms are particularly acute in relation to international tourists who may not be aware of remedial avenues such as the general consumer protection measures contained in the CCA.

Regulators and industry players should be careful to ensure that the regime which emerges maintains Australia’s high standard of service delivery and adequately protect the interests of international visitors.