Monday, 24 February 2014

Italian Competition Authority fines EASYJET and RYANAIR for unfair commercial practices

    The Italian Competition Authority in two separate decisions issued on 17 Febr. 2014 fined the airlines EASYJET and RYANAIR for using unfair commercial practices, in the sense of Directive 2005/29/EC, concerning travel insurance during the online booking process. Such practices were found to violate the provisions of the Italian Consumer Code that have transposed Directive 2005/29/EC into Italian law on misleading omissions (see Art. 7 of the Directive) and aggressive commercial practices (see Arts 8 and 9 of the Directive).
   First, both airlines were found to provide inadequate information on the terms of the travel insurance they were offering to passengers at an extra cost. They were not clarifying to passengers that the insurance contract was foreseeing a deductible amount, which was often disproportionate to the ticket price, as well as that the insurance did not cover taxes and airport charges. Such practice was a misleading omission.

   Second, both airlines charged passengers with an extra fee (20 € for RYANAIR, 12 € for EASYJET) to provide them with a certificate that they had not flown on the flight booked, which was a requirement to receive refund from the insurance company. In order to obtain such certificate, passengers had to dial a payable phone number to contact the airline employees and apply for the certificate. The latter condition was available only at the FAQ section of the site. As a result, passengers who wished to receive a refund had to go through a complicated procedure, which entailed high costs. Thus, the airlines were using non-contractual hurdles to discourage consumers from exercising their rights - which constitutes an aggressive commercial practice.

    Third, especially RYANAIR’s offer of travel insurance had a series of legal shortcomings:
I.  RYANAIR was offering travel insurance using an opt-out procedure, which means that the default option for the passenger was to buy the additional insurance. However, Art. 23(1) of the Regulation (EC) No 1008/2008 on airline pricing prohibits preselected extras. Note here that the CJEU has ruled that the pricing requirements laid down in Reg. 1008/2008 apply also to pricing of third-party services offered by airlines in the booking procedure (Judgment of 19 July 2012, case C-112/11 e-bookers). 
II.  The insurance advertisement highlighted that passengers could save up to 18.000 € through insurance, which was offered in two forms: a basic one and a plus one. The advertisement covered both forms, yet the maximum cover concerned only the plus form and under very specific conditions, neither of which was made known to passengers. Therefore, consumers were led to believe that obtaining travel insurance could save them the said amount in all cases - which is a misleading omission.
III.  In order to opt out of the insurance, passengers had to use a drop-down menu and select their place of residence from a list of countries in alphabetical order. Italian residents could find their country only indirectly between Netherlands and Norway as “Non mi assicurare” (do not insure me in Italian). Hence, the the opt-out procedure was unnecessary complicated and confusing, to dissuade passengers from exercising their rights - which is an aggressive commercial practice.

   As a result, the Italian Competition Authority fined RYANAIR with 850.000 € and set the airline a 30-day deadline to inform the Authority on the measures received to remove such practices. EASYJET took corrective actions during the procedure against it and therefore was fined with 200.000 €.

   You can find the press release of the Italian Competition Authority in English here. For the text of the EASYJET decision in Italian click here and for the RYANAIR decision here.

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