The Digital Services Act in action: combatting illegal and unsafe products

With the development of online marketplaces, combating illegal and unsafe products reaching EU consumers is not easy. In recent years, online platforms such as Temu, which offer heavily discounted goods that often directly ship from China, have become popular with consumers.

Temu first came under the 'spotlight' when BEUC- The European Consumer Organisation and national consumer protection organisations initiated an enforcement campaign against Temu (see our report here).

Then, in May 2024, the EU Commission designated Temu as a Very Large Online Platform under the Digital Services Act (DSA), which conferred obligations on Temu to assess and mitigate any systemic risks stemming from its services. 

Following this, in October 2024, the Commission opened formal proceedings to assess whether Temu may have breached the DSA in areas linked to the sale of illegal products, the potentially addictive design of the service, the systems used to recommend purchases to users, as well as data access for researchers. In July 2025, the Commission published preliminary findings that Temu was indeed in breach of the obligation under the DSA to properly assess the risks of illegal products being disseminated on its marketplace, and continues investigation in the other identified areas of concern.

Testing by consumer organisations has revealed that many parcels from Temu and similar online platforms contain products that are not compliant with EU consumer law and are even potentially harmful to consumers. These include, for example, clothing that contains banned chemicals, phone chargers that can explode, and balloons for children that contain illegal chemicals.

In an interesting and informative interview for Deutsche Welle, Augustin Reyna, Director General of BEUC, explains these developments (see here). 

New action by BEUC: Tamig Temu

We all like a good deal! However, those of us who know (a bit more) about consumer rights and consumer law are aware that cheap goods and services often come at a high price, by infringing our consumer rights.

TEMU, the online marketplace that has gained popularity in the EU, has recently came under the spotlight. This month, BEUC, The European Consumer Organisation, has taken a significant step by initiating an enforcement campaign against TEMU, named 'Taming Temu'. The campaign is a response to TEMU's violation of its consumer protection obligations under the Digital Services Act. The identified breaches include:

•   failing to provide sufficient traceability of the traders that sell on its platform and thereby to ensure that the products sold to EU consumers conform to EU law.
•   using manipulative practices such as dark patterns to get consumers, for example, to spend more than they might originally want to, or to complicate the process of closing down their account.
•   failing to provide transparency about how it recommends products to consumers.

BEUC filed a complaint with the European Commission, while 17 of BEUC’s members filed the same complaint with their competent national authorities. For a more efficient and effective enforcement action, BEUC asks the Digital Services Coordinators of each country (national authorities responsible for enforcing the EU’s Digital Services Act) to transfer the complaints to the Irish authority, TEMU’s country of registration. It would then be up to the Irish authority to take swift action to prevent further consumer harm.

Given the fast growth in the number of TEMU users, it is possible that the platform would pass the threshold of 45 million users per month, which would then classify it as a ‘very large online platform’ and grant the Commission competence to enforce the Digital Services Act.

Given that consumer law enforcement, especially against large platforms, was less effective in the past (see for instance our reports here and here), a concerted EU action is a welcome solution.

Tomorrow Never Dies: VLOPs debacle

Most of us in the consumer protection field celebrate that as of tomorrow, August 25th, the obligations of the Digital Services Act (DSA) will start binding very large online search engines (VLOSEs) and online platforms (VLOPs). 

By James Yarema on Unsplash

The European Commission designated the first set of VLOPs and VLOSEs on April 25th (see here). To recall, VLOSEs encompass Bing and Google Search, whilst VLOPs are: Alibaba AliExpress, Amazon Store, Apple AppStore, Booking.com, Facebook, Google Play, Google Maps, Google Shopping, Instagram, LinkedIn, Pinterest, Snapchat, TikTok, Twitter, Wikipedia, YouTube and Zalando. 

The designation occurred on the basis of the self-reported user data (more than 10% of EU population as active users) and the platforms were given 4 months to start complying with the obligations that the DSA introduced for VLOPs and VLOSEs. These obligations aim to improve transparency (detailed reporting obligations etc), user empowerment (improved content moderation, opt-out from profiling/recommenders systems, enhanced minors protection, bans on advertisements based on sensitive data etc) and facilitate enforcement (via reporting and cooperation obligations).

Unsurprisingly, we have already seen some pushback against these new obligations. Namely, Amazon Store brought an action to the General Court claiming that it should not have been seen as a VLOP (see case T-367/32) and that some of the DSA obligations should not be applicable to it (duty to provide users with an option for reach recommender system that is not based on profiling; duty to compile and publish an advertisement repository). The arguments that Amazon Store brings in are based on the principle of equal treatment and the need to protect Amazon's fundamental rights. The latter is quite ironic, considering that one of the contested obligations, on ensuring that users may opt for not being profiled, aims to protect the fundamental right of users' privacy.

This claim may have just been a strategy from Amazon Store to delay its compliance with the DSA. It is hard to imagine that they would be successful in proving that they are not a VLOP (see also BEUC's commentary on this here). We will follow this case but for now, let us hope that tomorrow brings a positive change!

Reflecting on EU (package) travel law in 2021: travel platforms in a regulatory blind spot?

The EU legislature has been pushing for the harmonisation of consumer protection in the travel sector for several decades now. The entire process has progressed in a piecemeal fashion, with a focus on selected transport services as well as package tours. Typically, after putting in place a set of common norms in one area, the EU would shift its attention to another, trying to build upon prior experience while also addressing new issues. Over time, discrepancies between harmonised norms across the different areas would become apparent and discussions would centre on the needed revisions. The Court has also remained quite busy responding to the questions posed by referring courts, especially in the field of air transport. References made in relation to other transport modes and package travel have been more limited, but not without importance, as the recent judgment in Kuoni Travel shows (see: Somber CJEU case on package travel...).

By contrast, travel services not covered by the main strand of regulatory debate (i.e. not qualifying as transport by air, rail, bus or coach, or as a package tour) have long escaped EU attention, partly for competence reasons. This has slightly changed when online travel platforms, such as Booking.com, Airbnb and Uber, entered the scene. First, the new Package Travel Directive of 2015 promised to take account of the ongoing developments in online travel markets. Second, in 2016 the European Commission adopted its agenda on collaborative economy, highlighting, among others, the associated challenges for consumer protection. Five years later, however, the EU law continues to have little to offer to consumers who plan their trips via online travel platforms. The 2015 Package Travel Directive (PTD) and its concept of linked travel arrangements (LTAs)* appears to complicate the regulatory landscape without bringing significant value to consumers, and travel platforms are only marginally affected (and some of them not at all - like Uber) by the recent work streams on consumer protection and online platforms. Finally, the impact of COVID-19 pandemic on EU travel law is yet to be seen, but a renewed focus on the well-established fields of EU travel law seems likely. 

Report on the Package Travel Directive

To get an idea of the current EU position on travel law it is worth taking a look at the Commission's report on the application of Package Travel Directive published earlier this year. The report is already several months old but remains worthy of attention, as it reflects the Commission's appraisal of the existing acquis and reveals the directions of future regulation.

 

Different services and consumer protection norms

The report begins with some illustrative stats. It notes that "in 2017, packages represented around 9% of all tourism trips of EU27 residents and had a share of around 21% of the total tourism expenditure." More recent numbers are not provided and even those given are not put into perspective, e.g. taking into account the corresponding shares of various stand-alone services and related trends.

To its credit, the report does recognize that the concept of a 'linked travel arrangement' and its distinction from a 'package' are somewhat problematic. In particular, with regard to 'click-through bookings' it seems very difficult to establish whether a package, an LTA or none of them was concluded. As the Commission admits:

"A travel service provider who, after completion of a booking, transfers the traveller’s name, payment details and e-mail address to another trader with whom a second service is booked within 24 hours of the confirmation of the first booking, is the organiser of a package and hence liable for the performance of both services. If one of those data elements is not transferred, the first trader facilitates a LTA and is only liable for the performance of its own service, provided the second booking happens within 24 hours. If it happens later, the PTD is not applicable at all" (p. 6). [Of course, there is also no LTA where the contract conclusion was facilitated for just one travel service, e.g. transport or accommodation. - AJ]

The report further points out that concerns have been raised as to what kind of obligations should be placed on the traders facilitating LTAs. These, for the time being, concern primarily insolvency protection and pre-contractual information. As regards the latter, several industry stakeholders argued that the information LTA facilitators are required to provide "could be considered confusing and deterrent, as travellers are primarily informed that they do not benefit from rights applying to packages" (p. 7). The Commission responded that it "was precisely the aim of this information requirement to draw the attention of consumers to the different level of protection offered by packages as opposed to LTAs and thus give them an informed choice between the two models." It is likely that a similar logic applied to the information duty which was recently added in Article 6a of the Consumer Rights Directive (CRD), concerning a different standard of protection in business-to-consumer (B2C) and peer-to-peer (P2P) contracts concluded via online marketplaces.  

Prima facie, the above regulatory approach seems reasonable, leaving consumers a variety of options at hand while providing them with information about relevant differences. However, on a closer look information duties in neither PTD (on LTAs), nor CRD (on the supplier's status) truly bring added value to consumers in online travel markets. In the Package Travel Directive, a choice is offered between broadly similar products (in both cases a combination of at least two travel services) with a key difference pertaining to the level of protection. That's fair enough, but in reality consumers may prefer to choose particular travel services at different points in time or from different providers, which is precisely what online platforms make possible. For this (arguably growing) group of consumers the choice between a higher and a lower level of protection is not available. Moreover, the recently amended Consumer Rights Directive could suggest that the level of consumer protection offered by EU law is higher in case of B2C contracts for stand-alone travel services as compared to P2P transactions. On a closer look, however, also this is does not really hold true. When we delve deeper into stand-alone travel services offered by businesses and by peer providers via online platforms (thus, e.g. excluding air or rail transport, for which P2P markets do not exist), we find that the protection offered to the consumers of those services by the EU acquis is almost non-existent, regardless of the supplier's status. Elsewhere in the report the Commission recognizes that a question remains open whether harmonised norms for linked travel arrangements should not be broadened, e.g. so as to also cover liability for the performance of relevant services and not only insolvency and information. Traders facilitating the conclusion of contracts for stand-alone travel services as well as individual providers of such services, however, are left out of the picture. As for the latter, one could think that the EU may not want to enter into the business or regulating small providers. These, nonetheless, can already be covered by the provisions of package travel law, as the commented report explicitly acknowledges (p. 5). Overall, the discussion about the scope of EU travel law and the corresponding role of package travel framework has not moved any further through the cited report.

Thomas Cook bankruptcy and COVID-19 pandemic

While reflection on the scope of the PTD, and EU travel law more generally, contained in the report falls short of expectations, the opposite is true for the extensive sections devoted to the impacts of Thomas Cook bankruptcy and the COVID-19 pandemic on the package travel sector. The analysis of both events is solid and contains valuable insights. For example, the Commission admits that the burden of Thomas Cook bankruptcy has been shared by the various travel guarantee funds and insurance companies, since the company continued to have insolvency protection in different Member States and did not rely on the PTD's mutual recognition mechanism. Nonetheless, the bankruptcy has not been without impact on the market for insolvency protection for package travel organisers and reportedly prompted a number of banks and insurance companies to pull out of the market. With this in mind, the report points to the need of new solutions to effectively protect travellers against the risk of insolvency, such as a "pan-EU guarantee fund as a kind of re-insurance for the first line guarantors" (p. 11). Moreover, following the disruptions caused by the COVID-19 pandemic, some stakeholders had argued that the protection of consumer refund claims should be extended beyond insolvency, and also cover termination due to unavoidable and extraordinary circumstances (p. 20-21). The Commission seems open to the idea and it seems, in general, that protection of the travellers in case of supplier's insolvency (in package travel and beyond) as well as, possibly, in case of major liquidity problems will be one of the upcoming goals for regulation. Indeed, it may be the lack of corresponding mechanisms that had led many travel service providers to withhold refund payments or to push consumers to accept vouchers instead of monetary refunds during the peak of COVID-19 crisis. The result of this was a serious mess, which consumer organisations are still working to clear up (see e.g. a recent press release by BEUC: Major airlines told to comply with passenger rights...).

Finally, the report can also be credited for drawing attention to characteristics of the value chains in the "travel ecosystem". For example, when discussing the possibility of limiting pre-payments and requiring travellers to pay only when they receive the service, possible negative impacts on suppliers' liquidity and ability to operate at scale are discussed. Moreover, a question has been raised whether suppliers of travel services (e.g. air transport) that are ultimately not provided to a given consumer following the latter's termination of a package travel contract should have a refund obligation towards the package organiser who reimbursed the traveller. Such an obligation is currently not in place, which - the report suggest - could lead to an unfair sharing of the burden among economic operators. Travel could therefore become another area in which B2B unfairness becomes a regulatory topic - after agriculture, food supply and online intermediation.

Concluding thought

 

The EU travel law is in need of rethinking. The current regulatory landscape looks like an increasingly complex patchwork, with some issues being addressed meticulously and other being resolved only at the surface. Admittedly, the analysis of well-established business models, such as package travel, is rich and detailed, yet the share of package tours in the overall travel sector pie is shrinking. While one can hardly imagine a field more fit for harmonisation, the EU approach to (online) travel markets remains fragmented. Clearly, the COVID-19 pandemic has surfaced challenges which we had previously not reckoned with and which now will need to be addressed. The Commission intends to do that as part of its upcoming analysis of EU package travel and transport law planned for 2022. It would be a waste of potential if stand-alone travel services and online travel platforms were to be kept, yet again, out of Commission's view.

 

* For a definition, see Article 3(5) PTD. Essentially an LTA means at least two different types of travel services purchased for the purpose of the same trip or holiday, not constituting a package, resulting in the conclusion of separate contracts with the individual travel service providers and facilitated by one trader in a specific way.

 

** The author carries out a research project on consumer protection in the collaborative economy, financed by the National Science Centre in Poland on the basis of decision no. DEC-2015/19/N/HS5/01557.

Online reviews in numbers – the Trustpilot Transparency Report 2021

Recently, Trustpilot published, for the first time, its Transparency Report (here). This report concerns Trustpilot's activity in 2020. Trustpilot is an online platform where consumers and businesses can share feedback (and respond to it) through online reviews. The importance of online reviews in consumer decision-making is undeniable, and information on them allows us to better understand how and why consumers use reviews. From a consumer law perspective, it is important to assess how the information conveyed through online reviews impacts the conclusion of consumer contracts. The biggest concern in this regard is the proliferation of fake reviews, often written by businesses to harm a competitor’s reputation or to boost its own reputation. Perhaps most importantly, consumer law is (and should be) concerned with how online platforms design and manage online review mechanisms.

In this context, Trustpilot’s report provides a rare insight into the collection and processing of online reviews, given that most platforms do not reveal information on this. While most of what the report contains can also be found in Trustpilot’s guidelines on online reviews (available on their website), some interesting information is revealed. In 2020, Trustpilot received around 38,000,000 reviews. Trustpilot removed over fake 2,000,000 reviews, which corresponds to almost 6% of all reviews submitted in 2020. Most of the removed fake reviews were positive reviews (4- or 5-star reviews). On average, Trustpilot’s fraud-detection automated systems review 100,000 reviews per day. Additionally, in a clear effort to increase transparency, the report explains what factors are taken into account when calculating the score of reviewer satisfaction: time span, frequency, and Bayesian average. Remarkably, Trustpilot even justifies the choice of certain methods. For instance, Trustpilot claims it uses a Bayesian average to guarantee that businesses with fewer reviews are not unfairly punished for it. Besides, Trustpilot informs that, even though they have a freemium model in place, 92% of businesses who use its platform do it for free. Trustpilot refutes claims that it favors businesses that subscribe to the paying model, by revealing that paying businesses have an average review star rating of 4.39, while non-paying businesses have an almost equal average of 4.38. These numbers also show how the average star rating is quite high, given that the rating goes from 1-5. In fact, Trustpilot reveals that 71% of their 2020 reviews gave the highest score possible to a business. As said, insights like these – particularly originating from the online platform itself – are quite rare, so reading this interesting report is highly recommended. 

New study on consumer protection in the digital age: should the burden of proof in the UCPD be reversed?

Earlier this month a very interesting report by Natali Helberger, Orla Lynskey, Hans-W. Micklitz, Peter Rott, Marijn Sax and Joanna Strycharz was published by BEUC. The study entitled "EU consumer protection 2.0: Structural asymmetries in digital consumer markets" addresses a number of topical issues concerning consumer protection in the digital age and consists of the following parts:

1. Surveillance, consent and the vulnerable consumer. Regaining citizen agency in the information economy
2. Personalised pricing and personalised commercial practices
3. A universal service framework for powerful online platforms

The first and most extensive part has a foundational nature and considers the key premises of consumer protection in view of structural asymmetries observed in digital consumer markets. Attention is paid, among others, to the concepts of digital vulnerability and consent. Following existing research, the authors remark that consumer vulnerability should not be reduced to internal characteristics, but can also be caused by external conditions, and that data-driven practices that promote exploitation of vulnerabilities can be linked to the lack of privacy. At the same time, privacy controls placed at consumers' disposal are often not effective and can lead to a false sense of security. The most ground-breaking conclusions and recommendations, however, follow from the subsequent analysis of what is described as "digital asymmetry". According to the authors, instead of focusing on the information aspect of the UCPD and the different consumer images, more weight should be attached to the structural power relations, including the power embedded in digital choice architectures controlled by online platforms. On this basis, a case is made for reversing the burden of proof in the UCPD so that effectivelly "unfairness of data exploitation strategies is presumed" (p. 77).

The second part of the study part looks more specifically at personalised pricing and advertising and the third part explores how obligations traditionally associated with services of general interest (SGI) could be applied to the platforms considered to hold a gatekeeper position.

We encourage our readers to consult this thought-provoking study, the full text of which can be found here.

CMA's paper on algorithms & online platforms: comprehensive report on benefits and perils of AI regulation

The UK Competition and Market’s Authority recently published a report on the consequences of the online platforms’ use of algorithms (‘sequences of instructions to perform a computation or solve a problem’) for consumer protection and for competition (here). This report builds on the CMA’s 2018 paper on pricing algorithms (here). The report starts by highlighting that the increasing sophistication of algorithms usually means decreasing transparency. The CMA’s report acknowledges the benefits of algorithms to consumers, such as the possibility to save consumers’ time by offering them individualized recommendations. Additionally, algorithms benefit consumers by increasing efficiency, effectiveness, innovation and competition. However, the main goal of the report is to list (economic) harms caused to consumers as a result of algorithms.

The report highlights that big data, machine learning, and AI-based algorithms are at the core of major market players such as Google (e.g. their search algorithm) and Facebook (e.g. their news’ feed algorithm). The CMA also acknowledges that many of the harms discussed in this report are not new but were made more relevant by recent technological advances. Finally, the report acknowledges that the dangers brought by algorithmic regulation are even greater where it impacts consumers significantly (such as decisions about jobs, housing or credit).

The harms discussed in the report deal mainly with choice architecture and dark patterns (e.g. misleading scarcity messages on a given product or misleading rankings). Additionally, personalization is depicted as a particularly dangerous harm, since it cannot be easily identified and because it manipulates consumer choice without that being clear to consumers. Personalization is also worrying because it targets vulnerable consumers. In particular, the CMA is worried about possible discrimination as a result of personalization of offers, prices and other aspects.

Personalized pricing implies that firms charge different prices to different consumers according to what the firm (and their algorithms) think that the consumer is willing to pay. While this has some benefits – like lowering search costs for consumers, the CMA warns that consumers might lose trust in the market as a consequence of personalized pricing practices. While some personalized pricing techniques are well-known – such as offering coupons or charging lower prices to new customers, others are more opaque and harder to detect. Non-price related personalization is also described as potentially harmful, such as personalized search results rankings or personalized recommendation systems (e.g. what videos to show next). In particular, the CMA warns that these systems may lead to unhealthy overuse or addiction of certain services by consumers and to a fragmented understanding of reality and public discourse.

Additionally, the use of algorithms harms competition since it can exclude competitors (e.g. through platform preferencing, via ranking, of their own products). Through exclusionary practices, dominant firms can stop competitors from challenging their market position. A prominent example of this is that of Google displaying its own Google Shopping service in the general search results page more favorably than competitors that offer similar services. Finally, the CMA report zooms in on algorithmic collusion, or the use of algorithmic systems to sustain higher prices.

The report also highlights the obstacles brought by lack of transparency, particularly when it comes to platform oversight. The CMA warns that this lack of transparency and the misuse of algorithms may lead consumers to stop participating in digital markets (e.g. deleting social media apps). This justifies, in the CMA’s opinion, the regulators’ intervention. In particular, the CMA considers that regulators can provide guidance to businesses as to how to comply with the law or to elaborate standards for good practices. Overall, the report brings attention to the fact that many laws in place do not apply to algorithmic regulation, such as to discrimination in AI systems. Moreover, the CMA highlights that the application of consumer law to protect consumers against algorithmic discrimination is still an unexplored area.

The report ends with a call for further research on the harms caused by algorithmic regulation. The CMA suggests techniques to investigate these harms that do not depend on access to companies’ data and algorithms, such as enlisting consumers to act as ‘mystery shoppers’ or through crawling or scraping data from websites. The CMA also suggests specific investigation techniques when there is access to the code.

Overall, this is an extremely comprehensive report that not only explains the biggest consumer harms brought by AI regulation but also contains several practical examples, as well as concrete methodological suggestions for further research and for better enforcement. Definitely a recommended read for both academics and practionners alike.

Further updates on consumer protection in the digital economy: TikTok, Google and Apple in the spotlight

Yesterday we reported on some encouraging news about online consumer protection coming from Norway. Today we would like to follow up on these reports and briefly review other developments relevant to consumer protection in the digital economy, which caught our attention over past months. All of these developments show how consumer law, competition law and data protection law are all relevant to the protection of consumer interests vis-a-vis major online platforms.

Our readers may have heard about the recent decision of the Italian data protection authority, Garante, ordering Tik Tok to immediately limit the processing of personal data with regard to users whose age could not be established with certainty. The action was taken as a matter of urgency, following a death of a young girl in Palermo who took part in a "black-out" challenge that spread across the platform. While this story understandably captured public attention, it is worth noting that a formal proceeding against TikTok was initiated by the Garante already at the end of last year.

Earlier this week Reuters reported that the search engine giant Google may be facing yet another antitrust probe from the European Commission, this time in relation to its advertising practices. Under examination are among others the integration of DoubleClick (Google's ad serving unit) and the company's plan to phase out third-party cookies on Chrome. Several weeks ago the British Competition and Markets Authority opened an investigation on the same subject. According to Google, greater concentration of its advertising ecosystem (aka "Privacy Sandbox") is supposed to better protect consumers’ privacy (which, of course, remains to be verified, particularly in light of "dark patterns" employed by the trader), yet authorities fear it they may negatively impact other interests (here: commercial interests of the publishers, although one could also think of consumer interests other than privacy). As the CMA notes, the challenge faced by regulators is "to address legitimate privacy concerns without distorting competition". It is worth recalling that online advertising is also part of the proposed Digital Services Act, which envisages e.g. an obligation of very large online platforms to publish ad repositories with information about targeting.

Last but not least, back in November, the data protection organisation NOYB filed a complaint with the Spanish and German data protection authorities against Apple's Identifier for Advertisers, arguing that it allowed for user tracking without consent. Interestingly, the organization - co-founded by the activist Max Schrems - chose to rely on the E-Privacy Directive instead of the GDPR, to avoid "endless procedures" of cooperation between DPAs. Indeed, some of the high-profile cases under the GDPR are still ongoing, including an inquiry into Google’s processing of location data, triggered by - you guessed it - a report by the Norwegian Consumer Council.

CJEU agrees with the AG in the Uber follow-up case - Star Taxi App

Last week the Court of Justice delivered its judgment in another case highly relevant to the platform economy - C-62/19 Star Taxi App. The English version of the judgment is not available at the time of this writing, yet the analysis of other language versions shows that the Court largely followed the opinion of the Advocate General Szpunar, on which we reported earlier this year (see AG opinion in Star Taxi App...). Like in several other judgments on online platforms analysed on this blog - from Uber Spain and Uber France to Airbnb Ireland - the focus remained on the classification of services provided by platform operators and its regulatory implications. The Court continued to rely on the analytical framework developed in the Uber cases, but - similarly to the Airbnb ruling - applied it more favourably to the platform provider. The judgment confirms that the classification of services of platform operators as activities falling outside of the scope of Directive 2000/31/EC on electronic commerce is not to be made too promptly. Moreover, the judgment addressed several other aspects of the EU regulatory framework - in a way which was not as favourable to the platform providers as they may have hoped.

Facts of the case and the questions referred

As we recounted in our previous post, the case involved a provider of a mobile application connecting drivers and passengers in urban transport. The business model of Star Taxi App was, however, not identical to the Uber platform. Firstly, the provider did not automatically select two parties for a ride, but rather displayed a list of drivers available for a journey, from whom the passenger was free to choose a party. Secondly, the fare was not set by and collected through the app, but was paid directly to the driver. Thirdly, only taxi drivers authorised and licensed to provide taxi services were allowed on the platform and no additional steps were taken to control the quality of the vehicles and drivers. Finally, unlike Uber, Star Taxi App was a Romanian platform, operating on the Romanian market.

The operation of the platform was considered to be in violation of applicable national rules, most notably as regards prior authorisation. The provider contested the sanctions imposed on him, arguing that the relevant norms were contrary to the EU law. Against this background, the Regional Court in Bucharest decided to stay the proceedings and ask the Court of Justice for an interpretation of the notions of "information society services" under Directive 2000/31/EC and "technical regulations" under Directive 2015/1535 on the provision of information in the field of technical regulations. Moreover, the reference provided the Court with an opportunity to clarify specific norms on freedom of establishment, contained in Directive 2000/31/EC (principle excluding prior authorisation) and Directive 2006/123/EC on services (conditions for establishing authorisation schemes and for granting authorisations).

Judgment of the Court

Finding 1: Star Taxi App provides information society services

Like the AG, the Court found that services provided Star Taxi App fulfil the criteria of "information society services", to which Directive 2000/31/EC applies (para. 42-48), and cannot be seen as "inherently linked" to the underlying transport services. Key to the latter finding was the fact that Star Taxi App did not create a new market for non-professional drivers, but was limited to licensed taxi drivers, i.e. a market for services which existed before (para. 52), and did not organise the general functioning of underlying transport services, as it did not select the drivers, set or charge prices or control vehicles or drivers (para. 53). Consequently, unlike in Uber cases, classification as "information society services" remained available.

Finding 2: Notification requirements under Directive 2015/1535 do not apply

The Court then reversed the order of the questions referred and moved to the assessment of notification requirements under Directive 2015/1535. Like the AG, the Court concluded that the Romanian requirements imposed on operators of taxi "dispatching" services did not constitue technical regulations as they were not specifically aimed at information society services. Whether or not this finding remains in line with the Court's previous case law can be a matter of debate. To recall, the Court was not equally generous to the national regulator in VG Media, where it found that the German copyright rules (introducing publisher rights) were aimed, at least in part, at regulating information society services (the use of snippets on search engines). In Star Taxi App, the Court was satisfied with the fact that "taxi dispatching" have long been defined more broadly and referred to the activity consisting in receiving customer bookings by telephone "or other means" and forwarding them to a taxi driver. The fact that more recent local rules in Bucharest explicitly mentioned "IT applications" among those "other means" was deemed irrelevant. To support this conclusion the Court observed that the analysed requirements, for example to obtain a two-way radio, applied equally to all types of dispatching services (para. 65). The latter argument seems rather shaky, considering that the Court later (rightly) argues that such a requirement, applied to the providers of information society services, could, in fact, be contrary to Directive 2006/123/EC. An alternative reading of Directive 2015/1535 could, however, be difficult to reconcile with the subsequent interpretation of Article 4(2) of Directive 2000/31/EC, which was likely a consideration in this part of judgment.

Finding 3: Article 4 of Directive 2000/31/EC does not apply to the scheme at hand, but Articles 9 and 10 of Directice 2006/123/EC do

The last part of the judgment concerns the applicability of the principle excluding prior authorisation in Article 4(1) of Directive 2000/31/EC to the case at hand. Similarly to the AG, the Court found that the analysed scheme was not covered by this provision and instead fell under the exception set out in the subsequent paragraph. To recall, pursuant to Article 4(2) of Directive 2000/31/EC, the principle excluding prior authorisations for information society services remains without prejudice to authorisation schemes which are not specifically and exclusively targeted at such services. Like the AG, the Court observed that a mere clarification (extension?) of the scope of pre-existing rules to dispatching services relying on IT applications does not consistute an authorisation scheme which is specifically and exclusively targeted at such services (paras. 81-82). Accordingly, a conflict between Directives 2000/31/EC and 2006/123/EC did not arise and provisions of the latter were deemed applicable.

The Court then moved to the interpretation of Articles 9 and 10 of Directive 2006/123/EC on freedom of establishment, referring numerously to its recent judgment in Cali Apartments. Like in the Cali case, the Court underlined that a separate and consecutive assessments must be made of, firstly, whether the very principle of establishing that scheme is justified, and, secondly, the criteria for granting the authorisations provided for by that scheme (para. 87). Since the information provided by the referring court in this regard was not sufficient (e.g. so as to assess if the scheme could be justified by reasons of consumer protection), the Court limited itself only to brief observations regarding the criteria apparent from the file. Most notably, it shared the view expressed by the AG that an obligation, imposed on service providers, to comply with technical requirements which are not appropriate for the service in question and thus generate unjustified burdens and costs for service providers could not be deemed compatible with Article 10(2) of Directive 2006/123/EC (para. 90). This could be the case for the requirement to obtain a two-way radio, which was nonetheless for the referring court to verify (paras. 91-92).

Concluding thoughts

Overall, the judgment in Star Taxi App is a reasonable ruling, seeking to strike a balance between the internal market goals and the public interest goals pursued by national regulators. One cannot fail to note, however, that the Court has taken a long way to arrive at this outcome. As apparent from the Star Taxi case, the EU rules at hand provide for significant safety vaults, which Members States can rely upon to regulate the provision of information society services in the public interest. The principle excluding prior authorisation in Article 4(1) of Directive 2000/31/EC does not apply to authorisation schemes which are not specifically and exclusively targeted at information society services and notification requirements in Directive 2015/1535 do not apply to rules which are not specifically aimed at this kind of services. Also the country of origin principle, which is laid down in Article 3(1) of Directive 2000/31/EC and was analysed in the Airbnb Ireland case, is not without limitaitons. Admittedly, the development of the platform economy has pushed some of these norms to its boundaries and a case could be made, for example, for making Article 4(1) of Directive 2000/31/EC less categorical. This, however, is a task for the EU legislature and a potential subject for the Digital Services Act. For the time being, the judgment in Star Taxi App shows, together with Airbnb Ireland, that classification of services of platform operators as activities falling outside of the scope of Directive 2000/31/EC should not be made too lightly and that EU free movement rules are to be reckoned with.

* The author carries out a research project on consumer protection in the collaborative economy, financed by the National Science Centre in Poland on the basis of decision no. DEC-2015/19/N/HS5/01557.

New Digital Markets Unit in the UK - putting (some/few) platforms on notice

Another interesting piece of news from the past few days is the UK government announcing the setting up of the Digital Markets Unit ('New competition regime for tech giants to give consumers more choice and control over their data, and ensure businesses are fairly treated') within the Competition and Markets Authority (CMA). The Unit's main task will be to introduce and enforce 'a new code to govern the behaviour of platforms that currently dominate the market'. Is the UK attempting to follow the example of the German Federal Cartel Office (Bundeskartellamt) that has been cracking the whip against the potential abuses of the dominant position on the market of such digital service providers like Facebook (see The Facebook Decision: First Thoughts by Podszun)?

Perhaps, the government's announcement draws attention to the risks associated with the concentration of power in the tech sector, bluntly giving notice to the dominant players on the digital marketplace that they will be under enhanced surveillance in the foreseeable future. They will be expected to follow the new rules for behaviour set out in the code, which will likely require more transparency (as to the use of consumer data?), opt-in options for personalised advertising (the issue that was at play in the German Facebook case), facilitating users' swapping to use any rival platforms.

The DMU is to start their work in April and is supposed to be able to 'suspend, block and reverse decision of tech giants, order them to take certain actions to achieve compliance with the code, and impose financial penalties for non-compliance'. What is of interest to us, of course, is to what extent this new unit will be able to benefit consumer protection in the UK? This is uncertain at the moment, but it seems that any consumer protection benefits may be coincidental rather than intentional here. First, the Guardian reported that the new unit will have oversight only over platforms funded by digital advertising and having 'strategic market status' (Digital Market Unit: what powers will new UK tech regulator have?). This would limit the unit's purview, possibly even only to Facebook's and Google's activities. Second, the DMU will focus on preventing damage to news media... which suggests that the interests of UK news outlets may play out more centrally, over consumers' interests.

A lot will depend on the new code of conduct set by/for the DMU. We will then definitely let our readers know when the new code for the behaviour of these digital platforms is adopted!

Local authorisation schemes for Airbnb hosts cleared by the Court of Justice (kind of)

Earlier this week the Court of Justice delivered its judgment in joined cases C-724/18 and C-727/18 Cali Apartments concerning the requirements imposed on Airbnb hosts by the French authorities. The judgment largely follows the opinion of Advocate General Bobek, on which we reported several months ago. Like the AG, the Court seems ready to accept a variety of restrictions, including the most controversial "offset requirement", as compatible with EU law - with certain caveats. The judgment is both detailed and technical, and comes out in favour of evidence-based decision-making, which may pose a challenge to the national courts. Meanwhile, legislative works on the so-called Digital Services Act are ongoing, in which the sharing of platform data with the local authorities is one of the contentious topics. 

 Background of the case

The case revolves around a number of restrictions imposed by the French law on the property owners wishing to let apartments for short periods to a transient clientele  which does not take up residence there (hereafter simply 'tourists'). Most notably, in municipalities with more than 200 000 inhabitants, in order to change the use of residential premises to the one set out above, prior authorisation is required. Detailed conditions for obtaining such an authorisation are laid down at the local level and may include offset requirements in the form of a conversion of non-residential premises into housing. The appellants, who were sanctioned for letting their Parisian properties to tourists in violation of national and local rules, argued that the relevant requirements were contrary to Directive 2006/123/EC on services in the internal market.

Judgment of the Court

Scope of Directive 2006/123 and the notion of 'authorisation schemes'

Before moving to the key questions concerning the compatibility of contested national rules with the harmonised liberalisation framework, the Court first analysed whether they are subject to the Services Directive at all and if so, to which of its provisions. This part of the judgment is rather brief and essentially confirms the act's broad scope and recalls the distinction between authorisations and other requirements.

• Not surprisingly, according to the Court, an activity consisting in the repeated short-term letting, for remuneration, of furnished accommodation to tourists is covered by the concept of 'service' within the meaning of Article 4(1) of Directive 2006/123 (paras. 32-34). 
• The Court further found that national norms targeting such an activity are not excluded from the scope of the Services Directive; in particular, they do not fall under the "rules concerning the development or use of land [and] town and country planning" referred to in recital 9 of Directive 2006/123 (see paras. 40-44).
  
• Finally, the Court confirmed that legislation requiring persons wishing to provide services mentioned above to obtain a formal decision from a competent authority, enabling them to access and to exercise service activity, constitutes an 'authorisation scheme' within the meaning of Article 4(6) of Directive 2006/123 (paras. 51-52).
  

In the subsequent part of the judgment the Court analysed whether, in the case at issue, the use of an authorisation scheme as well as more its specific criteria and their effective implementation were in line with requirements set out, respectively, in Articles 9 and 10 of the Services Directive. In both respects, the Court appeared to largely sympathize with the French authorities. This sympathy, however, is not as unconditional as it may seem at first sight.

 

Proportionality in Articles 9 and 10 of Directive 2006/123

As for the case for establishing an authorisation scheme in the first place, the Court recognized that the objective of "dealing with the worsening conditions for access to housing and the exacerbation of tensions on the property markets [...] to protect owners and tenants, and to increase the supply of housing while maintaining balanced land use" constitutes an overriding reason relating to the public interest referred to in Article 9(1)(b) of the Services Directive (paras. 65-68). The Court further found that a scheme of ex ante authorisations, such as the one considered in the main proceedings, could be both suitable and proportionate to the objective pursued. In reaching this conclusion, the Court underlined the importance of economic data showing the gravity of the problem in the areas covered by relevant legislation (cf. paras. 69, 73).

A similar reasoning can be observed in the subsequent part of the judgment, concerned with the specific criteria for granting authorisations. To recall, pursuant to Article 10(1) of the Services Directive, authorisation schemes shall be based on criteria which preclude the competent authorities from exercising their power of assessment in an arbitrary manner. Paragraph 2 states, among others, that the criteria shall be non-discriminatory, justified by an overriding reason relating to the public interest and proportionate to that public interest objective, not unlike in the previously discussed Article 9. In this more specific context, however, the role of "studies and other objective analyses" of the local conditions appears to be considered even more important (cf. para. 88). Particular attention is drawn to the proportionality of the offset requirement as a condition of relevant authorisation schemes. Overall, in the case at issue, the Court considered such requirement to be potentially in line with the Services Directive, without, however, giving national authorities a carte blanche in this regard.

• Note, among others, the importance attached by the Court to the fact that the local authorities, chosing to impose an offset requirement in the case at issue, were supposedly required to ensure that, firstly, the requirement was strictly relevant to the specific situation of individual neighbourhoods or districts and that, secondly, the same was true for required quantum of the offsetting (e.g. para. 83).
  

• Another aspect highlighted in the judgment is the compatibility of the offset requirement with the exercise of services activities [of letting apartments to tourists], which appears to be somewhat intransparent way of saying that conditions of the scheme should not discourage such activities entirely (paras. 91-94).
  

The above suggests that establishing compliance of the offset requirements with the principle of proportionality in the Services Directive is all but black-and-white and requires considerable expertise on the part of national courts.

Other criteria for granting authorisations (Article 10 cont'd)

The last part of the judgment engages with the remaining conditions laid down in Article 10(2), namely unambiguity, objectivity, prior publicity, transparency and accessibility. Also in this respect, the Court provides a number of reference points, which national courts use to uphold authorisation schemes before them, without, again, providing them with unlimited discretion. It is highlighted, among others, that:

• the fact that relevant terms (such as 'repeated short-term letting of furnished accommodation to a transient clientele which does not take up residence there') are not defined using numeric thresholds does not, in itself, affect the requirements of clarity, non-ambiguity and objectivity (para. 98) → the terms should nonetheless be clarified in a way that prevents doubt as to the scope of the conditions and obligations, so that the concepts are not applied arbitrarily (para. 99-100);
• the fact the delegation of the power from the national to the local level is focused on the objectives which the local authorities must take into consideration cannot, in principle, lead to a finding that those conditions are insufficiently clear and objective → in so far as reference is also made to the objective factors on the basis of which the granting conditions are to be determined (paras. 102-103);
• the fact that the conditions for granting authorisations and the quantum of the offsets are to be determined by the municipal councils of individual municipalities does not, in itself, affect the transparency, accessibility and prior publicity requirements → what matters is rather whether all owners wishing to let furnished accommodation to tourists are in a position to familiarise themselves with the conditions for granting authorisations, before committing to activities in question. More specifically, the Court found that the publication of the minutes of municipal council meetings in the town hall and on a website is sufficient to meet the prior publicity, transparency and accessibility requirements → in so far as it effectively enables any interested person to be informed immediately of the existence of legislation likely to affect access to, or the exercise of, the activity concerned (paras. 104-107).

Concluding thought

Overall, even though the judgment has reportedly been welcomed by the advocates of a stronger grip on platform-based activities, including by the mayor of Paris, it requires national courts to carry out a complex assessment of multiple criteria and does not give Member States an unconditional license to regulate services provided via platforms. The question remains: will national courts rise to the challenge?

Airbnb as intermediary in civil law? News from the Low Lands

Dear readers, 

it is not too late to report on a recent development in Dutch consumer law whose features make it likely relevant beyond local borders. 

On 9 March, just before the country transitioned to "intelligent lockdown" because of Corona, the Amsterdam district court gave a very consumer-friendly judgment in a case between a Dutch holiday maker and accommodation platform Airbnb. 

The basis for the case is a rule in Dutch law according to which real estate intermediaries cannot charge both the owner and the tenant for their intermediation services. The Amsterdam court agreed with the claimant that this rule should also apply to Airbnb, ordering the company to refund the fee unduly paid by the consumer. 

The Court rejected a number of counter arguments raised by Airbnb, ranging from the non-applicability of Dutch law under the platform's T&Cs to the scope of the Dutch rule - which originally was intended for residential leases - to, importantly, the qualification of Airbnb itself as intermediary. 

Readers of this blog may remember that Airbnb brought the French attempt to treat it as a real estate intermediary, which would result in it being subject to licensing requirements, before the CJEU, obtaining a victory against French regulators. The Dutch case at hand poses the interesting question whether the CJEU's ruling would stand in the way of considering Airbnb an intermediary for civil purposes only. A perfunctory look at the Information Society Directive (2000/31 EC) suggests the Dutch rule can be defended as being outside the scope of the harmonisation brought about by the Directive, which does not intend to harmonise rules of contract law other than the ones standing in the way of online contracting as such. 

Meanwhile, the first specialised service has emerged, offering consumers to automatise their claims for redress of Airbnb fees. The possibility of redress is open to consumers who have booked after mid-2016. 

Airbnb scores a victory before the Court of Justice

Earlier today the Court of Justice delivered a judgment in case C-390/18 Airbnb Irelend. The ruling largely follows the earlier opinion of Advocate General Szpunar, on which we reported in a previous post. Similarly to the widely discussed judgment in Uber Spain and Uber France, the commented case concerned the applicability of E-Commerce Directive to services provided by operators of the so-called collaborative platforms. In the judgment issued today the Court drew upon the criteria developed in Uber, yet the factual context in the case at hand ultimately led it to a very different conclusion. Most importantly, following the judgment, services such as those provided by Airbnb do fall within the scope of Directive 2000/31/EC on electronic commerce. Consequently, free movement of such services from other Member States can only be restricted under national law if substantive and procedural conditions laid down in that Directive are fulfilled. While the judgment, of course, comes in the context of preliminary ruling procedure, the interpretation provided by the Court is clearly favourable to the platform provider - at least with respect to its core market segment (and not eg Airbnb Plus). 

Facts of the case 

The case focused on the activities of Airbnb Ireland, a company established in Dublin under Irish law, offering an electronic platform which allows hosts with accommodation to rent and prospective guests to establish contact with one another. The company also offers host and guests a number of additional services, such as a format for setting out the content of an offer, photography services, civil liability insurance, a guarantee against damages, an optional tool for estimating the rental price and a reputational feedback system. The monetization occurs primarily via commission, collected from guests by Airbnb Payments UK Ltd along with other charges.

The business model of Airbnb has met with criticism of the incumbent players in the travel sector. In the present context, the Association for professional tourism and accommodation in France (AHTOP) argued that activities of Airbnb violated the applicable national rules regulating certain transactions concerning real property and financial goodwill (Hoguet Law). Pursuant to this law, mediation and management of buildings and businesses could only be undertaken after having obtained a professional licence. Airbnb did not have the relevant license, but contested the AHTOP’s claims, arguing that the Hoguet Law was in any case not enforceable against it, as it did not comply with requirements set out in Article 3(4) of the E-Commerce Directive. 

Judgment of the Court 

Qualification of services provided by Airbnb 

The judgment issued today appears to be a big win for Airbnb. Most importantly, according to the Court, its business model is to be distinguished from activities of Uber, which were qualified not as information society services, but rather as services in the field of transport. Importantly, in reaching that conclusion the Court did not distance itself from the Uber judgments. On the contrary, the test to be undertaken in order to establish whether an intermediation service, which prima facie qualifies as an information society service, forms an integral part of an overall service whose main component is a service of a different kind (transport service, accommodation service), has also been applied in the present case. In this regard, particular attention is to be paid to the ‘market maker’ and ‘decisive influence’ criteria. According to the Court, neither of these criteria has been fulfilled with respect to Airbnb.

In Airbnb Ireland, the Court found that the essential feature of the analysed platform was the creation of a list of offers for the benefit of hosts and guests. Services of this kind, provided by the operator, were not considered indispensable to the provision of accommodation services. The Court further found that Airbnb did not exercise decisive influence over the conditions under which accommodation services were provided, in particular it did not determine (directly or indirectly) the rental price charged. Also the provision of ancillary services did not call into question the separate nature of the intermediation service provided by that company and therefore its classification as an ‘information society service’. Consequently, services provided by Airbnb assessed in the present judgment qualified as ‘information society services’ and could benefit from the liberalisation framework laid down in the E-Commerce Directive. 

Unenforceability of free movement restrictions 

In the second part of the judgment the Court analysed whether an individual, such as Airbnb, may oppose the application to him or her of measures of a Member State restricting the freedom to provide an information society service which that individual provides from another Member State, where those measures do not satisfy all the conditions laid down in Article 3(4) of Directive 2000/31. Also in this regard, the Court responded in the affirmative, finding that free movement restrictions which, among others, have not been duty notified to the Commission are to be considered unenforceable against the provider in question. A similar conclusion had previously been reached by the Court with respect to the notification of technical rules under Directive 2015/1535. This line of case law is now explicitly extended to the E-Commerce Directive.

The conclusion reached by the Court in the commented part of the judgment was supported by a number of arguments. Firstly, the notification requirement set out in Article 3(4)(b) of Directive 2000/31 was considered to be sufficiently clear, precise and unconditional to confer on it direct effect and, therefore, it may be invoked by individuals before the national courts. What is more, despite certain differences between Directives 2015/1535 and 2000/31, in both cases the notification obligation was characterised not as a mere requirement to provide information, but rather an essential procedural requirement, which in turn justified the unenforceability of non-notified measures restricting the freedom to provide an information society service against individuals. Importantly, the fact that contested national law predated the entry into force of Directive 2000/31 had no bearing on this assessment. 

Concluding thought 

The commented judgment is another major building block to the EU legal framework in the so-called collaborative economy. The Court attempts to draw a line between particular business models of platform operators, following the previously developed ‘market maker’ and ‘decisive influence’ criteria. In the case at hand the effects of that reasoning have been clearly favourable to the platform provider. Accordingly, Member States’ freedom to regulate services of this kind, provided from other Member States, is limited by substantive and procedural conditions laid down in Article 3(4) of the E-Commerce Directive. This, however, does not mean that no independent national regulation of services like the ones provided by Airbnb is possible. One can well imagine national rules, which fulfil both sets of criteria, including the substantive ones related to consumer protection. Whether or not Member States will further attempt to regulate services provided by collaborative platforms – or particular components thereof, like rating or insurance – is still an open question. Further regulatory tendencies in that direction may ultimately strengthen a case for a targeted harmonisation at the EU level.

* The author carries out a research project on consumer protection in the collaborative economy, financed by the National Science Centre in Poland on the basis of decision no. DEC-2015/19/N/HS5/01557.

Thomas Cook's liquidation puts package travel rules to a test

Earlier today Thomas Cook, one of the world's oldest package tour organizers, entered compulsory liquidation, affecting about 600,000 travellers. The company explained its financial problems by a variety of factors: from political unrest in important holiday destinations to prolonged Brexit negotiations. Since the decision comes before the UK's exit from the EU, the follow-up process, including important consumer protections, is subject to Directive 2015/2302 on package travel.

A short history of package travel law

Source: Pixabay

Harmonised rules on package travel belong to the earliest EU instruments of consumer law. The relevant discussions date back to the 1981 Council resolution on a second programme for a consumer protection and information policy, and were based on pre-existing laws on package travel in Member States like the UK. Directive 90/314/EEC on package travel was first to harmonise this framework at the European level. It introduced a set of minimum protections for the travellers who bought 'packages', defined as a pre-arranged combination of not fewer than two tourist services (in particular transport and accommodation), sold or offered for sale at an inclusive price, when the service covered a period of more than twenty-four hours or included overnight accommodation. The directive laid down rules on pre-contractual information, the content of contracts, consumer's right to transfer the package, changes to contract terms, liability for non-performance as well as security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency.

This framework was recently updated in the wave of a broader reform of the European consumer law. As of 1 July 2018, Member States are obliged to apply national measures implementing a new act - Directive 2015/2302 on package travel and linked travel arrangements. Unlike its predecessor, the updated framework provides for a full level of harmonisation. It addresses a similar set of matters as Directive 90/314/EEC, but in a much more comprehensive way. 

Insolvency protection

As regards insolvency protection, Article 17(1) of Directive 2015/2302 requires Member States to ensure that organisers established in their territory provide security for the refund of all payments made by or on behalf of travellers insofar as the relevant services are not performed as a consequence of the organiser's insolvency. If the carriage of passengers is included in the package travel contract, organisers shall also provide security for the travellers' repatriation. Pursuant to next paragraphs, an organiser's insolvency protection shall benefit travellers regardless of their place of residence, the place of departure or where the package is sold and irrespective of the Member State where the entity in charge of the insolvency protection is located (para. 3). When the performance of the package is affected by the organiser's insolvency, the security shall be available free of charge to ensure repatriations and, if necessary, the financing of accommodation prior to the repatriation (para. 4). For travel services that have not been performed, refunds shall be provided without undue delay after the traveller's request (para. 5).

This provides an interesting background for the today's coverage of Thomas Cook's liquidation. The UK government and the Civil Aviation Authority are reported to have launched "the largest repatriation in peacetime history" codenamed Operation Matterhorn. Hotels accommodating Thomas Cook customers have been informed that the cost of accommodation will be covered by the government, through the Air Travel Trust (ATT) Fund/ Air Travel Organiser’s Licence (ATOL) cover. Assistance will reportedly be provided to all customers, regardless of their nationality. It can be assumed that customers whose return flights were scheduled to countries other than the UK will also be able to reach their destinations, although current statements focus understandably on UK travellers. A dedicated website is further being launched "to let customers know how to get their money back", which suggests that refunds for services not performed will also be available.

Customers of Thomas Cook are therefore likely to obtain the protection provided under Directive 2015/2302. The ATT/ATOL cover appears to be directly linked to this framework. It requires ATOL holders to pay a fee of £2.50 for each traveller, which is held in a fund managed by the ATT. This fund is used to support consumers currently abroad and provide financial reimbursement for the cost of replacing parts of the package. While all of this points to the well-functioning package travel scheme, parts of today's reporting are painting a slightly different picture. 

For example, the UK government announced that it is "stepping in" to assist all impacted passengers, including those who are not ATOL protected. Considering that Thomas Cook is an ATOL holder, a question can be asked: which group of travellers is in fact covered by this statement and how significant this group is?

Of interest are also the widely reported last-minute rescue talks carried out between the company and the UK government. Prime Minister Boris Johnson revealed that the government had rejected a request from Thomas Cook for a bailout, while questioning whether directors of the company were "properly incentivised" to avoid bankruptcy. This seems to disregard the existence of insolvency protections discussed above, to which companies of this kind are also contributing. As long as the United Kingdom remains in the EU, it is also required to ensure an effective functioning of this scheme.

Concluding thought

Today's news about Thomas Cook's liquidation is remarkable for a number of reasons. It concerns one of the oldest organisers of package tours, established in the UK, which itself is on its track to leave the European Union. It raises the question about the functioning of existing insolvency protections and especially how they will apply to travellers from outside the UK. One can also wonder if their situation would be different, had the liquidation happened post-Brexit.

Thomas Cook's story also sheds light on the broader transformation of the travel sector. What the company has not mentioned as a likely factor for its financial troubles is the growing role of direct booking channels and new types of intermediaries, like online platforms. While effects of this transformation on the long-established companies like Thomas Cook may be regretted, its story should primarily be a wake-up call for the law- and policymakers. The potential connection between increased regulatory burdens and the inability to compete with other travel companies is perhaps one of the questions to be asked. More importantly, however, the collapse shows that package travel is no longer the principal way how people travel and this is not really reflected in the legal framework. The 2015 reform of package travel law has partially extended its scope to the so-called "linked travel arrangements", thus capturing at least part of the transformation. For now, however, the discussion does not ensure that interests of those who prefer to assemble their trip on their own are adequately safeguarded.

* The author carries out a research project on consumer protection in the collaborative economy, financed by the National Science Centre in Poland on the basis of decision no. DEC-2015/19/N/HS5/01557.