Contents

1........... Introduction.. 2

1.1........ Policy context 2

1.2........ Organisation and timing. 2

1.3........ Different categories of travel products- definitions. 3

1.3.1..... Consultation and expertise. 4

1.4........ Consultation of the Impact Assessment Board. 6

1.5........ Specific characteristics of the package travel and the legal framework in place. 6

2........... Problem definition.. 8

2.1........ Context of the problem definition- changes in the travel market 8

2.1.1..... The EU travel market 8

2.2........ The travel market has outgrown the existing legislation – an introduction to the problems in the existing package travel market 10

2.3........ Key problems faced by businesses. 11

2.3.1..... Absence of a level playing field. 11

2.3.2..... Unnecessary/unjustified compliance costs. 12

2.3.3..... Legal discrepancies between the Member States leading to additional costs and obstacles to cross-border trade. 14

2.4........ Key problems faced by consumers. 17

2.4.1..... Consumer detriment suffered by users of combined travel arrangements. 17

2.4.2..... Specific problems of consumers detriment stemming from unclear and outdated rules 18

2.5........ Baseline scenario. 20

2.6........ Does the Union have the right to act?. 20

3........... Policy objectives. 21

4........... Policy options. 22

4.1........ Identified policy options. 22

4.2........ Discarded policy options. 26

4.2.1..... Option 8 “Travel Directive”. 26

5........... Assessment of Impacts. 27

5.1........ Assessment of Option 2 - Guidelines and Better Enforcement of Existing Legislation (PO2) 27

5.2........ Assessment of Option 3 – Introduction of a "Package Travel Label" (PO3A) and/ or "This is not a package" disclaimer (PO3 B)- add-on option to other policy options. 28

5.2.1..... Sub-option A: Package Travel Label 28

5.2.2..... Sub-option B: "This is not a package" disclaimer. 29

5.3........ Assessment of Option 4 – Repeal of the Directive. 30

5.4........ Assessment of Option 5 – Modernisation of the Directive and coverage of "one trader" packages (PO5) 32

5.5 Assessment of Option 6 - Graduated approach- modernisation of the Directive and coverage of both "one trader" and "multi trader" packages while applying a lighter regime to "multi-trader" assisted travel arrangements (PO6) 38

5.6........ Assessment of Option 7 - Modernisation of the Directive and coverage of both "one trader" packages and "multi-trader" travel arrangements (PO7) 41

6........... Comparative assessment of policy options. 42

6.1........ Preferred Policy option. 46

7. Monitoring and evaluation.. 46

ANNEX 1. 48

The main requirements of the Package Travel Directive.. 48

1........... Information requirements. 48

2........... Binding prices. 50

3........... Right to transfer the package. 50

4........... Cancellation or change of contract terms. 50

5........... The organiser's responsibility and complaint handling. 50

6........... Insolvency protection. 51

ANNEX 2. 52

1........... Problem definition-data tables and graphs. 52

2........... Estimation of the travel market segments. 59

Estimation of the pre-arranged packages segment 60

Estimation of the combined travel arrangements segment 61

Estimation of the market segments. 61

Estimation of the total volume of the market 62

Business trips. 62

3........... Overview of applicable legislation and rights. 64

4........... Gaps in the current legal framework for packages. 65

ANNEX 3. 67

Scope and definitions. 67

1.1........ Definition of "package". 67

1.2........ Definition of "consumer". 70

1.3........ Definitions of "retailer" and "organiser". 71

Information requirements. 71

Requirements for the brochure. 71

How to provide the required information. 72

Last minute bookings. 72

Lack of sanctions for non-compliance with the information requirements. 72

Contract changes before the departure.. 73

Price revisions. 73

Significant alterations of essential terms before departure. 73

Significant price alterations. 74

Cancellations of the contract before departure. 74

Cancellations before departure on the ground that there are too few participants. 75

Cancellations before departure due to force majeure. 75

Transfer of the package before departure. 76

Alterations of the contract after departure.. 76

Cancellations after departure due to force majeure. 76

Interplay with the APR Regulation. 77

Problems related to performance, liability and obligation of the professional parties. 78

Who is the responsible party?. 78

Compensation for damages. 78

Type of liability. 79

Conditions for liability. 79

Notifications. 79

Timing of repayment.. 80

Insolvency protection.. 80

Prescription periods. 81

ANNEX 4. 82

1........... Introduction. 82

2........... Proposed legislative measures in option 5 - Modernisation of the Directive and coverage of "one trader" packages (PO5) 82

2.2.1..... Including other (modern) channels of marketing communication. 85

2.4.2..... Liability for the proper performance of the contract 90

2.4.3..... Responsibility for providing prompt assistance if the consumer is in difficulty (for other reasons than the organiser's improper performance) 91

2.4.5..... Obligation to provide alternative arrangements. 92

2.4.6..... Insolvency protection. 93

3........... Proposed legislative measures in option 6 - Graduated approach- modernisation of the Directive and coverage of both "one trader" and "multi trader" packages while applying a lighter regime to "multi-trader" assisted travel arrangements (PO6) 95

4........... Proposed legislative measures in option 7 – Modernisation of the Directive and full coverage of both "one trader" packages and "multi-trader" travel arrangements (PO7) 97

ANNEX 5. 98

Detailed assessment of policy options. 98

2.1.2..... Compliance costs for businesses. 107

2.1.3..... Administrative costs for businesses. 108

2.1.4..... Impact on SMEs. 108

2.1.5..... Impact on consumers and households. 108

2.1.6..... Impact on public authorities. 108

3.1.4..... Impact on consumers. 110

ANNEX 6. 153

ANNEX7. 158

1. Introduction

1.1. Policy context

The travel market plays a central role in the European economy of today. It significantly contributes to prosperity and growth within the single market. Travel and tourism represent 7.8% of the EU GDP, supporting 18 million jobs, and their contribution into it is expected to increase to 8.1% by 2021.[1] The European Union remains the world's No 1 tourist destination, with 384.8 million international arrivals in 2011.[2]

A key task for the European Union is to create a modern legal framework that offers the best possible conditions for the travel market to grow further, for the benefit of both businesses and 500 million consumers in Europe. This regulatory framework must provide sufficient protection for consumers so that they can confidently buy their holidays anywhere in the Union. At the same time, a level playing field for travel businesses must be ensured to increase competition in the market. The adoption of the Package Travel Directive (PTD)[3] in 1990 made a significant contribution to the development of a single market for an important part of the travel market, and created important guarantees for European travellers.

The PTD applies to pre-arranged packages, typically consisting of transport and accommodation (and/or other significant tourism services) sold together:[4]Nowadays, an increasing number of consumers, in addition to buying pre-arranged packages at their travel agent's, put together their trips themselves according to their own needs based however on specific offers coming from one or more, commercially linked, traders. The applicability of the Directive to all these new travel products has become uncertain; in particular to those products sold on-line, while some are clearly not covered by the current scope of the Directive.

A modernisation of the PTD has repeatedly been asked for by the industry as well as consumer organisations. The revision of the PTD is also explicitly envisaged in the European Consumer Agenda[5] and is mentioned in Annex II to the Single Market Act II.[6]

1.2. Organisation and timing

Lead DG: DG JUST. DG JUST liaised with relevant services through the Impact Assessment Steering Group (IASG), which was first convened in June 2009 and met twice afterwards (March 2010 and July 2012): The following services participated in the group: DG ENTR, DG MARKT, DG SANCO, DG CNECT, DG MOVE, DG TRADE, DG BUDG, the SG and the SJ. The legislative proposal is included in the 2012 Agenda Planning and Commission Work Programme (CWP), with reference 2010/JUST/273.

1.3. Different categories of travel products- definitions

Independent travel arrangements - a travel service, such as a flight, accommodation or car rental that is purchased as a stand-alone product, i.e. purchased separately and not offered in combination with other tourist services, even if the traveller uses several travel services for the same trip or holiday.

Pre-arranged package - a combination of travel services bundled in advance by an organiser and consisting of at least two of the following services: (1) carriage of passengers, (2) accommodation and (3) other tourist services not ancillary to passenger transport or accommodation and accounting for a significant proportion of the package (e.g. car rental).

Combined travel arrangements[7] - combinations of travel services where at least two of the above mentioned services, such as flights, hotel stays or car rental, are purchased for a single trip or holiday either from the same supplier or from suppliers that use assisted booking processes and where the buyer can put together the relevant travel services according to his preferences (tailor-made). Combined travel arrangements are, contrary to pre-arranged packages, dynamic by nature and can be divided into two main sub-categories:

"One-trader packages": Consumers can customise the content of the trip or holiday according to their needs on one website or at one high street travel agent, while being free throughout the booking process to choose separate travel components. These travel arrangements are put together by one trader (including at the request of the traveller) and are offered or sold in a manner that is typical for packages, e.g.:

offered, sold, or charged at an inclusive price,

sold within the same booking process,

covered by one contract, or

advertised or sold under the term "package" or under a similar term;

"Multi-trader" travel arrangements:

"Multi-trader packages": the difference between a "multi-trader package" and a "one-trader package" is that a "multi-trader package" is put together by several traders and the arrangement has at least one of the characteristics that are typical for packages, as indicated above under "one-trader packages", or when the traveller's name or particulars needed to conclude a booking transaction are transferred between the traders at the latest when the booking of the first service is confirmed;

"Multi-trader assisted travel arrangements": are combinations of travel services where one trader facilitates in a targeted manner the procurement of travel services from another trader, during a single visit of a point of sale or through linked online booking processes. In such cases consumers conclude separate contracts with the relevant service providers and no elements typical for a package (see above) are present.

See also annex 8 for a glossary of abbreviations used in the text.

Figure 1 Distinction between combined travel arrangements and pre-arranged packages

|| Pre-arranged packages: Pre-packaged arrangements by tour operators Little flexibility as to the dates and prices; multiple choices but limited customisation ability

|| Combined travel arrangements: Packaging is done by the customer in real-time on basis of available components; Enhanced customisation ability of the customer; Real-time availability and real-time booking;

Source: E-Business Watch, ICT and e-Business in the Tourism Industry, Sector Report No .8/2006

1.3.1. Consultation and expertise

In the first public consultation in 2008, the Commission received more than 80 contributions to its 2007 working document from all relevant parties (business stakeholders, consumer organisations, lawyers, academics and 14 MS). In January 2009, it launched the "Consumer Detriment[8] Study in the area of Dynamic Packages" (Consumer Detriment Study). The study covered 17 EU countries and was based on interviews with a sample of 500 consumers. Against this background, the Commission initiated the formal impact assessment process in June 2009. The consultation dialogue and evidence gathering was carried out with the assistance of an external contractor, the Risk & Policy Analysts (RPA) in consortium with London Economics and You Gov.

In October 2009, a second public consultation was published, consisting of five on-line questionnaires targeted at different stakeholders (consumers, consumer organisations, businesses, industry associations and MS authorities). The Commission received 161 contributions from a wide range of respondents. 89% of MS authorities, 70% of business associations, 64% of businesses and 96% of consumer organisations supported a revision of the Directive.[9]

A full-day Member States' workshop was organised on 27 October 2009 to discuss problems and policy options. 16 Member States and one EEA State attended it[10].

The Commission also set up a subgroup within the framework of the European Consumer Consultative Group (ECCG) comprising representatives of consumer organisations. It adopted its opinion on 21 April 2010[11].

A one-day stakeholders' workshop was organised on 22 April 2010 to discuss the impacts of the identified policy options. Almost 100 stakeholders took part in it[12].

More than 15 interviews with key industry representatives were conducted from September 2009 to October 2010.

In March 2012 the Commission outsourced to an external contractor, TNS European Behaviour Studies Consortium, a study to test a Package Travel Label and consumer behaviour when purchasing dynamic packages. The results of this study contribute to the assessment of policy option 3.

In June 2012 the Commission organised a workshop for Member States and a stakeholders' conference to further discuss the revision process and the main pending issues, as well as to present the results of the behavioural study[13].

It can be concluded that stakeholders (including Member States authorities):

· are in favour of clarifying and updating the Directive to address new market developments;

· are mostly in favour of extending the scope of the Directive to cover combined packages as well as streamlining and modernising the information requirements;

· are divided as to which party should be liable for the proper performance of the contract and for assisting a consumer in difficulty;

· are strongly against setting up a pan-European insolvency fund and support instead flexibility for Member States to decide what kind of insolvency scheme they set up, as long as there is mutual recognition of the different schemes across the EU;

· are also divided on the idea of introducing a Package Travel Label. Some consumer organisations and businesses originally strongly supported it, provided there are strict and clear rules for its use. On the other hand, some consumer organisations argued that more labels might confuse consumers. After seeing the results of the study (see assessment of policy option 3), most stakeholders have shown scepticism.

Furthermore, the vast majority[14] stated that it is important to further harmonise EU rules on the scope, definitions, information requirements, liabilities of the professional parties and contract changes. Furthermore, the revision has also been requested from or been supported by the co-legislators and the EESC.[15]

1.4. Consultation of the Impact Assessment Board

The IA report was examined by the Commission's Impact Assessment Board (IAB) on 21st November 2012. The IAB evaluated the IA report positively and considered the assessment to be thorough. The IAB recommended several aspects to be improved, in particular by providing a more complete overview of Member States' legal framework, simplifying presentation of options, improving coherence of options and specific objectives as well as including more stakeholders' views. All these recommendations have been addressed. For instance, the existing legal framework was presented in more detail in this report and Annex 2, presentation of options was simplified and only the assessment of retained sub-options was kept in the main report, specific objectives were reformulated to make them more measurable, more stakeholders views were added to the main report and the annexes.

1.5. Specific characteristics of the package travel and the legal framework in place

Travel services are to some extent regulated at EU level in sector-specific legislation e.g. in the transport sector, where different regulations safeguard passengers rights[16] depending on the mode of transport (e.g. travel by ship, bus, rail or air). Travel services are also covered by horizontal EU consumer protection legislation such as the Unfair Contract Terms Directive[17], the Unfair Commercial Practices Directive[18] and the Consumer Rights Directive[19], as well as the contract law of the Member States.[20] Travel services also fall within the scope of the Services Directive[21] and, when provided online, of the E-Commerce Directive[22].

When purchasing travel products (e.g. accommodation, transport and car rental), consumers are protected against unfair, i.e. misleading or aggressive marketing practices. Traders must always display the full price of the product including any unavoidable charges such as local fees, taxes and handling fees. The advertising of travel products may not be misleading and may not, in particular, contain false information or omit important information to entice consumers to purchase a travel product they would not have bought otherwise.

For online purchases of travel products, sellers must give detailed information, including their contact details and a description of the main characteristics of the product. They cannot use pre-ticked boxes to induce consumers to buy additional services[23]. Furthermore, contracts for travel products must not contain unfair terms. For example, the seller may not impose terms which the consumer had no real opportunity to read before signing the contract.

The passenger rights regulations lay down specific rights for travellers in relation to carriers with regard to transport services, but not in relation to the actual combination of different tourist services.

Although as summarised above, some horizontal consumer protection rules apply to package travel contracts as well, they do not regulate specific aspects associated with them, thus leaving important gaps for consumers. These gaps include specific information obligations, such as on the travel itinerary, the definition of liability in the event of problems in the performance of the included services and mandatory insolvency protection requirements.. A detailed overview of legislation and rights applicable to different travel services and a table showing legal gaps in the area of packages are included in Annex 2.

Package travel contracts normally represent a rather complex and atypical contractual relationship:

· the customer expects to be able to rely on one single interlocutor who guarantees the overall quality of the package;

· a package normally involves several service providers (separate sub-contractors providing different travel services, e.g. hotel accommodation, charter flights, car rental and excursions);

· the customer does not have a contract with the individual service providers and is often not even aware of the identity of all the involved service providers, who may be often based abroad and not share his/her language;

· a problem with one travel service has often consequences for other services included in the package;

· pre-payments are very common, thus exposing the customer to a financial risk;

· the packages often involve travelling considerable distances and travellers can be at risk of being stranded far away from their place of residence if the organiser goes bankrupt;

· there is a commercial link between different service providers and the organiser of the package.

2. Problem definition

The Package Travel Directive has worked well throughout the years creating its own market. However, with the increasing trend towards on-line travel purchases, its scope has become unclear and outdated. As a consequence, businesses across the Internal Market are no longer competing on an equal footing and are facing obstacles to expand their operation cross-border. Its outdated scope is a source of significant detriment for consumers who often purchase unprotected travels under the impression that they are protected. Other outdated and unclear provisions of the current Directive generate unnecessary costs for businesses and consumers.

2.1. Context of the problem definition- changes in the travel market

2.1.1. The EU travel market

The EU travel market comprises approximately 90,000 tour operators and travel agencies.[24] It is estimated that 80% of them sell packages (72,000 businesses).[25] SMEs constitute 99% of these businesses, of which micro enterprises represent 92%. In the EU there are also 200,000 hotels[26] (99% SMEs, 73% of which are micro enterprises), 13,000 car rentals[27] (99% SMEs, out of which 94% are micro enterprises), 300 airlines (50% large and 50% medium sized businesses) and 58,000 businesses operating in the transport sector other than airlines and car rentals (99% SMEs, about 90% micro enterprises).[28]

2.1.2. Development of Internet distribution

Almost 70% of EU citizens use the Internet at least once a week. More than half of the Internet users are "regular users" surfing the Internet every day or almost every day. 73% of EU households had access to the internet in 2011, with the Netherlands posting the highest access rate (94%) and Bulgaria the lowest (45%)[29]. Together with the growing number of Internet users, the travel market has significantly shifted on-line. Gross online travel bookings across Europe account for 35% of the total bookings in 2011, now measuring €83.6 billion compared to €238 billion for the entire (on- and off-line) market, having increased by 21% since 2006.[30]Travel services are the most popular category purchased on-line. Stand-alone air tickets account for more than 50% of the total online sales value of travel services, followed by stand-alone hotel bookings (19%) and packages (14%)[31].

2.1.3. Different categories of trips

Estimates based on the Consumer Detriment Study and Eurostat (tourism database)[32] indicate that, out of a total number of trips of about 580 million every year in the EU (excluding short domestic trips which are s generally not purchased as a package), there are 500 million holidays and 80 million business trips. For holidays, pre-arranged packages currently account for about 23% of the total market volume (i.e. about 118 million trips), combined travel arrangements for another 23% (i.e. also about 118 million trips, of which 87 million are “one trader” packages and 31 million are "multi trader" travel arrangements (50% of which are "multi-trader" packages and 50% are "multi-trader" travel arrangements) and independent travel arrangements for 54% of the travel market volume (i.e. roughly 277 million trips).[33] Combined travel arrangements are on the rise[34]: data shows that 23% of EU citizens buy them every year but the figures are substantially above average for Ireland (46%), Sweden (44%), Italy (36%) and Slovenia (42%)[35] (see also Annex 2 Figure 5).

Figure 2 Holiday travel market- different categories of holiday trips

Concerning business trips, 80%-85% (64-68 million) of trips are arranged by travel management companies (TMCs)[36]. Taking into account the specificities of such trips, it is considered that most business travellers do not use pre-arranged packages, but rather prefer more customised solutions, better tailor-made to the needs of their work-related journey[37]. Therefore, out of the 80 million business trips carried out annually in the EU, it is assumed that around 24 million trips are combined travel arrangements (out of which 16 million are "one trader" packages organised by TMCs), while independent travel arrangements have been estimated at around 56 million trips (out of which 50 million trips are booked by TMCs).[38]

Table 2 Market of Business- different categories of business trips

Business trips Market segment || % share || Number of business trips (millions) || Number of business trips arranged by TMCs (millions) || Number of business trips NOT arranged by TMCs (millions

"One-trader" packages || 22% || 18 || 16 || 2

"Multi-trader" travel arrangements || 8% || 6 || 0 || 6

Independent travel arrangements || 70% || 56 || 50 || 6

TOTAL || 100% || 80 || 66 ||

2.2. The travel market has outgrown the existing legislation – an introduction to the problems in the existing package travel market

The main underlying drivers of the problems related to the Package Travel Directive are its outdated scope and the presence of outdated and unclear provisions.

2.2.1. The outdated and unclear scope of the Directive

The current Directive refers to "pre-arranged" combinations of travel services and does, therefore, not explicitly cover packages which are combined at the consumer's request. Still, in the Club Tour-Case[39], the Court of Justice of the European Union clarified that the combination of tourist services by a "bricks and mortar" travel agency at the specific request of the consumer falls within the scope of the Directive if the consumer pays an inclusive price and there is a contract between the consumer and a travel agent,. However, the practical impact of this ruling has led to litigation at national level, and failed to provide full clarity on the applicability of the package travel legislation. See Annex 3 for details how the term package is interpreted in different Member States.

In particular, it remains unclear whether, in the light of that ruling, the current Directive also applies to "one-trader" packages sold on-line, whereas "multi-trader" packages and "multi-trader" assisted travel arrangements are clearly outside of its scope. This is the case even though at least "one-trader" packages and "multi-trader" packages have similar characteristics and are competing for the same customers.

The figure below illustrates the scope of the Directive in relation to different travel arrangements.

Figure 3 Scope of the Directive

2.2.2. Outdated and unclear provisions of the Directive

Several provisions of the Directive lack clarity (for instance, provisions on the liability, contract changes) and some provisions are outdated (for example, the rules regarding information requirements or lack of termination rights for consumers). See annex 3 for further details.

In a nutshell, most of the problems with the current legislation can be categorised into two main groups:

Business problem, i.e. absence of a level playing field, unjustified compliance costs and obstacles to cross-border trade within the Internal Market (see Chapter 2.3), as well as

Consumer problems, i.e. detriment suffered by consumers (see Chapter 2.4).

2.3. Key problems faced by businesses

2.3.1. Absence of a level playing field

The described changes in the market have led to a situation where the market players covered by the PTD are at a competitive disadvantage compared with those which are not covered or, at least, do not consider themselves to be covered, although both are competing for the same customers and although the combinations they sell can include exactly the same components.

Consumers are often unaware that different protection applies to such competing products (i.e. pre-arranged as opposed to "one trader" or "multi traders" packages). However, businesses selling such competing products are subject to different obligations and thus bear different costs. In particular, the average cost of businesses for complying with the PTD requirements has been estimated at €10.5-€12.5 per package. When considering 160 million holiday packages currently covered by the Directive[40], aggregate annual compliance costs amount to about 1.7 – 2 € billion.

The breakdown of costs for complying with the PTD is provided in Annex 5, section 1.1.1.

Such average cost accounts for about 1.4%-1.6% of the average price of a pre-arranged package (777€[41]). Even if it is small, this percentage contributes to the difference in the average price as compared with combined travel arrangements (741€[42]). It can be argued that this difference in price, to a large extent, reflects an unjustified difference in regulatory treatment among traders selling competing products in the same market segments.

Box 1 Example of differences in the market playing field

Happy Flight, an airline, sells online a ticket to Malaga to a consumer in Finland. In the booking process Happy Flight offers hotel accommodation through the website of a business partner which has a similar website layout. After selecting the flight and the hotel, the consumer is charged for the two services at one inclusive price. In parallel, Happy Holidays, a Finnish tour operator, sells a pre-arranged package consisting of exactly the same flight and accommodation in the same hotel. To sell this package, Happy Holidays has to provide insolvency protection and comply with the information requirements of the PTD. Additionally, he will be liable for the proper performance of all the services included in the package. This costs him on average €10.5-€12.5 per package. Happy Flight, which in fact offers the same travel services but presents them differently, does not incur such costs.

2.3.2. Unnecessary/unjustified compliance costs

With the development of the Internet and other changes in the market, some of the above mentioned compliance costs do not seem justified:

· Outdated information requirements

According to the current rules, if an organiser provides consumers with a public brochure, it must contain prices and other information, for instance about the itinerary, the meal plan, the destination and the means, characteristics and categories of transport. The particulars in the brochure are, as a general rule, binding on the organiser/retailer, including prices. These rules have led to businesses complaining that, in order to minimise litigation risks, they do reprint the brochures in case of changes in prices, accommodation, etc., which costs them around €400 million annually.[43] This gives an amount of approximately 2.5€ per package, when divided by the number of packages covered by the Directive.[44] In today's Internet world, the continued need for specific printed information seems less justified than 23 years ago.

· Unjustified costs for package travel organisers in case of delays, cancellations, force majeure events and accidents related to transport due to insufficient redress mechanisms

Where transport is included in the package, in most cases, both the package organiser and transport carriers are obliged to provide compensation and assistance in case of delays, cancellations or accidents to passengers under EU rules on passenger rights. Thus, consumers may in many situations choose whom to turn to: the carrier or the organiser. This situation where several parties (i.e. transport provider and a package travel organiser) are obliged to provide assistance and possibly pay compensation for the same situation (e.g. cancellation or delays), might lead to unjustified cost for certain organisers (double compensation paid to travellers).

· Lack of coherence with EU passenger rights rules - unlimited liability in case of force-majeure events

Currently there are no limitations to the organiser's liability to provide alternative arrangements for the continuation of the package in case of events which prevent the consumer from returning home according to the planned schedule. This is clearly a burdensome rule for businesses and, due to its unlimited character, difficult to insure against. For example, ECTAA estimated that, during the 2010 volcanic ash crisis, tour operators had to provide care and assistance to the stranded passengers, including their repatriation, for an overall cost of € 380 million.[45] The EU rules on passenger rights provide for a limitation of the carrier's duty to provide accommodation for cancelled/delayed trips in the case of bus and maritime transport and a similar limitation is foreseen, also for force majeure events, in the review of APR[46].

The PTD rules lack a similar limitation to the organisers' liability to provide alternative arrangements for the continuation of the package, which would seem particularly appropriate in long lasting force majeure events.

· Duplication of protection for business trips

The current PTD protects "consumers" purchasing packages. However, the definition of "consumer" encompasses anyone taking the package, thereby including business trips and granting full protection also to business travellers purchasing a package (B2B contracts).

It is considered burdensome and unnecessary that the protection applies also to travellers going on business trips organised by specialised Travel Management Companies (TMCs)[47]. This cost amounts to € 10.5 – € 12.5 per package leading to a total of € 30-114 million[48] annually for the industry. Business travellers have specific demands, they know exactly when and where they have to go and give specific instructions to their travel agencies. Also, the contracts are usually rather long-term ones, concluded between the agency and the travellers' employer, are usually very detailed and address the handling of possible disputes or problems. For these reasons, business travellers are far less exposed to problems which might occur during their journey and have no personal financial risk or damage. In practice, business trips organised by TMCs, even if not covered by the directive, provide a similar level of protection as under the PTD.

Business trips arranged by TMCs account for 80%-85% of all business trips in the EU However, especially micro and small enterprises often do not have specific contractual agreements with specialised TMCs and hence procure their travel arrangements in a similar way as an average consumer would do.

2.3.3. Legal discrepancies between the Member States leading to additional costs and obstacles to cross-border trade

The current Directive is based on minimum harmonisation, and this has resulted in legal discrepancies between Member States. This fragmentation generates additional compliance costs for businesses wishing to trade cross-border as recently signalled in the performance checks of the internal market in the tourism sector carried out in 2012[49]. Businesses that trade across borders have to pay about € 375 to research information about the Member State in which they want to get active. They also have to bear recurring costs of adapting their information materials to the requirements of different Member States. Taking into account the average number of EU companies which make cross-border sales, this translates into about additional €2 per package out of which €1.7 is a one-off cost[50]. The overall baseline administrative burden associated with cross-border trade has been estimated at € 26 million (out of which €21m are one-off costs for researching Member States' differing national legal requirements and legal advice; €5.1m are recurring annual administrative costs).

Administrative costs associated with cross-border trade || €2 per package

Total costs for export-oriented businesses || €12.5-€14.5

The Eurobarometer study has shown that more than 70% of EU retailers, including (but not limited to) the travel industry, would be interested in making cross-border sales if laws regulating consumer transactions were the same across the EU and half of retailers that made cross-border sales would be interested in selling their products in more than ten Member States.[51] One third of businesses stated in the public consultation that their level of cross-border trade would increase if the rules regarding package travel were to be harmonised across the EU. This could be one of the reasons explaining the current low amount of cross-border sales by travel agents and tour operators (less than 10% according to 2009 data).

The following examples of legal discrepancies in the package travel sector are particularly likely to cause barriers to cross-border trade:

· Divergent insolvency protection schemes and lack of mutual recognition

Under the Directive, the organiser/retailer must provide sufficient evidence of security for the refund of all money paid over and the repatriation of the consumer in the event of insolvency[52]. The Directive does not set out any explicit requirement for the actual method of insolvency protection as long as it is effective[53]. As a result, there are diverging methods of insolvency protection in the Member States, e.g. insurance policies, bank guarantees, national insolvency funds or a combination of these methods. This, combined with the lack of explicit rules on mutual recognition, have resulted in a situation where some retailers or organisers who are trading cross-border had to pay several times for insolvency protection which they had already secured in their Member State of establishment[54].

More than 58% of enterprises consider the variety of insolvency schemes as an important obstacle to cross-border trade and ask for increased harmonisation. Even though the performance checks of the internal market for the tourism sector carried out in 2012 showed that a number of Member States recognise the protection awarded by funds established in other Member States[55], a systematic mutual recognition in the sector-specific legislation is sometimes missing.

Some Member States also appear to impose national insurance and guarantee obligations on cross-border service providers legally established in other Member States in order for them to access and exercise their activity occasionally in their territory[56].

This situation is detrimental to the Internal Market and can block competition among these insolvency protection providers. It can also cause that businesses have to insure themselves locally while they may obtain a better price somewhere else.

Data provided by a large EU tour operator show that among Member States (even belonging to the same geographical area) differences in the average insolvency protection cost per package can be very significant[57].

· Divergent information requirements[58]

Some Member States introduced additional information requirements to be included in the brochure or contract. There are also stricter formal requirements in some Member States with regard to the method of providing information, e.g. the requirement that information must be in writing.

As a result, traders who want to produce common brochures for several Member States have to check the specific information requirements applicable in the different Member States concerned. A majority of stakeholders (82% of MS' authorities, 67% of businesses and 59% of consumer organisations) stated in the public consultation that differences in information requirements across the EU are a problem.[59]

Box 2 Example of cross-border obstacles related to information requirements

Sunny summer, a package travel organiser based in Luxembourg, wants to expand his business into the French speaking part of Belgium. He wants to send out brochures to consumers in Belgium. However, he learns that he cannot use the same brochures, as in Belgium the brochure must also provide information concerning financial security in the event of insolvency. Therefore, in order to avoid any risk of litigation, he reprints the brochures especially for the Belgian market.

· Different scope of the protection rules[60]

Member States have different rules and practices in relation to the scope of protection under the PTD (e.g. trips of less than 24 hours, occasionally organised trips or certain types of combined travel arrangements[61]). Businesses wishing to sell cross-border hence have to carry out careful legal checks to verify which rules apply on every national market.

79% of enterprises consider the different scope of the protection rules as an important obstacle to cross-border trade. Moreover, almost 80% of business stakeholders and MS authorities asked for harmonisation of the PTD scope and definitions.[62]

· Different national rules concerning liability and obligations of the contractual parties[63]

The current Directive uses the wording "organizer and/ or retailer" and thereby does not designate one particular party as being responsible[64]. This wording was apparently chosen to leave the choice to the Member States. At present, France is the only Member States where the liability rests with the retailer and different sorts of joint liability exists in Belgium, Bulgaria, Cyprus, Denmark, Greece, Hungary, Luxembourg, Lithuania, Malta, Portugal, Romania, Slovakia and Sweden.[65]

This has led to diverging national rules in relation to who is liable towards the consumer: the retailer, the organiser or both. More than 80% of enterprises consider the different national rules concerning liabilities as an important obstacle to cross border trade and 70% is of opinion that this aspect requires harmonisation across the EU.[66]

Box 3 Example of cross-border obstacles related to different rules on liability

Voyage, a travel agency based in Strasbourg, France, sells package holidays organised by ZX travels. Under French law, it is Voyage who is liable for the proper performance of the package. On the German side of the border, the travel agency Reisen is selling the same types of packages organised by ZX travels. However, under German law, Reisen is not liable for the proper performance of the package, as this liability lies with ZX travels. Such discrepancies in liability rules discourage both travel agencies to sell cross border, as this would cause additional costs and would require changes to their business models.

2.4. Key problems faced by consumers

2.4.1. Consumer detriment suffered by users of combined travel arrangements

An increasing number of holidays booked by consumers are not protected as they fall outside the scope of the PTD[67].

The Consumer Detriment Study confirmed that problems concerning combined travel arrangements happen more often and are on average more detrimental than problems concerning pre-arranged packages. The main conclusions are:

· Problems are more likely to arise if the package was purchased using the Internet;

· The likelihood of receiving assistance is much lower (40%) when the consumer is redirected between websites (e.g. purchasing "multi-trader" travel arrangements) rather than when making a purchase on a single website (60%);

· The incidence of problems for combined travel arrangements (8.2%) is much higher than for pre-arranged packages (3.1%) and independent travel arrangements (1.6%) and;

· Combined travel arrangements cause more detriment than any other type of travel arrangements. On average, the gross detriment per problem for pre-arranged packages was estimated at €191 (i.e. 25% of the average costs of the package) compared to €593 for combined travel arrangements (i.e. 80% of the average cost of such travel arrangements).

The highest level of detriment was experienced in the UK, DE and FR (see Figures 7 and 8 in Annex 2).

The most common problems and the main source of detriment for consumers as identified in the study are provisions of incorrect or incomplete information, problems with transport delays or cancellations, as well as problems with services not being provided or being of a lower standard than expected.

The insolvency of an organiser or a service provider can be particularly detrimental to consumers. It is often difficult for consumers to understand whether combined travel arrangements which they bought with the assistance of a trader are protected or not. Indeed, 67% of consumers who bought combined travel arrangements through an intermediary with billings by different companies wrongly believed that they would receive a refund in case of bankruptcy of one of them. This confusion could lead to significant detriment, particularly when consumers only realise that they are not protected once their travel company has failed and are left stranded abroad or unable to get their money back. For example, an estimated 1.4-2.2 million air passengers were impacted by an airline insolvency between 2000 and 2010, of these, 12% were stranded away from home incurring the average costs of over €796[68].

As a whole, the Consumer Detriment Study estimated a yearly personal consumer detriment for users of combined travel arrangements in the EU27 at more than € 1 billion net (i.e. after compensation)[69] compared to only € 159 million for pre-arranged packages. This comprises both financial and non-financial detriment, including loss of time and moral damages (see example in Box 3 below)[70].

Box 3 Examples of consumer detriment

Margus, an Estonian, booked a holiday in Rome (flight and four night accommodation) from an Internet website enabling him to tailor his holidays by combining different travel services. When he arrived at the hotel, he found out that the bathroom had no water. He complained at the reception desk, but he was told that the water problem could not be solved and no further rooms were available. Margus then phoned the call centre of the on-line operator where he made the booking, and was told that he had to solve this problem with the hotel himself. He eventually had to leave and find another hotel. He hence lost 3 hours in trying to solve the problem, €3 for phone calls and paid an additional €200 for a room in another hotel. Had his holiday been a package travel covered by the EU Directive, the organiser would have been liable to offer Margus assistance, e.g. by providing him with an alternative room or hotel.

Thomas, a UK citizen, booked a flight to Thailand directly from the website of the XX airline. After choosing the preferred flight, he was offered an attractive hotel at a discount price, which he decided to purchase (assisted travel arrangements). His friend James had in the meantime bought accommodation at that same hotel and flight with that same airline via a pre-arranged package offered by the XY Leisure Group. While being in Thailand, the XX airline went bankrupt and therefore their return flight was cancelled. However, James told Thomas not to worry, as the XY Leisure Group holds an ATOL licence and would have therefore taken care of repatriating them at no additional costs. However, soon afterwards Thomas learnt that, as he had bought separate travel components directly from the XX airline, he did not, contrary to James, enjoy bankruptcy protection. As a consequence, he had to make his own travel arrangements to get home, which cost him €700 on top of the cost for his original ticket.

2.4.2. Specific problems of consumers detriment stemming from unclear and outdated rules

As noted above, and although to a lesser extent than the "unprotected" combined travel arrangements, also those buying the "protected" pre-arranged packages suffer detriment.

This is due to the fact that some provisions of the Directive lack clarity, some are outdated or do not meet the reasonable expectations of today's consumers, whilst failing to take due account of legislative developments at EU level in terms of increased consumer protection, for example thanks to passenger rights rules now covering all transport modes.

· Uncertainties in relation to prices

Under the current PTD, businesses are allowed to revise the price of the package due to certain increased costs, including increased fuel prices or changes in the currency exchange rates, although it is possible for businesses to hedge at least against the risk of currency fluctuations. There is no cap for the possible price increase and as a consequence consumers lack certainty in relation to the final price of their package. Consumers may cancel the contract if the price change is significant. However the term "significant change" is open to interpretation. Some Member States have introduced more specific rules. For instance, Italy has introduced a 10% cap, whereas Germany specifies that travellers may cancel the contract if the price increase exceeds 5%. Moreover, while extra costs are practically always passed on to consumers, the PTD does not specify that consumers are entitled to a discount in the event of cost savings.

· Uncertain liability

Divergences in national rules concerning who is the responsible party (organiser, retailer or both) can be detrimental to the consumer as it can be unclear which party is liable for the performance of the contract[71] and has to procure insolvency protection, especially if the package holiday is purchased cross-border or where the retailer and the organiser are established in different Member States or where the organiser is based outside the EU (enforcement against a trader based outside the EU might be difficult). It can lead to situations where the organiser and the retailer refer the consumer to the other party neither of them taking responsibility.

· Lack of a right to termination

Consumers sometimes have a legitimate need to cancel the contract before departure, which is not reflected in the current PTD. For example, today, unless the organizer decided to cancel the trip, consumers cannot unilaterally terminate the contract if they do not wish to embark on a holiday in the event of a serious situation at the place of destination such as a violent conflict, an ecological disaster or a dangerous and contagious disease. Several Member States have introduced a general termination right against compensation (for example BE, CZ, DE, DK, EE, EL, FI, HU, LT, LV, PT, NO), whilst others allow for termination even without compensation in force majeure events (for example in DK, FI)[72]. Therefore, the current rules are unclear, vary considerably across the EU and are not always satisfactory for consumers.

· Uncertainty as to the right to compensation for non-material damages

The Directive does not explicitly state that the consumer has a right to compensation for non-material damage and, in particular, that such compensation can arise from the loss of enjoyment which the consumer has suffered because of improper performance of the travel contract. However, this right was confirmed by the Court in the Simone Leitner-case[73].

· Cumbersome access to justice

European consumer associations have reported that a large number of the complaints received are within the area of travel services. For instance, data provided by the European Consumer Centres (ECCs) show that the most frequent type of consumer complaint, out of the 552 cross-border complaints related to the PTD in 2011, concerns packages not performed at all or not in conformity with the booking.

The current PTD does not set up any contact points for complaints, minimum prescription periods or mechanisms for out of court dispute resolutions, which have been criticized by and called for by various consumer organisations/bodies, e.g. the ECCG opinion of 21 April 2010[74]. It should be noted that following the adoption of the ADR/ODR proposal[75], the PTD would benefit of an extension of ADR procedures in case of conflicts between consumers and businesses.

2.5. Baseline scenario

Without additional public intervention, the problems identified (unfair competition, unnecessary compliance costs, obstacles to cross-border trade, consumer detriment) would remain.

Member States might also take action at local level to protect their citizens by extending their national legislation to cover more types of travel arrangements. For example, the UK extended the bankruptcy protection for "flight plus" travel arrangements in April 2012. This will result in an increased regulatory fragmentation and additional obstacles to cross-border trade.

As consumers get more Internet savvy, they are expected to self-package or purchase combined travel arrangements falling outside the protection of the PTD. As the result, unfair competition between different market players would continue or even increase.

The compliance costs for the industry might decrease along with a lower number of travel arrangements subject to the PTD requirements. However, the consumer detriment would increase as more consumers would be travelling unprotected and buying travel arrangements under the wrong perception that they are protected.

Consumers and businesses would also continue to bear unjustified costs related to outdated and unclear provisions of the Directive.

2.6. Does the Union have the right to act?

The legal basis for EU action is Article 114 of the Treaty, which provides that "the European Parliament and the Council shall […] adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the Internal Market." Furthermore, Article 114 (3) specifies that "the Commission, in its proposals envisaged in paragraph 1 concerning health, safety, environmental protection and consumer protection, will take as a base a high level of protection, taking account in particular of any new development based on scientific facts."

The proposal shall therefore eliminate internal market fragmentation causing obstacles to cross-border trader and distortions of competition, as well as enhance the protection of consumers, taking into account new market developments. This objective cannot be sufficiently achieved by the Member States, given the disparities between national legislations that are the reason for internal market barriers and distortions of competition. If the Member States addressed new market developments as well as regulatory gaps and inconsistencies in EU law in an uncoordinated manner, this would create even more fragmentation in the Internal Market and exacerbate the problem. Moreover, there is currently no EU legislation that can replace the detailed regulations of the existing Package Travel Directive.

3. Policy objectives

In accordance with Article 114 of the Treaty, the overall general objective is to contribute to the better functioning of the Internal Market and achieve a high level of consumer protection

.

General objective 1 Improve the functioning of the Internal Market in the package travel sector. Related specific objectives · Ensure a more competitive and fairer level playing field for the businesses operating in the travel market; · Increase the cross-border offer of package travel services by reducing costs and obstacles to cross-border trade in the package travel market; · Reduce unjustified compliance costs for businesses in the package travel market. Operational objectives Reduce unnecessary cost related to the application of the Directive in the B2B segment · Reduce cost related to outdated information requirements · Lower the costs for companies by clarifying rules on liability between the involved professional parties · Reducing cost for organisers related to double compensation under the PTD and passenger rights · Streamlining the interplay with passenger rights regulations and reduce costs for businesses by including limiting the liability of the organiser in force majeure events. · Decrease costs for businesses in connection with insolvency protection || General objective 2 Achieve a high level of consumer protection in the package travel market Related specific objectives · Reduce consumer detriment and increase transparency for travellers who buy combinations of travel services currently not covered by the PTD by addressing new market developments; · Reduce consumer detriment stemming from unclear and outdated provisions. Operational objectives Increase transparency of information provided to consumers to ensure that they receive correct and complete information when purchasing packages · Clarify rules on liability of the involved professional parties, so that consumers know who is the liable party if something goes wrong when going on a package holiday · Increase certainty in relation to the price of the package by providing a limitation of price increases, · Introduce a possibility for consumers to terminate the contract in certain situations · Codify that consumers can be entitled to non-material damages · Introduce a minimum prescription period for claims for damages and price reduction

4. Policy options

4.1. Identified policy options

Eight policy options have been identified. These options reflect the suggestions made by various stakeholders throughout the consultation process. They include legislative and non-legislative measures, which can be combined to maximise their effectiveness.

· Option 1 – Maintaining the status quo – baseline scenario (PO1)PO1 entails maintaining the PTD in its present form. It is the ‘do-nothing’ baseline against which any potential changes under other policy options and their impacts will be assessed.

· Option 2 – Guidelines (PO2)

Option 2 entails maintaining the PTD in its form and preparing guidelines. These would include CJEU rulings and some clarifications on the scope and on the liabilities, addressing the lack of clarity issues notably outlined in Annex 3, for:

- providing information (pre-contractual, before departure, last minute bookings);

- performing the contract properly;

- providing prompt assistance if the consumer is in difficulty, and

- sufficient evidence for security in the case of insolvency.

Option 2 recognises that certain aspects of the Directive require clarification and may deliver some improvements for stakeholders by providing guidance.

· Option 3 – Introduction of a "Package Travel Label" and/ or requirement for traders to state that the services in question do not constitute a package- so called "This is not a package" disclaimer (add-on option to other policy options) (PO3)

This option covers two sub-options:

Sub-option A entails the introduction of a "Package Travel Label" – an obligatory logotype to be presented to consumers when purchasing a package. Such Package Travel Label would be:

- a mandatory pan-European logotype ;

- aimed at clarifying whether a package is covered or not and which are the key rights of it;

- available in both off-line and on-line transactions;

- backed up by verification and surveillance by national enforcement authorities, and

- introduced as add-on to other policy options and not as a stand-alone measure.

Sub-option B entails the introduction of an obligation for traders, when they are offering combined travel arrangements which are not packages as defined in the PTD, to inform travellers that individual service providers are solely responsible for their contractual performance.

· Option 4 – Repeal of the Directive and self-regulation (PO4)

This option entails a repeal of the current PTD and the adoption of self-regulation by the industry. Self-regulation would include specific information requirements and clarification on the liability for proper performance of the travel contract. This option takes account of the fact that there are several pieces of legislation[76] which, to some extent, apply also to package travel, as well as industry codes of conduct.

· Option 5 – Modernisation of the Directive and coverage of "one trader" packages (PO5)

Option 5 involves a revision of the current PTD in which the main legal structure of the existing Directive is kept, but which includes addressing the problems outlined in section 2 and in Annex 3 (while Annex 4 provides a detailed description and justification for the legislative measures proposed). The table below provides a summary of the proposed policy measures and their correspondence with the identified problems.

DRIVERS OF THE PROBLEM || SPECIFIC PROBLEMS || PROPOSED POLICY MEASURES Measures clarifying existing legal framework are highlighted in black whereas those introducing new measures are highlighted in red

OUTDATED AND UNCLEAR SCOPE OF THE DIRECTIVE || Consumer detriment for users of combined travel arrangements Absence of a level playing field || Modernising the scope to cover "one trader" packages (the Directive would be modernised to cover "one-trader" packages sold online and would clarify that "one-trader" packages sold at high street are legally subject to all PTD requirements).

OUTDATED AND UNCLEAR PROVISIONS resulting in consumer detriment || Uncertainties in relation to prices || -Sub-option 0: status quo i.e. package travel contracts can allow for price increases due to certain increased transportation costs, including increased fuel prices or changes in the taxes or currency exchange rates; -Sub-option 1: introducing a cap of a maximum price increase of 10%; -Sub-option 2: clarifying that consumers have a right to terminate the contract if the price increases more than 5%, while requiring that possible cost decreases have to be passed on to the consumer as well; -Sub-option 3: making prices in the contract binding, except for price increases caused by unforeseeable increase in taxes or fees imposed by third parties for the performance of the services (e.g. tourist taxes or landing/embarking fees).

Uncertain liability || -Sub-option 0: status quo i.e. liability of retailer and/or organiser -Sub-option 1: contractual liability of the seller/retailer; -Sub-option 2: contractual liability of the organiser and joint liability in case the organiser is based outside the EEA; and -Sub-option 3: joint contractual liability of the seller/retailer and the organiser (consumer can seek redress from either of them);

Lack of right to termination || Introduction of termination rights for travellers against compensation and in force majeure cases without compensation

Uncertainty as to the right to compensation for non-material damages. || Clarification of right to compensation for non-material damages.

Cumbersome access to justice || Introduction of a minimum one-year prescription period for claims for damages or price reduction

UTDATED AND UNCLEAR PROVISIONS resulting in unjustified/ unnecessary costs || Outdated information requirements || Pre-contractual information requirements replacing the current mandatory requirements for the content of brochures;

Unjustified costs for package travel organisers in case of delays, cancellations, force majeure events and accidents related to transport || Clarified rules on the possibilities to seek redress from the transport carrier in case of costs related to delays, cancellations, assistance or accidents regulated by the EU Passenger Rights. Consumers would continue to be able to choose whom to seek compensation and assistance from (transport carrier or the organiser of the package).

Clarified rules that travellers do not have a right to double compensation for the same event from a carrier and a package organiser.

Unlimited liability for the travellers' continued stay if the return journey cannot be provided in force-majeure situation || Setting a time limit for the organiser's obligation to ensure accommodation for the continued stay (e.g. for maximum 3-4 days).

Duplication of protection for business trips || Exclusion from the scope of business trips organised by TMCs.

Legal discrepancies leading to costs and obstacles to cross border trade (different scope, different information requirements, different rules concerning liabilities) || Increased harmonisation of rules concerning the scope of the Directive, information requirements, liabilities and obligations of the contractual parties

Divergent insolvency protection schemes and lack of mutual recognition || Flexibility of Member States as to the method of providing insolvency protection, whilst adding explicit rules on the effectiveness of the national insolvency protection scheme and, the mutual recognition of security provided under the law of the Member State of establishment.

· Option 6 – Graduated approach- modernisation of the Directive and coverage of both "one trader" and "multi trader" packages while applying a lighter regime to "multi-trader" assisted travel arrangements (PO6)

This option includes Option 5 (all proposed policy measures) supplemented with an extension of the scope of the PTD with a graduated approach:

- "multi-trader" packages would be subject to the same regime as pre-arranged packages (including full liability for the performance of the package and the obligation to procure insolvency protection),

-"multi-trader" assisted travel arrangements do not display typical features of a package and are hence less likely to mislead consumers. They would be subject to a lighter regime, limited to insolvency protection and an obligation to state in a clear and prominent manner that each service provider will be solely contractually responsible for the performance of its service(s) (policy option 3B).

As mentioned above, in case of "multi-trader" travel arrangements, the different components of the trip are purchased from different traders, often under legally distinct contracts and as a consequence the distinction between seller and organiser is often blurred. Therefore the following sub-options concerning the liabilities are considered:

Sub-option 1: the liability is placed on a single provider (a trader selling the first component who links to facilitate the purchase of the other components) who would be considered as an "organiser";

Sub-option 2: liability is placed on each involved provider for the service segment they offer;

Sub-option 3: joint liability of all traders unless the parties designate only one trader to be liable.

· Option 7 – Modernisation of the Directive and coverage of both "one trader" packages and all "multi-trader" travel arrangements (PO7)

This option includes PO 5 and 6 whilst subjecting also all "multi-trader" assisted travel arrangements to all PTD requirements. This means that all obligations and liabilities also would apply to "multi-trader" assisted travel arrangements. Annex 4 provides a detailed description and justification for the legislative measures proposed in Options 5 and 6, based on the results of the public consultation.

· Option 8 – “Travel Directive” (PO8)

This option includes Option 7 supplemented with an extension of the scope also to all independent travel arrangements (stand-alone individual travel services, e.g. car rental, accommodation or flight tickets). The market of independent travel arrangements accounts for 54% of all trips (about 277 Million trips annually). This option would in principle apply the same set of rules to all travel services irrespective of whether the product is offered/purchased as part of a package or as a stand-alone product.

The proposed legislative policy options (PO5-PO8) are based on strengthened targeted harmonisation. The aspects which require leaving flexibility to Member States include prescription periods and method of insolvency protection.

For these provisions the minimum harmonisation is proposed while other provisions are based on maximum harmonisation.

4.2. Discarded policy options

The Impact Assessment does not consider a regulation since a directive allows the Member States a margin of manoeuvre when incorporating the contractual rules in their national contract law system. A regulation would not allow for such flexibility and could therefore badly interplay with national contract laws in the Member States

4.2.1. Option 8 “Travel Directive”

PO8 is discarded because the majority of the most common consumer problems with independent travel arrangements can, provided that appropriate enforcement exists at national level, be successfully dealt with in the framework of existing rules such as national contract law, the Unfair Contract Terms Directive, the Unfair Commercial Practices Directive, the Consumer Rights Directives well as the Regulations in the area of Passenger Rights. In contrast to complex and atypical contractual relationship in case of packages, the contracts for independent travel arrangements do not involve several service providers which identity if often unknown to consumer. Therefore, such contracts can be more easily managed by consumers in case of any problems. Moreover, this option would entail additional costs for the industry, in particular for SMEs. These additional costs would most likely result in unjustifiable higher prices for consumers.

5. Assessment of Impacts

This section presents the most relevant impacts of each of the policy options on key target audiences, i.e. consumers, businesses and MS authorities, in the form of a cost/benefit analysis. All the impact of each policy options will be assessed against the baseline scenario(BS). The estimate of the BS compliance and administrative costs, provided in section 2, will therefore be used to assess the impact of the policy options redefining the scope of the PTD (PO5, PO6 and PO7). The detailed analyses of all the impacts are presented in Annex 5.

5.1. Assessment of Option 2 - Guidelines and Better Enforcement of Existing Legislation (PO2)

Meeting the objectives: this option would only very partially meet the policy objectives. Indeed, unfair competition between different market players is likely to continue. The regulatory fragmentation would remain. By clarifying the current rules, this option may however lead to a certain reduction of detriment as the result of better implementation of the PTD by businesses and Member States. However, as guidelines per definition are not a binding tool, these benefits would depend on their actual use by national authorities.

Economic impacts

Compliance costs for businesses: There should be no overall change in costs incurred by industry as a result of guidelines being issued, as they would relate to clarifications of the existing PTD rules.

Administrative costs for businesses: Similarly to compliance costs, there would be no overall change in administrative costs incurred by businesses as a result of guidelines.

Impact on SMEs: very little change compared to the BS.

Competition in the Internal Market: A clarification of some of the definitions in the PTD could, in theory and to some extent, lead to a clearer segmentation between travel arrangements which are covered or not covered by the PTD and, thereby, lead to somewhat fairer competition. However, confusion might remain in particular in the area of "multi-trader" travel arrangements and also for online "one-trader" packages.

Impact on consumers: Consumers may gain some clarity and may also be better protected due to better implementation and enforcement of the PTD. However, some of the loopholes stemming from the content of the PTD provisions would remain (e.g. lack of minimum prescription period to claim damages in cross-border situations).

Impact on EU budget: no change compared to the BS

Impact on competitiveness: no change compared to the BS

Impact on public authorities: no change compared to the BS.

Social impacts: no change compared to the BS

Impact on fundamental rights: no change compared to the BS as the guidelines are not legally binding.

Environmental impacts: no change compared to the BS

Stakeholders' views: Issuing guidance was supported by the minority of stakeholders. Only 28% of companies, 32% of business organisations and 11% of consumer organisations were in favour in issuing the guidance.

Distribution of impacts by Member States: All Member States will be equally impacted by this PO.

5.2. Assessment of Option 3 – Introduction of a "Package Travel Label" (PO3A) and/ or "This is not a package" disclaimer (PO3 B)- add-on option to other policy options

5.2.1. Sub-option A: Package Travel Label

Meeting the objectives: this option would only partially meet the policy objectives.

Indeed, the label could reduce consumer detriment by enabling consumers to take better informed decisions and it could result in fairer competition among the different market players. However, the expected amount of consumer detriment reduction would not off-set costs incurred by businesses for the implementation of the label.

Economic impacts

Compliance costs for businesses: Companies selling packages would need to get familiar with new information requirements and adapt their web-pages and promotional materials to display the Package Travel Label. The average one-off cost for adapting a company's website and /or printed materials has been estimated at €500[77]. These costs would potentially affect 72,000 companies selling packages at present with the overall one-off costs amounting to €36 million. As this is an add-on option, the final costs would depend on the policy option chosen.

Administrative costs for businesses: Administrative costs coincide with compliance costs, see Annex 6.

Impact on SMEs: SMEs would absorb most of the costs in absolute values. However these costs are one-off and relatively small.

Competition in the Internal Market: Competition may become fairer, as the label would help to distinguish packages which are inside or outside of the scope of the Directive.

Impact on consumers: The impact of a label is expected to be relatively small. Indeed, data coming from the 2012 behavioural study dedicated to the introduction of a "package travel label" show that only 3.1% of consumers would click on the label to find out more about their rights. However, out of those who clicked on the logo, 80% felt knowledgeable about their rights. Also those who noticed the logo but did not click on it felt better informed. It is estimated that detriment would decrease by about € 3 million every year (see details in Annex 5). As the compliance costs related to the introduction of the logo are one-off, no price increases for consumers are expected.

Impact on public authorities: MS would be responsible for the enforcement of the rules.

Impact on EU budget:, the European Commission would have to ensure to have the copyright on the logo and its registration as a trade mark. This would represent a small cost for the institution of the order of a few thousand Euros.

Social impacts: This option is not expected to have specific and significant impacts on employment.

Impact on fundamental rights: This option would result in slightly higher consumer protection in Europe in the area of package travel and, hence, is likely to have a positive impact on the rights protected by the EU Charter of Fundamental Rights, notably and foremost Article 38 on consumer protection. Article 16 on the freedom to conduct business would on the contrary be somewhat negatively impacted, as the expected small consumer benefits would most likely not compensate the significantly higher costs this option would create for businesses.

Environmental impacts: No environmental impacts are expected.

Simplification potential: no impact

Stakeholders' views: MS Authorities highly ranked the effectiveness of the label in terms of greater clarity for consumers. However, most of consumer and business organisations were sceptical about the benefits of the label if it is not accompanied by an awareness raising campaign and quality control procedures.

Distribution of impacts by Member States: Member States with the highest share of consumers buying traditional packages (i.e. UK, MT, NL) are likely to be impacted more. As this is an add-on option, the distribution of impacts will depend on the preferred policy option.

5.2.2. Sub-option B: "This is not a package" disclaimer

Economic impacts

Compliance costs for businesses: Mainly companies selling on-line "one-trader" packages and "multi-trader" travel arrangements are likely to be affected by this option. Travel service providers (e.g. hotels, car rental companies, airlines, and other transport carriers) marketing their services on the Internet and providing links to other websites would have to adapt their websites to display a clear disclaimer stating that the product is not a package. Similarly as for the Sub-option A, the average one-off cost for adapting a company's website has been estimated at €500[78]. As this is an add-on option, the total cost could amount to maximum €34.5 million depending on the policy option chosen[79].

Administrative costs for businesses: Administrative costs coincide here with compliance costs, see Annex 6.

Impact on SMEs: SMEs would absorb most of the costs. The impact would be however limited as these are one-off and small costs.

Competition in the Internal Market: the same impact as Sub-option A

Impact on consumers: As the costs related to the introduction of the disclaimer are one-off, companies would rather quickly absorb them and consumers would hence benefit from more transparency and clearer information at virtually no additional cost.

The reduction of consumer detriment is expected to be higher than under Sub-option A (Package Travel Label) as a negative information would warn consumers who otherwise might purchase unprotected travel under the wrong impression that it is protected (as already indicated this is the currently case for 67% of users of combined travel arrangements).

Impact on public authorities: the same impact as Sub-option A

Impact on EU budget: no impact

Social impacts: the same impact as Sub-option A

Impact on fundamental rights: the same impact as Sub-option A

Environmental impacts: the same impact as Sub-option A

Stakeholders' views: All stakeholders underlined the importance of the transparency on the market i.e. clear information for consumers whether they are buying a "non-protected" travel.

Simplification potential: no impact

Distribution of impacts by Member States: IR, SE, IT and SL where the share of consumers buying combined travel arrangements is significantly above the EU average (Annex 2, Figure 5) and UK, DE and FR which are the biggest online travel markets (Annex2, Figure 3) are likely to be the most impacted by the additional compliance costs linked with the introduction of the "This is not a package" disclaimer.

5.3. Assessment of Option 4 – Repeal of the Directive

Meeting the objectives: In theory, this option could ensure a more competitive and fairer level playing field and reduce unjustified costs for businesses.

However, deregulation at EU level would most likely increase legal fragmentation, since MS would be able to maintain and create rules in an uncoordinated manner. This would be harmful to the Internal Market.

In case of the repeal of EU legislation, the number of unprotected consumers and an amount of consumer detriment would increase.

Economic impacts

Compliance costs for businesses: The repeal of the Directive might result in decreased compliance costs for businesses of up to €10.5-€12.5 per package. However, the cost savings for businesses would depend entirely on the willingness of MS to repeal their national legislation protecting consumers. It is likely that many MS would maintain and further develop their legislation in this area.

Administrative costs for businesses: Similarly to compliance costs, this PO might result in lower administrative costs for businesses of up to €409 million depending on the number of MS that decide to repeal their national legislation (the remaining baseline administrative costs are considered business as usual).

Competition in the Internal Market: This option might increase legal fragmentation within the Internal Market since MS would be able to maintain and create rules in an uncoordinated manner.

Impact on SMEs: The repeal of the Directive might in theory lead to fairer competition since nobody ( and hence also no SMEs) would be any longer subject to the EU package travel requirements and the related compliance costs, provided however that all MS would be ready to repeal their own national legislation in this area.

Impact on businesses from third countries: this option could in theory facilitate organisers outside the EU to sell packages in the EU as they would not have to comply with the PTD requirements. However, as it is likely that MS decides to keep their national rules, the organisers outside the EU will have to comply with national rules of each MS they sell packages to.

Impact on consumers: The repeal of the Directive is likely to increase gross consumer detriment (estimated at more than €159 million annually for traditional packages and more than €1 billion for combined travel arrangements every year). In theory, a lower cost burden for industry could lead to lower end-prices to the consumer. The average price per package could go down by about €10.5-€12.5, but only if MS decided to repeal their national legislation.

Impact on public authorities: MS would be free to decide whether to maintain their national legislation unchanged, repeal their national legislation or update their legislation. If legislation is repealed, consumers being stranded when on holiday due to the insolvency of the tour organiser might more often turn to embassies to receive necessary assistance and financial support to be repatriated.

Impact on EU budget: no impact.

Impact on competitiveness: See Annex 7 for detailed analysis. Quantifications are presented in this report under the other economic impacts.

Social impacts: Only small social impacts expected. For instance, consumers being stranded due to the insolvency of the tour organiser would not receive the necessary assistance and financial support to be repatriated, thus possibly causing delays to their professional activities.

Impact on fundamental rights: This option would result in lower consumer protection in Europe in the area of package travel and, would hence have a negative impact on the rights protected by the EU Charter of Fundamental Rights, notably and foremost Article 38 on consumer protection. Article 16 on the freedom to conduct business might positively be impacted, depending on the number of MS which would repeal their national legislation.

Environmental impacts: Businesses would not be required to re-print brochures as a result of the PTD and its indirect effect in practice (see section 2)

Simplification potential: Deregulation could result in simplification of the legal framework for businesses. However, the impact will depend on MS actions that might revise their legislation leading to more fragmentation with reverse effect on simplification.

Distribution of impacts by Member States: All MS will be equally impacted by the Repeal of the Directive.

5.4. Assessment of Option 5 – Modernisation of the Directive and coverage of "one trader" packages (PO5)

Meeting the objectives: This option meets well the policy objectives, both improving the Internal Market functioning and achieving a high level of consumer protection. Indeed, it would eliminate legal fragmentation and provide for a more level playing field for operators. As more packages would be brought under the scope of the PTD (this option would cover about 40% of all holiday trips) and certain rules would be clarified, the consumer detriment would decrease.

Economic impacts

Compliance costs for businesses: In some MS, national legislation already covers some online "one-trader" packages (e.g. DE and partly SE) and some large operators based in these countries may be assumed to already comply with package travel requirements across all countries in which they operate. However, it cannot be assumed that even in those MS all traders selling "one-trader" packages online comply, in practice, with all PTD-requirements, including the bankruptcy protection. The results of the Consumer Detriment Study suggest that at least 50% of these travel arrangements are sold at high street travel agents' and thus in most of the cases are already subject to the PTD. It is therefore assumed that 50% of "one-trader" packages that are currently not covered would now be covered. Hence, approximately 44 million “one-trader” holiday packages and 1 million B2B trips would be brought under the scope of the PTD, while 8 million of "one-trader" B2B trips organised by TMCs would be excluded from the scope of the PTD.

The following table presents the impact of Option 5 (PO5) on costs of companies (detailed calculations are provided in Annex 5)

Savings on costs || Monetised values

Administrative costs- elimination of the brochure requirement (only big companies, currently under the scope of the PTD can benefit) || €390 million euro annually[80] (almost €3 euro per package)

Exclusion of business trips organised by TMC (only companies currently under the scope of the PTD can benefit) || - €60-€76 million euro annually -€9.5 – 10.5 per package[81]

Elimination of differences in provisions hampering cross-border trade (Only companies trading cross-border can benefit) || €5 million annually

Clarified rules on possibilities of redress for package travel organisers from transport carriers in case of costs related to delays, cancellations, assistance or accidents regulated by the EU Regulations on passenger rights || Not possible to quantify

The introduction of a limitation (in days) to provide alternative arrangements in case of long lasting force majeure events || Not possible to quantify

Improved mutual recognition of insolvency funds and improved competition between insolvency schemes. Businesses might seek to subscribe to the most efficient scheme. || Not possible to quantify

New costs ||

Bringing new travel arrangements in the scope || €335-€424 million annually -€7.5 - €9.5 per package

The overall impact on the industry would be a benefit of €42-€115 million annually (low €7.5 and high €9.5 estimate of compliance costs per package).

Impact on SMEs: Mainly SMEs selling on-line "one-trader" packages brought under the scope of the PTD (and which currently have been treated as to be outside the scope) would incur increased compliance costs. Those costs would amount to a maximum of €7.5 - €9.5 plus €0.15 of administrative costs per package. Most SMEs which are selling "one-trader" packages at high street (bricks and mortar travel agencies) are already subject to all the PTD requirements, even though these rules are not always properly enforced. The additional costs would therefore affect mostly online sellers of these travel arrangements. SMEs would also benefit from increased harmonisation and clarity of rules across the EU as they would be able to rely on one set of rules across the EU.

Micro-enterprises account for 92% of all travel agencies and tour operators (79,000 companies). The exclusion of micro and small businesses from the scope of the Directive would not be therefore a viable option. Firstly, it would result in unfair competition between businesses selling competing products whilst having different regulatory regimes and hence facing uneven compliance costs. Secondly, it would significantly increase consumer detriment, as consumers would not be able to easily determine the rights they enjoy, as these would depend on the size of the business they are purchasing from. Overall, excluding or applying a lighter regime for small and/or micro enterprises would be contrary to the objectives of the revision process, i.e. achieving a high level of consumer protection and improving the functioning of the Internal Market[82].

Competition in the Internal Market: Businesses would benefit from a fairer level playing. Competition is likely to improve as a result of the harmonisation of legislation (and the ensuing reduction in obstacles to trade).

Impact on businesses from third countries: this option would facilitate organisers outside the EU to sell packages in the EU as they would have to comply with the same requirements in all MS. Organisers outside the EU selling packages to consumers in the EU, will face the same obligations as the EU organisers i.e. they would face an increase of costs for packages newly brought under the scope of the Directive.

Impact on consumers: PO5 would reduce the detriment associated with "one-trader" packages, especially in the on-line environment. Indeed, also these package travellers would be entitled to refunds of advance payments and repatriation in the event of insolvency, redress in the event of non-performance of contracts and spend less time and effort in seeking compensation. It could be assumed that the detriment per package and incidence of problems for "one-trader" packages brought under the scope of the Directive would be the same as for pre-arranged packages. The estimated reduction of consumer detriment would be therefore up to 88%[83], i.e. the baseline level of detriment associated with combined travel arrangements would decrease.by €348 million assuming that 50% of one-trader packages are newly brought under the scope of the PTD.[84] For detailed calculations see Annex 5. Some consumers may experience an increase in the price of “one-trader” travel arrangements, up to € 9.5, as businesses may pass on to them the increased compliance costs. This impact will depend on supply and demand elasticity, but in any case this is likely to be less than 2% of the total price of the package and broadly comparable with the cost of obtaining commercial travel insurance and, as such, unlikely to be detrimental to consumers. In a competitive market, price increases on the end product tend to get minimised to the possible extent.

Impact on public authorities: all MS would be affected, as this option would require some changes in the domestic legislation. MS would bear the usual cost which accompanies the implementation of EU legislation.

Impact on EU budget: no impact, the European Commission would bear the usual cost which accompanies the implementation of new EU legislation.

Impact on competitiveness: More competition is expected in the sector, due to the increased level playing field. See Annex 7 for detailed analysis. Quantifications are presented in this report under the other economic impacts.

Social impacts: Businesses selling "one-trader" packages would incur additional costs, however as these costs will be passed on consumers, they are not expected to have any negative effect on employment. In the longer term, as business models would adjust, there would be more transparency and more competition that might lead to job creation.

Impact on fundamental rights: This option would ensure a high level of consumer protection in areas which are currently unregulated by EU legislation. It fully complies with the provisions of the EU Charter of Fundamental Rights, notably and foremost Article 38 on consumer protection. Article 16 on freedom to conduct business would not be significantly impacted since, even if there would be higher compliance costs, there would also be a significant reduction in administrative burden.

Environmental impacts: The main effects of this policy options would relate to the printing of brochures as undesirable environmental impacts linked to it would no longer occur.

Stakeholders' views: The inclusion of "one-trader" packages was supported by the overwhelming majority of stakeholders in the public consultation (93% of MS' authorities, 78% of industry associations, 64% of businesses and 96% of consumer organisations).

Simplification potential: For businesses, this option would simplify the regulatory environment, eliminating the need to research of different national laws. Moreover, this option would simplify some of the current unclear provisions of the Directive, in particular rules on liabilities and streamline the information requirements.

Distribution of impacts by MS: FR will be the MS that probably will be the most impacted regarding rules on liability. In several other respects, such as regards the insolvency protection, FR will be less impacted. In this area, for instance, the UK will be significantly impacted, since the UK will have to amend their recently adopted rules which extend their insolvency protection scheme also to cover the so called "Flight-Plus packages".

IR, SE, IT and SL where the share of consumers buying combined travel arrangements is significantly above the EU average (Annex 2, Figure 5) and the UK, DE and FR which are the biggest online travel markets (Annex2, Figure 3).

These countries are therefore likely to be the most impacted by the additional compliance costs stemming from extension of the scope of the Directive.

Assessment of sub-options

· Sub-options concerning the liability for proper performance of the contract

The results of the public consultation about who should be responsible for the proper performance of the contract are widely divided. The largest number of respondents favoured the package organiser as the liable party or joint liability.

Based on the assessment (see annex 5 for details), sub-option placing the liability on the organiser is the preferred solution as it is the least burdensome for businesses while providing for sufficient protection of consumes. Only in one MS (FR) there would be a shift of liability from retailers to organisers.

· Sub-options concerning the revision of prices following the signature of the contract

Industry stakeholders argue that the existing rules on price revisions should be maintained, while consumer organisations say that there is a need for increased foreseeability of expenses and that the current possibilities of price revisions should be abolished.

Sub-option 1 (maximum increase capped at 10%) and sub-option 2 (price increase above 5% giving the right to cancel the contract) are less costly for businesses while safeguarding consumer interests.

The preferred measure could be therefore one of these sub-options or a combination thereof.

See annex 5 for detailed assessment.

Impacts of other substantive provisions

Substantive provision || MS impacted || Impact of the provision

Introduction of termination rights for travellers against compensation, as well as without compensation for force majeure events || All MS would be impacted, but less impact in MS such as CZ, DE, BE, DK, EE, EL, FI, HU, LT, LV, PT and ES where variations of such termination rights already exist. || In serious unavoidable and extraordinary situations (force majeure cases), the majority of businesses act reasonably and, in order to maintain their reputation, cancel trips themselves. However, organisers and travellers might have different opinions as to the implications of extraordinary situations for the trip Consumers would benefit from gaining the right to cancel holiday in the event of a force majeure situation, such as for example the outbreak of violent conflict or an ecological disaster, even if the organiser refuses to do so. This may result in some increase of compliance costs for businesses. If a termination right against compensation is introduced, consumers would be able to terminate the contract at any time paying a fee to businesses. If the fee is proportionate, businesses would face a very limited impact as the compensation paid by consumers is supposed to cover these costs.

Clarification of right to compensation for non-material damages || All MS except for AT, BE and EE that already explicitly provide for compensation for loss of enjoyment. || The consumer would be entitled to compensation for both material and non-material (moral) damages (e.g. loss of holiday enjoyment) in cases of non-performance or improper performance of the contract. For businesses the clarification should not bring significant costs, since this is an existing possibility, although not often used by consumers.

Flexibility of MS as to the method of providing insolvency protection whilst adding explicit rules on the effectiveness of the national insolvency protection schemes, the mutual recognition of security provided under the law of the MS of establishment, as requesting the well as establishment of central contact points (minimum harmonisation rule). || Limited effect on Member States. They will have to establish central contact points to facilitate the mutual recognition. || No additional compliance costs for companies. Businesses would benefit from mutual recognition of schemes across the EU, as increased competition among funds in the internal market is likely to drop the insurance costs. Businesses offering services cross-border would particularly benefit from reduced costs through mutual recognition as they would not need to provide the insolvency protection in each MS they operate. Consumers would get access to more offers at competitive prices.

Reinforced rules on the possibilities to seek redress from the transport carrier in case of costs related to delays, cancellations, assistance or accidents regulated by the EU Passenger Rights. Consumers would continue to be able to choose whom to seek compensation and assistance from (transport carrier or the organiser of the package). || All Member States || Package travel organisers could have some savings as it would be easier for them to recuperate at least part of the compensation paid to travellers in case of delays, cancellations, assistance or accidents regulated by the EU Passenger Rights. The extent of this saving is however unknown as two of these Regulations[85] have only recently entered into force and the APR is currently under review. At present, the possibility of seeking redress often depends on the specific arrangements between two business parties[86].

The liability of the organiser to provide alternative arrangements for the continuation of the package in case of force majeure events would be limited (e. g. to a maximum number of three or four days). This provision would reflect the rules set out in EU Passenger Rights Regulations. || This would require legislative amendments in all Member States. || Compared to the legal situation today, this would mainly result in a cost reduction for organisers[87]. Consumers would in most instances not be significantly affected, but would incur increased detriment in situations where it is not possible for the traveller to return immediately to the place of destination within four days after the return. It can also be expected that such a cap on the liability to provide assistance would make it easier for organisers to insure this risk.

Introduction of minimum one year prescription period for claims for damages or price reduction (minimum harmonisation rule). || Member States will not be affected by such a minimum requirement || Overall, this provision would bring slightly increased legal certainty for consumers, but since most Member States already have at least one year prescription periods, no major cost or impacts are expected.

5.5 Assessment of Option 6 - Graduated approach- modernisation of the Directive and coverage of both "one trader" and "multi trader" packages while applying a lighter regime to "multi-trader" assisted travel arrangements (PO6)

Meeting the objectives: Compared to PO5, this option would further contribute to the better functioning of the Internal Market in the package travel sector, eliminating legal fragmentation and levelling the playing field for operators. Making "multi-trader" assisted travel arrangements sub