While reading this article concerning the German Travel Contracts Act and the relevant Consumer Protection issues, kindly note that I am not a professional Legal Eagle – my views are the result of “donkey’s years” of hands-on experience in circumventing detrimental European Union trade barriers, and is presented as an unbiased and (hopefully) understandable background to information concerning these tricky regulations, writes Reinhart Mecklenburg.
Is there any obligation for S. A. firms to accept German Law?
As a tour operator, hotel or lodge owner based in Southern Africa, obviously YOUR rules and regulations apply. There is absolutely no obligation on you to accept the terms and conditions pertaining to a foreign country’s law. Your services are rendered in Southern Africa and they are under the jurisdiction of YOUR country’s Law. The only time where I doubt that you can bank on your local law, is when you contract out of negligence. I guess Common Law Rights would apply in case of a dispute. Having said that, please appreciate that the foreign tour operator that markets your product abroad has to adhere to the rules and regulations that are applicable in the country where their business is registered. And should you believe that the often quoted EU directive number 90/314/EWG dated 13thJuly 1990 has been implemented in all EU member states, I have to disappoint you – implementation of the EU directive (not law, mind you), is totally different between Helsinki and Palermo. The implementation of EU-wide Cancellation & No Show Fee regulations pertaining to package tours has been left to the individual. EU member countries EU Quote: Member States should be at liberty to adopt, or retain, more stringent provisions relating to package travel for the purpose ofprotecting the consumer. Unquote. Germany has chosen the “more stringent provisions”.
Your Mediating Clause is verboten in Europe
One matter, however, on which all EU member countries – plus Switzerland – seem to have agreed upon, is the fact that no tour operator or travel agent may hide behind the mediating clause, e.g.:
“We are not responsible for “this and that”, and our arrangements are subject to the conditions imposed on us by the relevant third parties, acting as our agents.”
In EU-land: The party that collects the money from the consumer is responsible.
Terms & Conditions in Tour catalogues are regulated by Civil Law
Our powerful consumer protection organisations always insist on the maximum advantage for the end user. In Germany, advertising is regulated within two systems: statutory rules and self-regulatory codes. The codes mainly cover questions of taste and decency and some specific types of advertising, e. g. aiming at children, concerning alcohol and car advertising, and are dealt with by the German Advertising Council (Deutscher Werberat). Other matters, such as misleading statements, sales promotions, prize competitions, unfair marketing practices, price labelling and shop opening hours are regulated by law. Consequently the “terms & conditions” published by German tour operators are indeed regulated by Civil Law. (Not EU)
Meet the “Centre for Protection against Unfair Competition”
The most important law concerning advertising is the Act against Unfair Competition (Gesetzgegen den unlauteren Wettbewerb). It is part of civil law. Accordingly competitors, certain trade associations, chambers of commerce and consumer associations are authorised to enforce statutory law if competition rules are infringed. The most acrimonious institution which has a formal, i.e. judicially authorised, right to initiate legal action against those who infringe laws concerning unfair competition is the Centre for Protection against Unfair Competition. And that’s the very organisation that presently donners the poor German tour operators and travel agents!
Consumer protection organisations have ruled that it is against the law when a tour operator publishes a late cancellation/no show fee of 100%. Allegedly even though the terms & conditions specifically say that such a tough cancellation fee is exceptional, and only applicable to certain named lodges, trains, and government rest camps – who in turn – impose such a regulation on the tour operator. In fact that particular rule has existed for many years and most German tour operators are adhering to it. Most – definitely not all!
Some operators – especially scheduled group tour operators – may have concluded special deals with their African suppliers and are able to publish late cancellation fees ( = 7 days to No Show) of as low as 60% of the tour price. However, some large operators and numerous smaller boutique-like destination specialists without any in-house legal departments fall short of adhering to the law – by mistake and not by purpose. Now many of them have to face costly official warnings (Abmahnungen) from the Centre for Protection against Unfair Competition. Why, you may ask, does the Centre for Protection, etc. concentrate so much on our sunshine trade? I am not sure. Perhaps the present recession leads to a much rougher business climate and some operator predators try to intimidate their competitor(s) by launching complaints with the consumer protection associations?
A very expensive experience
A German tour operator that gets caught has to pay the “admin” penalty immediately, sign and return a cease and desist document (Unterlassungserklärung), and delete/amend all “faulty” text copies in his catalogues and website presentations forthwith. Should the inspectors find a catalogue or a website that has not been amended as ordered, the tour operator has to pay a further penalty of 4.000 Euro. The problem is that the guns seem to be directed against the travel trade right now. It is the most critical time of the year, because all the brand new catalogues are being launched. It could well be that hundreds of thousands of allegedly “illegal” tour catalogues have to be destroyed and reprinted with the correct wording. Thinking of it: Perhaps it’s the ailing printing industry that is behind the present wave of accusations?
The tour operator’s right to cancel a tour due to lack of sufficient participation
Official warnings have recently been served on several tour operator colleagues who omitted to inform the consumer of their detailed minimum participation conditions. It is NOT sufficient to state on the “General Terms & Conditions” pages – mostly in the back section of a brochure – that the tour operator reserves the right to cancel a tour 25 days prior to departure if the required minimum number of XYZ pax has not been achieved by that date. Instead a detailed explanation has to appear on the very page (print as well as web) where itinerary & price are shown. Even well established tour operators fail to provide this information in their catalogues. The risk of being punished by the Centre for Protection against Unfair Competition is extremely high.
In terms of German Civil Law the consumer enters into a contract with his tour operator – not with the retail travel agent where he books the tour, and certainly not with you as the service supplier in Southern Africa. Even if a German guest signs one of those famous “we are not responsible for” forms at a safari lodge, such a document has no legal consequence in terms of the customer’s rights back home. His “contract of carriage” has been entered into with his German tour operator. In the event that a package tour tourist who claims that he/she was not properly informed by his/her German tour operator that dangerous animals may walk around the swimming pool area, he/she can sue his tour operator in the event that his/her hairy leg has been bitten off by a hyena.
So what’s all the fuss about that German Travel Law?
Basically the “German Travel Contracts Act” (Reisevertragsrecht) is a set of very stringent regulations protecting the tourist against problems that may arise on a package holiday. I underline the word “package”, because in the event of a consumer booking a service directly with you, no German consumer protection law applies. Also of importance is the definition of a package holiday: Any two services (like airline and hotel) sold to a customer at a combined tour price is regarded as “package tour”. The trick of issuing two separate invoices – one for the land arrangement and one for the air ticket has been tried a lot – no chance! And if an over enthusiastic retail agent still dares to put a package tour together he/she is liable to a fine of € 10.000. On top of that the poor guy is fully liable for any problem that might happen on tour.
Anyone with a PC and a 220V power supply can start a tour operating business
Only registered tour operators are permitted to market and sell packages. “Registered” means that a would-be tour operator only has to show proof of a valid insolvency insurance. In contrast to the UK, where registered (ATOL) operators have to cough up an expensive bond guarantee, any German based Tom, Dick, Fritz & Abdul can open a tour operating business over night. No experience needed, no Pty Limited (GmbH) registration needed and no bond required. Just a valid insolvency insurance – that’s basically it. For low volume and ad hoc operators, insolvency insurance cover is available at about €400 premium per year. In Germany we are light years behind the British Bonding System. So – admittedly – there is some plausible justification for the activities of the Watchdog Association. In fact they also check whether shower lotions contain cancer causing chemicals, and whether the dosage of urine in a public pool is above the permitted limit. In all fairness – let’s accord them their raison d’etre.
Again: Does this law affect Southern African Suppliers?
From a legal point of view: Not at all! But be aware: From a German tour operator’s point of view it means that he will choose his African partners very carefully indeed. The guys will ask you for your third party and passenger liability insurance, check whether your cars/buses have permits to carry fare paying passengers, that driving hours without regulated rests for the driver are not exceeded and if your fire extinguisher has been regularly serviced. Accommodation establishments will need to ensure that their public liability insurance covers them adequately against claims resulting from faulty equipment, slippery pool surfaces, food contamination, noise, flooding, electrical failure etc. As mentioned before: The convenient mediating clause is illegal. Hence the German tour operator is fully responsible for the services rendered by his partners and their subcontractors in Southern Africa.
No wonder that most German tour operators prefer to cooperate with partners who are aware of Germany’s tough legal requirements and whose terms & conditions are as compatible as possible with the rules and regulations in the source market.
True: It’s not the number one selection criteria, but it certainly disadvantages a supplier that sticks to his 100% cancellation charge strategy, whilst his competitor offers more relaxed cancellation conditions.
Cancellation and No Show Charges
The most commonly used terms are shown below. They also apply for “critical”* Game Reserves, Safari Lodges, Fly-In Safaris and Luxury Train Operators. As a waterproof industry example the following scale of charges has been taken from the DERTOUR Africa catalogue
- until 45 days before departure 15% of the tour price
- 44 to 30 days before departure 25% of the tour price
- 29 to 22 days before departure 50% of the tour price
- from 21 to 0 days before departure 80% of the tour price.
*The majority of what I have termed “critical suppliers” usually insist on a 100% late cancellation and/or No Show fee. Well informed DMC’s are familiar with the German consumer protection laws. They can, of course, successfully convince such “critical suppliers” to restructure their conditions in accordance with the market requirements at the point of purchase.
Clever clogs can get away with peanuts
If a clever clog tourist proves to his German tour operator that the seat (bed) which he/she cancelled at short notice was sold by you to another person, he/she can get away with a tiny handling fee instead of a fixed cancellation fee. Law and justice aren’t the sam!
Of course there are loopholes and exceptions to the rules
For example if a tour operator proves beyond doubt that his admin and other charges have been higher than above “averages”, he can charge more. He has to mention this clause in his terms, of course. However, this is a terribly time consuming nuisance and tour operators try to avoid this at all costs. The law maintains that any published tour price is inflated by 25% to 30% for profit and commission payments – and those two ingredients are not accepted as “cost items”. The law makers ignored the fact that a cancelled pax has incurred as much in marketing costs, working time and processing costs, perhaps even more, than a “regular” client. Believe me: Every one hates cancellations and no one aims at making an unfair profit from this. In any case: Most long haul travellers take out a cancellation insurance. So the whole issue isn’t really such a big deal after all.
OK then: 100% Cancellation Charges are illegal in Germany. But where do you actually draw the line: 99%, 97%, 95%, 93%, 91%? One of Germany’s most respected lawyers – specialised on the travel law – claims that everything above 90% is subject to legal interference from the Centre for Protection against Unfair Competition. And he added: “Don’t be silly and provoke these guys by publishing anything higher than 90%.” In any case, our debate isn’t really about “how many percent”, but rather about a reasonable “Win-Win” compromise, tailored to the specific needs of the relevant tour operator. Group tour operators and Incentive organisers certainly have different priorities to FIT specialists.
In general a tour operator is not permitted to charge more than 20% of the tour price at the time of booking, provided the date of travel is further away than approximately 1 month. In case of a booking between 30 days and 1 day prior to departure, he can usually charge 100% of the tour price. Payments for package travel made by a consumer in a retail travel agency, normally goes directly to the tour operator and NOT to the retail agent (who might go bankrupt after cashing in!). Hence the good old days, when retail travel agents lived off the “transit cash flow” are gone! They normally claim their commission in the month after the departure date.
Alterations and amendments
In essence there is NO CHANCE to alter or amend price and product of a “brochurized” product without the risk of being sued. What’s printed in the brochure is “claimable”. Period!
Last year the legislator permitted people to change catalogue prices if the operator can prove that the hotel room or tour which the clients wants to book is no longer available under the negotiated free sale agreement, and that consequently a new booking – at a different price – has to be made. Not a huge improvement, but in times of flexible website presentations it’s about time that the legislator understands that printed brochures cannot be treated differently to websites.
Justified price changes
Not withstanding the above – German tour operators can only alter a price when the time lapse between date of booking and date of departure is longer than four months. Should a price hike be higher than 5% the client is entitled to cancel free of charge. Under certain conditions – like a sudden VAT increase – the relevant price difference may be collected up to 21 days prior to departure. After this deadline it is almost impossible to pass on any increases.
Advertise the JNB/CPT flight on SAA – but fly the pax on 1-Time Airlines
By law German operators are NOT permitted to exchange one carrier for another without prior notice. And if a change becomes necessary the agent has to come up with a very good reason for the change. Even the type of aircraft can be part and parcel of the contract. If we say in the brochure that you fly from Eros to Etosha in a Cessna 210, and the tourist has to board a Piper, you can expect a “money back complaint”, because in a Cessna the tourie sits under the wings and can take mooi photos, whilst in a Piper all he sees is a shaky piece of aluminium. Indeed a 100% correct and honest product description and the relevant product delivery is of utmost importance.
Apply the good old Southern African pragmatic approach! My win-win suggestion to solve any possible problems is that you certainly don’t change your “normal” terms and conditions that are valid for all markets – worldwide.
However, and only on request, PLEASE consider to agree to a “side letter” for your German partners, reducing pax fees to a mutually acceptable level.
I sincerely hope that I haven’t discouraged you from penetrating the German market. Please don’t worry too much about all those strange laws, rules and regulations. Southern Africa has very unique products at affordable prices – and at the end of the day: That’s what really counts.