AFTA submission in response to the COAG Legislative and ... · maintains appropriate levels of...

AFTA submission in response to the COAG Legislative and Governance Forum on Consumer Affairs

Travel Industry Transition Plan Consultation Draft



Who is AFTA? The Australian Federation of Travel Agents Ltd (AFTA) was founded in 1957 to:

• establish professional standards for travel agents;

• stimulate, encourage and promote travel;

• bring together those acting as intermediaries in the distribution of travel

services; and

• build strong working relationships with suppliers and consumers of travel- related services.

AFTA represents approximately 80 per cent of Australia’s travel intermediaries that control more than 95 per cent of travel intermediary turnover. It also has a substantial base of associate members, representing non-intermediary sectors of the travel-related services industry. Members are bound by AFTA’s Code of Ethics. AFTA represents the interests of its members on many local and international bodies, including peak bodies of other national intermediary associations. AFTA also contributes significantly to the Australian domestic tourism industry by a strong involvement with the Federal and State Government Tourism departments and Authorities via many working parties, committees and other direct interactive involvement.



Endorsements

AFTA’s members and the following travel businesses endorse this submission.



Table of Contents Executive Summary 1 1. Background 2 2. Framing the Transition Plan 5 3. Transition Plan – Proposed Action 7 4. Approval Requirements 28 5. Transitional Arrangements 32 6. Existing measures of Oversight 34 7. Conclusion 35

Bibliography 36

Appendix 1: 37



Executive Summary

• AFTA welcomes the opportunity to make a submission in response to the COAG Legislative and Governance Forum on Consumer Affairs in relation to the Travel Industry Transition Plan Consultation Draft (‘the TITP Consultation Draft’).

• AFTA welcomes the Travel Industry Transition Plan (‘the draft transition

plan’), which represents the path to essential reform for the ongoing viability of the Australian travel industry. The draft transition plan represents many years of policy development and consultation with industry and community stakeholders, including AFTA, to ensure a fair and equitable regulatory environment for travel agents and consumers alike.

• Australia currently has a regulatory and licensing scheme that is

outdated and is no longer ‘fit for purpose’. It is no longer suited to the needs of the modern travel industry and the modern Australian traveller.

• Now is the time to ‘future proof’ the Australian travel industry to ensure that it is globally competitive, and has a robust and appropriate regulatory structure.

• AFTA strongly supports the five key recommendations made in the TTIP

Consultation Draft to reform the regulatory framework for travel agents in Australia:

to repeal the Travel Agents legislation; to increase reliance on generic consumer protection legislation,

corporations laws, industry-specific remedies and oversight mechanisms;

to wind up the Travel Compensation Fund (‘TCF’); to align the travel industry with tourism policy; and to develop a voluntary industry accreditation and/or industry

specific dispute resolution scheme.

• AFTA proposes that under a voluntary industry accreditation scheme, a travel agent or travel service provider can attain accreditation if they meet certain essential entry criteria. Central to an accreditation scheme will be the requirement to adhere to a voluntary industry code of conduct, which will be developed in accordance with the Australian Competition and Consumer Commission’s Guidelines for developing effective voluntary industry codes of conduct.

• AFTA is fully committed to working with governments and consumers to

develop a collaborative travel industry transition plan, incorporating a voluntary industry accreditation scheme and code of conduct, which takes into account the needs of the modern travel industry in a globally competitive environment.

• The TITP Consultation Draft represents sensible reform to ensure that

Australia has a fair, efficient and competitive travel industry that meets the needs of consumers and industry alike.



1. Background AFTA welcomes the TITP Consultation Draft, which represents the path to essential reform for the ongoing viability of the Australian travel industry. The draft transition plan represents many years of policy development and consultation with industry and community stakeholders, including AFTA, to ensure a fair and equitable regulatory environment for travel agents and consumers alike. Australia currently has a regulatory and licensing scheme that is outdated and is no longer ‘fit for purpose’. It is no longer suited to the needs of the modern travel industry and the modern Australian traveller. Now is the time to future proof the Australian travel industry to ensure that it is globally competitive, and has a robust and appropriate regulatory structure. In September 1986, Ministers for Consumer Affairs in Western Australia, New South Wales (NSW), Victoria and South Australia signed a ‘Participation Agreement’ in which the Participating States acknowledged the need for the establishment of a co-operative scheme for the regulation of travel agents (‘the National Scheme’).

The Participation Agreement required member States to enact legislation containing 'uniform provisions’. These provisions included, inter alia, a requirement that travel agents be licensed and for those agents to become (and remain) members of the TCF.

In December 1986 the TCF was established by Deed of Trust which made provision for payment of compensation to consumers who deal with travel agents that fail to account for money they receive.

History of inquiry and consultation

The TITP Consultation Draft is a key development in the long road to reform in the travel and travel-related services market. The broad reform framework, which is outlined for public consultation within the document, builds on many years of inquiry into the adequacy of the National Scheme to meet the needs of the modern travel industry. Since late 1998, Federal, State and Territory governments have recognised the need for reform to the travel and travel-related services market. Despite this recognition, it has taken the 14 intervening years for governments across Australia to take tangible steps towards reform.

1998 to 2000: the Centre for International Economics review

In December 1998, the Ministerial Council on Consumer Affairs (‘MCCA’) appointed the Centre for International Economics (‘CIE’) to conduct a review of the National Scheme, in accordance with National Competition Policy principles. The terms of reference for the review required CIE to: • clarify the objectives of the National Scheme and legislation; • identify the nature of any restrictions on competition; • analyse the likely effect of any restrictions on competition and on the

economy in general; • assess and balance the costs and benefits of each restriction; • consider alternative means of achieving the same result including non-

legislative approaches; and • consider whether the legislation giving effect to the National Scheme

contravened the competitive conduct rules in Part IV of the Trade



Practices Act 1974 (Cth) and the Competition Codes of each jurisdiction.

CIE completed its review in March 2000. Its report was presented to MCCA in July 2000. CIE saw the complete removal of prescriptive licensing and mandatory TCF requirements, as the preferred model in the long-term.1 The CIE recommendations were not implemented due to public interest concerns expressed by the Ministers at the time.

2010: the PricewaterhouseCoopers review

In May 2009, the Standing Committee of Officials on Consumer Affairs (‘SCOCA’) commissioned a study from PricewaterhouseCoopers (‘PwC’) of consumer protection measures in the travel and travel-related services market, including the role of the TCF. The study considered competency and conduct requirements as well as compensation under the National Scheme. The review was intended to provide analysis of the effectiveness of the National Scheme in the light of the fact that some sections of the travel services industry have consistently argued strongly for reform of the TCF or its removal. Following extensive consideration of the National Scheme, the PwC report concluded that the current State-based framework and, in particular, the current compensation scheme administered under the TCF, represents a disproportionate regulatory response relative to the regulatory and consumer protection environment in other industries.

2011: Government’s response to the need for reform

In response to the findings in the PwC report, SCOCA released a Consultation Paper in March 2011 that proposed options for reforming the existing functions of the National Scheme, in particular: • the competency and conduct of travel agents; and • consumer compensation. Following consultation with key stakeholders across the travel and travel-related services industry, MCCA Ministers agreed in June 2011 for the development of a draft transition plan, to oversee transition away from the current National Scheme to a modern accreditation framework. The MCCA Joint Communiqué of 3 June 2011 stated that:

“The Ministerial Council supports the further development of a Travel Industry Transition Plan, in consultation with industry and consumers, as a pathway to an industry-wide regulation approach, which complements industry efforts to promote confidence and quality, and maintains appropriate levels of consumer protection.”

2012: the Travel Industry Transition Plan Consultation Draft

On 6 July 2012, the Ministers agreed to a draft transition plan and requested that consultation about the implementation be undertaken so the Ministers could approve the timetable in December 2012. The meeting communiqué included the following statement on this issue:

“Ministers present at the Meeting of Ministers for Consumer Affairs acknowledged the Travel Compensation Fund (TCF) had played an important role in protecting consumers in the past. However, Ministers agreed that the TCF could not continue to be the primary vehicle for

1Centre for International Economics, 2002 (CIE 2002), National Co-Operative Scheme for the Regulation of Travel Agents: Working Party Report to Ministers on the National Competition Policy Review, August 2002, p 3.



consumer protection in the travel market. There have been both fundamental changes in the market and recent legislative arrangements entered into between the States, Territories and Commonwealth, in particular the strengthened legislative protections under the Australian Consumer Law (ACL). Ministers have received from officials a draft plan of transition from the existing arrangements to ensure that consumers continue to be protected in the travel market. Ministers intend to release a draft transition plan and invite comments and suggestions from interested parties. Ministers committed to consultation with all interested parties, including industry and consumer groups during the development of the final transition plan. Ministers agreed to receive a final transition plan with the intention that the plan be determined at the December meeting of Consumer Affairs Ministers in Sydney in December 2012.”

In August 2012, the COAG Legislative and Governance Forum on Consumer Affairs released the TITP Consultation Draft. AFTA is fully committed to working with governments and consumers to develop a collaborative travel industry transition plan, incorporating a voluntary industry accreditation scheme and code of conduct, that takes into account the needs of the modern travel industry in a globally competitive environment. The TITP Consultation Draft represents sensible reform to ensure that Australia has a fair, efficient and competitive travel industry that meets the needs of consumers and industry alike. The structure of this Submission follows the structure of the TITP Consultation Draft.



2. Framing the Transition Plan AFTA recognises the need for a regulatory scheme which is adaptable, dynamic and general in its applicability. A modern regulatory scheme for the travel industry should recognise the competitive nature of the travel industry, and the extensive choices available to the consumer.

Overarching principles

AFTA strongly supports the overarching principles, as outlined in the TITP Consultation Draft, that were developed to support and guide the development of the draft transition plan. AFTA restates these overarching principles below:2

2 COAG Legislative and Governance Forum on Consumer Affairs, Travel Industry Transition Plan Consultation Draft, August 2012, p. 11.

This section will outline AFTA’s key principles and policy priorities towards the development and implementation of the Transition Plan. AFTA’s preferred transition options build on extensive consultation and cooperation with government, in particular since SCOCA commissioned the PwC review in 2009. Australia’s modern travel industry needs to meet the needs of consumers and industry alike in the modern digital economy.

Extract from TITP Consultation Draft • Regulation should be forward-looking or “future-proofed’, for

example: - Regulation should have the flexibility to adapt to an evolving

industry; - Regulation should remain relevant to conditions in the industry,

until at least 2020 • General, rather than industry-specific, regulation should be

favoured. For example: - Consistency with the ACL and other Government policy

settings; - No industry-specific regulation (as is the case in other service

industries); - Reliance on industry-specific quality regulation as a

complementary regulatory mechanism. • Regulation should diminish any existing regulatory burdens, for

example: - Reducing costs to industry and risks for Government; - Shifting to a risk-based approach that incorporates industry self-

regulation; - The benefits of regulation should clearly outweigh any costs to

business. • There should be a focus on real, specific problems to maintain the

integrity of the scheme, for example: - Regulation should be relevant – as is appropriate for a mature

industry that is functioning reasonably well – in order to avoid distorting the market;

- Any identified information asymmetries should be addressed; - Regulation should be practically enforceable.

• Regulation should support a global market dominated by e-commerce, for example: - Domestic participants should not be subjected to such

compliance burdens that their competitiveness against international participants in the market is diminished.



Key assumptions

In developing the draft transition plan, AFTA acknowledges that certain assumptions must be made. AFTA strongly supports the key assumptions, as outlined in the TITP Consultation Draft, which intend to guide the development of the draft transition plan. AFTA restates these assumptions below: 3

Extract from TITP Consultation Draft

• The coverage of the present regulatory scheme has significantly diminished due to the combined effect of new technologies and distribution channels such as e-commerce / m-commerce,4 as more and more consumers eschew (and are likely to eschew) dealings with travel agents in favour of transacting with travel service providers.

• Traditional information asymmetries between suppliers and consumers have largely broken down.

• The greatest proportion of travel expenditure by consumers is not protected by the National Scheme and the TCF due to coverage of payments to travel intermediaries in limited circumstances.

• Globalisation and increasing competition from online and overseas-based agents in the Australian market has increased consumers’ exposure to unlicensed trading (i.e. because off-shore based intermediaries are not captured by the National Scheme) and the risk of uncompensated loss, further diminishing the reach of the National Scheme.

• The National scheme is costly to administer, with an estimated cost of between $19.57 million (total administrative burden) and $25.3 million (total compliance burden).

• The market has various effective voluntary measures for self-protection and there may be scope for developing further such mechanisms. In particular, consumers who pay by credit card (including PayPal, BPAY transactions and debits using a credit card scheme) have recourse to measures such as credit card charge-backs, which have proven to be effective.

• Prudential oversight similar to that provided by the TCF is provided by other national laws and industry arrangements, which cover a great proportion of the intermediary sector. Trends towards consolidation in the sector, resulting in fewer but larger agencies operating as publicly listed companies and wholesale distribution arrangements, may further increase this coverage.

• Consumers are likely to engage agents in the future for specific reasons and exercise conscious decision-making in selecting the agent, particularly if a fee-for-service model eventuates in the agency business.

3 COAG Legislative and Governance Forum on Consumer Affairs, Travel Industry Transition Plan Consultation Draft, August 2012, p. 14. 4 Note that m-commerce refers to ‘mobile commerce’.



3. Transition Plan – Proposed Action 3.1 Recommendation 1:

Repeal Travel Agents Legislation AFTA strongly supports Recommendation 1 to repeal the Travel Agents legislation as proposed in Section 3.2.1 of the TITP Consultation Draft. AFTA affirms its long-held view that the current regulatory scheme is no longer relevant and needs to be removed in order to future-proof the Australian travel industry.

The National Scheme

The National Scheme provides for two key components,5 namely licensing of persons carrying on business as a travel agent, and the creation of the TCF as a consumer protection compensation fund for travellers suffering loss in respect of travel arrangements made by a travel agent. Any person who ‘carries on business as a travel agent’ must be licensed to do so.6 Accordingly, licensing requirements are dictated by the functional activities of a person/agent.

The changing travel market dynamic

AFTA acknowledges that the basic concept of the National Scheme – the promotion of uniform industry standards at a national level – has merit. However, the National Scheme is no longer relevant and needs to be removed in order to future-proof the Australian travel industry. PwC’s 2010 Review confirmed AFTA’s long-held view that the National Scheme has not kept pace with developments in the travel sector over the past 25 years and, accordingly, is outdated and no longer fit to achieve key consumer protection objectives in the current market environment.7 In particular, the National Scheme has been left behind by the development of:

new technologies, in particular sourcing and booking by online travel intermediaries domiciled outside of Australia;

the consolidation of existing licensed travel agents within the industry; and

5 The National Co-operative Scheme for the Uniform Regulation of Travel Agents – Participation Agreement (Schedule). 6 The National Co-operative Scheme for the Uniform Regulation of Travel Agents – Participation Agreement (Schedule). 7 PriceWaterhouseCoopers, Review of consumer protection in the travel and travel-related services market, November 2010, p. 82.

This section outlines AFTA’s STRONG SUPPORT for the recommendations of the TITP Consultation Draft for reform to the regulatory framework for travel agents in Australia. In this section, AFTA outlines the rationale for its support of the TITP Consultation Draft recommendations, which builds on the industry’s ongoing support for reform away from mandatory participation in the TCF. AFTA supports a Transition Plan which will ensure a level playing field between currently registered travel agents and their competitors, to ensure healthy competition and choice for consumers.



increased supply chain diversity, in particular purchasing of travel products directly from the supplier – e.g. airline, hotel, tour company services.

In today’s world there are more and more travellers not covered by the coverage that is provided by the TCF due to:

the growing number of consumers dealing directly with suppliers; and

the growing number of travel bookings made with intermediaries that are outside of the current system and the TCF.

Indeed, as highlighted by Graphic 1 the National Scheme’s failure to keep up with the evolution of the industry has resulted in a two-tiered structure – those travel intermediaries that require a licence and those that do not – resulting in a disproportionate regulatory burden on licensed travel intermediaries. Graphic 1: Travel businesses that require a licence under the current National Scheme8

AFTA proposes that a modern, voluntary industry accreditation scheme will need to lower the considerable existing regulatory burdens, and level the playing field between existing licensed travel agents and other travel intermediaries that are not within the current National Scheme. This is necessary to improve equity in the industry and to discourage distorted business models which are developed solely to avoid regulatory oversight (e.g. artificially pushing operations offshore or online).

8 Definitions in Graphic 1 utilise the industry categorisation within the TCF Annual Report, with additional analysis and interpretation.



3.2 Recommendation 2: Increase reliance on generic consumer protection

legislation, corporations laws, industry-specific remedies and oversight mechanisms etc.

AFTA strongly supports Recommendation 2 to increase reliance on the generic consumer protection legislation, corporations laws, industry-specific measures and oversight mechanisms as proposed in Section 3.2.2 of the TITP Consultation Draft. AFTA affirms its long-held view that Australia’s current laws pertaining to consumer protection and the conduct of corporations, coupled with industry-specific remedies and oversight mechanisms are more than capable of providing protection for consumers in their dealings with Australian travel agents.

Australian Consumer Law (ACL)

The ACL is contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (‘CCA’). The CCA came into effect on 1 January 2011 and supersedes the Trade Practices Act 1974 (Cth) (‘TPA’). Many elements of the TPA, however, form part of the CCA. The ACL replaces key parts of various State and Territory Fair Trading Acts and regulations that were originally designed to fill the gaps that existed within the Commonwealth TPA. The objective of the CCA is:

“to enhance the welfare of Australians through the promotion of competition and fair trading and providing consumer protection”9

AFTA agrees with PwC’s 2010 finding that generic consumer protection rules are sufficient to protect consumers from travel agent misconduct. Following implementation of the ACL on 1 January 2011, Australian consumers are well protected by updated national consumer protection legislation. As PwC asserts, it is likely that the generic ACL regime provides adequate regulation of business conduct in the travel industry and that there is no clear body of evidence suggesting a demonstrable need for industry-specific measures.10 AFTA acknowledges that the ACL currently applies across the entire Australian economy, including the tourism industry and related markets such as the travel intermediary sector. It includes provisions regulating misleading and deceptive conduct, non-supply, unconscionable conduct, unfair contract terms, unfair practices and consumer guarantees, amongst many other things. AFTA submits that the best available evidence suggests that generic consumer protection provisions are sufficient to protect consumers from consumer protection risks in the travel industry. 11

Corporations laws

The Corporations Act 2001 (Cth) is the principal legislation regulating companies in Australia and is administered by the Australian Securities and

9 Competition and Consumer Act 2010, s. 2. 10 PriceWaterhouseCoopers, Review of consumer protection in the travel and travel-related services market, November 2010, p. 106. 11 PriceWaterhouseCoopers, Review of consumer protection in the travel and travel-related services market, November 2010, p 106.



Investment Commission (ASIC). The Corporations Act 2001 regulates a broad range of matters including the formation and operation of companies, duties of officers, takeovers and fundraising. AFTA submits that the Corporations Act 2001, in conjunction with the Australian Stock Exchange (ASX) Listing Rules and ASX Corporate Governance Principles and Recommendations, are sufficient to provide prudential oversight of corporations within the travel industry and thereby ensure financial solvency, transparency and accountability. These laws of general application provide prudential oversight in relation to financial reports and solvency declarations, solvency, minimum capital reserves, ASIC and auditor roles, auditor independence, continuous disclosure, corporate governance, and a prohibition on false and misleading statements.

Industry-specific remedies and oversight mechanisms

AFTA acknowledges that the range of industry-specific remedies and oversight mechanisms that already exist are sufficient to provide protection for consumers in their dealings with Australian travel agents. These remedies and mechanisms include, but are not limited to, the International Air Transport Association (IATA) and credit card charge-back facilities. In summary:

International Air Transport Association (IATA) administers the IATA Passenger Agency Program, which is a travel agent accreditation scheme designed to facilitate the secure distribution of airline tickets through a network of accredited sales locations. Travel agents who meet certain industry standards and financial criteria are eligible for accreditation under the scheme and, in so doing, will be authorised to provide credit for the sale of airline tickets on behalf of IATA member airlines.

Credit card charge-back refers to a circumstance where a consumer can request their financial institution to reverse a transaction back to the merchant or seller. For travellers who make payment for their travel using their credit card, charge-back can be their ‘first port of call’ for reimbursement in the unfortunate event of failure to provide a service by a travel agent or other travel provider.

Incentives to create market-generated measures for combating agent behaviour

AFTA acknowledges that the removal of the TCF and the implementation of the draft transition plan will create incentives for industry to develop its own measures for combating agent behaviour that risks undermining consumer confidence in the industry. As proposed in the TITP Consultation Draft, these market-based measures may take the form of a:

Voluntary industry accreditation scheme; incorporating a

Voluntary code of conduct.



Questions

Section 3.2.2 of the TITP Consultation Draft includes the following questions:

AFTA Response: (a)

Yes AFTA submits that a national communications campaign is required to address particular consumer information needs . Communication campaigns by government should particularly aim to inform consumers that the use of Australian travel agents, identified simply by their ABN or other appropriate Australian identifier, attracts certain consumer rights and minimum standards under the ACL and other relevant laws and regulations. Furthermore, consumer use of overseas based travel intermediaries, or non-accredited online intermediaries, may not afford the same level of consumer protection or minimum standards. AFTA also submits that a parallel national trade advisory campaign will be required to address particular trader information needs. The purpose of the campaign will be to assist travel agents and other travel suppliers to understand the transitional arrangements and newly created consumer protection measures being introduced under the transition plan. The campaign should include an amplified attention to the ACL. In addition, there will be a need to update State and Territory government consumer affairs / fair trading websites to reflect the transition plan.

AFTA Response: (b)

When dealing with travel agents, there are some particular pieces of information that consumers would find useful. Information that may be particularly valuable for consumers in informing their dealings with travel agents includes:

Years in operation: the number of years that a travel agent has operated is an important piece of information for consumers and may assist in fostering confidence in consumers and developing customer service in travel agents. A new system might utilise a system similar to that implemented by other industries, whereby members are categorised in broad classes corresponding to the number of years they have been in operation (for example ‘Gold’ for ‘x’ number of years, ‘Silver’ for ‘y’ number of years etc.);

Memberships of industry organisations: including membership of the IATA, the International Cruise Council of Australasia (‘ICCA’), the Cruise Lines International Association (‘CLIA’), the Franchise Council of Australia (‘FCA’), the relevant chamber of commerce in the State in which the travel agent operates, and whether the

Questions

a) Are there any particular consumer or trader information needs that should be addressed by a national communications campaign? For example, should any particular messages be conveyed?

b) When dealing with travel agents, what sort of information would

consumers find useful?

c) Are there any special audiences that should be targeted?



travel agent holds a Travel Industry Designator Service (‘TIDS’) identifying code; and

Awards and certificates received: including the AFTA National Travel Industry Awards, airlines and cruise lines awards, and retail brand awards for service excellence.

AFTA Response: (c)

AFTA strongly supports the need for a communications and education strategy to raise the awareness of all consumers. In particular, the campaign needs to inform consumers of the benefits associated with purchasing via a travel agent and how this can help mitigate certain risks. Although AFTA supports the need for a broad campaign aimed at informing the general population, a complementary communications campaign should target some special audiences, in particular:

young people who are often first time travellers; and older leisure travellers who are increasingly utilising online

intermediaries to arrange their travel. These consumers are especially vulnerable given their relative inexperience in dealing with travel intermediaries. Such travellers should be especially informed of the various options available (such as credit card charge-back etc.) to safeguard their money. 3.3 Recommendation 3: Winding up the TCF AFTA strongly supports Recommendation 3 to wind up the TCF as proposed in Section 3.2.3 of the TITP Consultation Draft. AFTA submits that the National Scheme, in its current form, is no longer fit for purpose and does not adequately meet the needs of the modern travel industry. The National Scheme, of which the TCF is the central design feature, was established in 1986 within a retail travel market that is considerably different from today. While the National Scheme has served its purpose in the past, the existing combination of the TCF and State-based licensing does not take into consideration modern day practices of direct dealings between suppliers and consumers (facilitated by the internet) and the changing commercial practices of the travel industry. AFTA strongly supports Recommendation 3 to wind up the TCF as there is an urgent and overwhelming need to reform consumer protection measures in the travel services market. For over 25 years the travel industry has been subject to a disproportionate financial and regulatory burden despite the relatively stable nature of the industry. Unlike other retail service industries in Australia, licensed travel agents are subject to outdated, narrow, impractical and inefficient requirements, including: • the need to submit annual audited financial statements; • the need to maintain a mandated minimum level of equity, working

capital and net assets value; and • stringent state business/person registration. AFTA has welcomed successive recommendations from government-initiated reviews that have recommended the winding up of the TCF as



part of broader reform to the travel industry. As Chapter One of this Submission highlights, reviews conducted since 2000 have concluded that the TCF places a disproportionate financial burden on travel agents.

Current regulatory burden

The regulatory burdens imposed by the current National Scheme create substantial administrative and compliance costs on licensed travel agents and severely curtail the competitiveness of Australia’s travel agents’ industry. AFTA commissioned KPMG in early 2012 to quantify the regulatory burden of the existing National Scheme on the travel agent industry. The KPMG study found that the National Scheme places a considerable administrative burden on the industry, amounting to over $19.5 million per annum. Of this amount, 94 percent of the total administrative burden within the National Scheme is associated with meeting the annual requirements of the TCF.12

The ‘window of protection’ under the TCF is shrinking

Consumers are rapidly adapting to the multiple routes to market that are available within the digital economy. With more and more travel products available directly from the supplier, or through online intermediaries outside of the National Scheme, TCF coverage is shrinking as a proportion of total travel purchases. The 2010 PwC Review clearly concluded that the scope and scale of the problems that existed before the National Scheme was implemented have significantly declined or have almost effectively disappeared. It concludes that subsequent developments in the industry mean that there is no longer sufficient justification for industry-specific consumer protection in the sector and that the existing regulations are no longer fit for purpose.13

Now is the time for action

AFTA agrees with the TITP Consultation Draft’s assertion that ‘on a practical level, the interdependency between the uniform licensing provisions (within State Travel Agents Acts) and the TCF means that, in their current form, one cannot be retained without the other’.14 Given the need to reform or repeal State and Territory Travel Agents Acts to enable reform to the travel and travel-related services market, AFTA recommends that the TCF be wound up as soon as practicable. AFTA has proposed an implementation timeframe in Chapter 4 of this Submission, which outlines a realistic timeframe for the industry to transition into a new regulatory scheme, whilst maintaining necessary continuity for consumers during the transition period.

12 KPMG, Study into the red tape burden associated with the regulation associated with the regulation of travel agents, April 2012, p. ii. 13 PriceWaterhouseCoopers, Review of consumer protection in the travel and travel-related services market, November 2010, p. 3. 14 COAG Legislative and Governance Forum on Consumer Affairs, Travel Industry Transition Plan Consultation Draft, August 2012, p. 18.



Questions

Section 3.2.3 of the TITP Consultation Draft includes the following questions:

AFTA Response: (a)

The TCF currently has approximately $30m in accumulated reserves. Under the terms of the present Trust Deed, TCF wind-up would see these funds redistributed to all jurisdictions (except NT) subject to first satisfying the TCF’s existing liabilities. AFTA notes that the TITP Consultation Draft proposes several other uses for the TCF reserves including consumer education and seed funding for a voluntary industry accreditation scheme. AFTA agrees that such uses can help promote consumer protection and fair-trading in the travel sector.

AFTA Response: (b)

Throughout the transition period, AFTA submits that the majority of the pool of TCF reserves be held in trust, during which the funds can be used to support specific transition activities, if required. Graphic 2 outlines AFTA’s preferred allocation of TCF reserves for the following purposes: • Voluntary Industry Accreditation Scheme; • Education/awareness campaign(s); and • Redistribution of residual funds as dividends to the States and Territories.

Questions

a) Can other uses be suggested for the TCF reserves that would be relevant to the proposed transitional arrangements?

b) Could the TCF reserves be put to other uses that promote consumer

protection and fair trading objectives within the sector?



Graphic 2: Proposed allocation of the TCF’s existing reserves

Redistribution to States/Territories: AFTA recommends that upon the conclusion of the transition period, a majority (70%) of the TCF’s remaining reserves should be distributed to the States and Territories. This recommendation is consistent with the existing provisions of the current TCF Trust Deed and acknowledges the State and Territory-based nature of the existing National Scheme. During the term of the transition period, this majority share of funds should sit in trust, during which time it can act as a pool of funds, where required, to support essential transitional arrangements. Consumer Education: As identified in the TITP Consultation Draft, a proportion of TCF reserves could help to fund an education campaign that assists consumers to utilise the new scheme. Such a campaign could include marketing material informing travellers of the benefits and risks associated with purchasing via a travel agent. Consumers could be informed to better understand the nature of the travel agent transaction and the parties involved. This would include payments in advance and the existing protection offered by credit card providers (e.g. Charge Back). National Trade Advisory Campaign: As an important component of the education campaign to consumers, a national trade advisory campaign should be funded from within the allocation for communications to assist travel agents understand the transitional arrangements. Further, this campaign would assist travel suppliers to understand the new arrangements and requirements which would also underpin the importance of travel agents being a part of the newly created accreditation scheme and code of conduct. This trade education would need to include workshops, information services provided by flyers and online and an amplified importance of the ACL.



Voluntary Accreditation Scheme: AFTA recommends the allocation of seed funding from the TCF reserves for the development of a voluntary industry accreditation scheme for the travel industry, which incorporates a voluntary industry code of conduct. An effective accreditation scheme can help maintain an adequate consumer environment, with considerably reduced regulatory burdens for travel agent businesses. AFTA agrees with the observation in the TITP Consultation Draft that voluntary accreditation delivers greater net benefits than a government-run scheme. Instituting such a scheme would require the allocation of seed funds to develop effective accreditation policies and standards, and to establish viable institutional and governance frameworks. 3.4 Recommendation 4: Alignment with Tourism Policy AFTA strongly supports Recommendation 4 to align the travel industry with tourism policy as proposed in Section 3.2.4 of the TITP Consultation Draft. AFTA acknowledges that there is currently no specific Federal or State/Territory government portfolio for the travel industry. As a matter of practicality and efficiency, it may be advantageous for the governance of the travel industry to form part of the Federal Government’s existing ‘tourism’ portfolio. AFTA has a longstanding track record of active involvement in the development of the tourism industry, both in Australia and throughout the world. Having served the tourism and travel industry in Australia for 55 years, AFTA is one of the oldest continuous advocates on behalf of the industry and the travelling public. AFTA is deeply aware of the importance of a strong tourism industry in Australia and abroad, which makes a vital contribution to employment and the economic livelihood of communities. AFTA has been, and continues to be, a strong player in the Australian tourism industry, particularly as it works to meet the challenges of the tough global economic climate and the high value of the Australian Dollar. For example:

AFTA is an active partner of Tourism Australia and supports its initiatives to promote Australia domestically and around the world. Furthermore, AFTA also participates in the Australian Tourism Exchange;

AFTA is represented on several Working Parties overseeing implementation of the recommendations of the National Long-term Tourism Strategy;

AFTA has been a leading member of the National Tourism Alliance (‘NTA’) and its predecessor organisations;

AFTA works closely with industry advocates, such as the Tourism and Transport Forum (‘TTF Australia’), to highlight key policy challenges and opportunities before government;

AFTA is a key partner of the Tourism Incident Response Plan, which helps to provide a risk management framework for addressing market shocks, such as natural disasters.



AFTA has been, and continues to be, an active participant in tourism policy debates at both a national and a State/Territory level;

AFTA is an active participant in the Australian Passenger Agency Joint Council (‘APJC-AU’), which coordinates interaction between travel agents and IATA at a local level; and

AFTA continues to support and sell Australian tourism to domestic and overseas visitors.

Additionally, AFTA is actively involved in the global travel and tourism industry, and is involved with a number of organisations and initiatives. For example:

AFTA is an active participant in the World Travel Agents Associations Alliance (‘WTAAA’), which fosters and facilitates exchanges of information and advice between travel agent associations on matters of mutual interest as they arise in the various national and international domains in which the parties operate;

AFTA is an active participant in the Passenger Agency Global Joint Council, which coordinates interaction between travel agents and IATA at a global level; and

AFTA works closely with fellow partners to help develop travel and tourism across Latin America through the Council on Australia – Latin America Relations (COALAR) Tourism Action Group.

AFTA submits that the reforms proposed in the TITP Consultation Draft, and supported by AFTA, are key reforms that will benefit the broader travel and tourism sector. Strong and viable travel agencies, staffed by skilled and enthusiastic travel professionals, are essential in connecting the Australian and international tourism industries to the Australian travelling public.

Questions

Section 3.2.4 of the TITP Consultation Draft includes the following question:

AFTA Response (a)

Yes AFTA acknowledges that there are other synergies involving consumer policy regulators, which require further consideration. The Australian Competition and Consumer Commission (ACCC), as the chief statutory independent body responsible for ensuring compliance with the Commonwealth's competition, fair-trading and consumer protection laws, is a particularly respected and trusted organisation. AFTA acknowledges the ACCC’s respect and standing within the community and notes the body’s existing channels for the dissemination of information. The ACCC can efficiently and effectively raise public awareness of consumer rights under the ACL through its existing channels (e.g. through flyers, online media etc.). An effective ACCC-led campaign could inform potential customers of the comparative costs and benefits of

Questions

a) Are there any other synergies involving consumer policy regulators that ought to be considered?



booking their travel through Australian travel agents, in comparison to utilising overseas or online travel intermediaries that are not covered by the ACL. 3.5 Recommendation 5: Voluntary industry Accreditation and/or industry-

specific dispute resolution scheme AFTA strongly supports Recommendation 5 to develop a voluntary industry accreditation and/or industry-specific dispute resolution scheme as proposed in Section 3.2.5 of the TITP Consultation Draft. AFTA has been engaged in an ongoing multi-jurisdictional consultation process regarding consumer protection reform since mid-2009. In the context of the TITP Consultation Draft’s recommendation for a voluntary industry accreditation scheme, AFTA draws attention to its original position outlined in its April 2011 response to the SCOCA Consultation Paper. This original position supported reform away from State-based licensing and mandatory participation in the TCF to voluntary industry accreditation. Whilst AFTA welcomes the draft transition plan mandate to reform the travel industry away from the existing National Scheme, it is important that essential minimum standards remain in place to protect the travel consumer and the integrity of the travel industry. AFTA is progressing well with the development of a voluntary industry accreditation scheme, and upon the formal commencement of the transition plan, would be well placed to formally implement and administer a voluntary accreditation scheme for the travel industry. Specific operational aspects of AFTA’s voluntary industry accreditation scheme continue to be developed. AFTA notes that its Constitution and Code of Ethics will provide a foundation building block for the development of a voluntary industry accreditation scheme. In addition, AFTA already handles customer complaints regarding AFTA members and travel-related service providers. AFTA proposes that under a voluntary industry accreditation scheme, a travel agent or travel service provider can obtain accreditation if they meet certain essential entry criteria. These essential entry criteria will include:

adherence to the voluntary industry code of conduct, which is to be developed in accordance with the ACCC’s Guidelines for developing effective voluntary industry codes of conduct;

evidence of adequate training and advertising; and payment of a mandatory accreditation fee.

Graphic 3 outlines the components that a travel agent or travel service provider will need to satisfy in order to be accredited under the voluntary industry accreditation scheme. The graphic also outlines the benefits gained from the development of a voluntary industry code of conduct.

AFTA endorses a vigorous and effective pursuit of inappropriate travel intermediary business behaviour by the ACCC, to ensure compliance with the ACL under the Transition Plan.



Graphic 3: Voluntary industry accreditation scheme

Coverage of a voluntary industry accreditation scheme

Given that membership of an industry-led accreditation scheme will be voluntary, AFTA submits that parties which are not currently included within the scope of the current National Scheme will NOT be precluded from seeking accreditation. Provided that applicants meet the requirements for accreditation, travel intermediaries will be eligible to join the accreditation scheme. Graphic 4 demonstrates how travel intermediaries that are not currently licensed under the National Scheme may apply for accreditation, should they meet the criteria.



Graphic 4: Concentric analysis of the modern Australian travel service industry – entities inside and outside of the current National Scheme

Applicability of a voluntary industry code of conduct – under the ACCC Guidelines

AFTA is strongly supportive of voluntary industry codes of conduct and contends that the establishment of a voluntary industry code of conduct for all travel agents is highly likely to improve voluntary compliance with the ACL. AFTA proposes to introduce a voluntary industry code of conduct for travel agents which delivers:

heightened levels of consumer protection due to the increase in awareness of accredited agents;

reduced regulatory burdens for business; and appropriate, effective monitoring, oversight and enforcement.

Integral to the future proofing of the travel industry is the reliance placed on the CCA. AFTA acknowledges that there is a need to maintain effective consumer protection to underpin the professionalism of the industry and to instil a high level of consumer confidence. To enhance this, AFTA contends that there is a need to supplement the CCA framework with additional protection provisions and hence is strongly supportive of a voluntary industry code of conduct for the travel industry. AFTA’s position is supported by the PwC Review, which notes that a scheme of this nature ‘places the onus for providing this protection on industry, who have an incentive to ensure the current level of protection is provided in the most efficient manner’.15

15 PriceWaterhouseCoopers, Review of consumer protection in the travel and travel-related services market, November 2010, p. 137-8.



As the peak industry body, AFTA is uniquely placed to develop a voluntary industry code of conduct which delivers effective compliance with the ACL.

Benefits of a voluntary industry code of conduct

The introduction of a voluntary industry code of conduct is critical to future proofing the travel industry and allowing a system which is led by industry to adapt quickly to the ever-changing factors of a global industry. Australia is uniquely placed to play a leading role in forming a new system that will become a benchmark for the global travel community. Countries around the world grapple with this challenge every day. AFTA takes part in many global interactions and is well aware that many countries around the world are looking to Australia for this solution. AFTA believes that this voluntary industry code of conduct approach is the key to this solution. Further, AFTA contends that a voluntary code of conduct will provide greater consumer protection and benefits as it will be purpose-built for the travel industry with the consumer at the core of its purpose. This code will enable a more effective regime than the current National Scheme with the following principles:

it is more flexible than government legislation and can be amended more efficiently to keep abreast of changes in industries’ needs;16

it is less intrusive than government regulation, resulting in lower compliance costs for businesses;17

industry participants will have a greater sense of ownership of the code, leading to a stronger commitment to comply with the CCA;18

self-regulation does not impose costs on government in terms of implementation, compliance monitoring and enforcement action – these are borne by the industry;19

the travel industry, via AFTA, is best-placed to develop the voluntary industry code of conduct which will address business conditions and acknowledge the challenges facing the industry, but which also ensures that the travel agents’ customer (the consumer) is at the core of its purpose; 20

the voluntary industry code of conduct will act as an additional quality control within the travel industry, supplementing AFTA’s Code of Ethics; and

complaint-handling procedures under the proposed code are likely to be more effective, time efficient and user friendly than existing dispute resolution measures.21

Although a voluntary industry code of conduct enables businesses to opt-out, it will nonetheless provide enhanced consumer protection as consumers will be able to choose to transact with participating businesses,

16 Australian Competition and Consumer Commission, Guidelines for developing effective voluntary industry codes of conduct (Commonwealth of Australia, July 2011), p. 3. 17 Australian Competition and Consumer Commission, Guidelines for developing effective voluntary industry codes of conduct (Commonwealth of Australia, July 2011), p. 3; COAG Legislative and Governance Forum on Consumer Affairs, Travel Industry Transition Plan Consultation Draft, August 2012, p. 21. 18 Australian Competition and Consumer Commission, Guidelines for developing effective voluntary industry codes of conduct (Commonwealth of Australia, July 2011), p. 3. 19 COAG Legislative and Governance Forum on Consumer Affairs, Travel Industry Transition Plan Consultation Draft, August 2012, p. 21. 20 COAG Legislative and Governance Forum on Consumer Affairs, Travel Industry Transition Plan Consultation Draft, August 2012, p. 21. 21 Australian Competition and Consumer Commission, Guidelines for developing effective voluntary industry codes of conduct (Commonwealth of Australia, July 2011), p. 3.



in addition to using other non-regulatory consumer protection options. As such, the development of a voluntary industry code of conduct presents minimal risk to consumers, but will greatly reduce business reporting burdens, and presents opportunities to enhance efficiency throughout the travel industry.

Developing a voluntary industry code of conduct

AFTA understands that any voluntary industry code of conduct would need to be developed in consultation with its members, key stakeholders and other interested parties in order to develop an effective regime which appropriately balances consumer protection imperatives with the need to reduce compliance burdens placed on businesses. In this regard, it is proposed that any voluntary code of conduct would be developed in light of the ACCC Guidelines for developing effective voluntary industry codes of conduct to ensure adequate attention to detail and weighting of competing interests.22 An overview of proposed matters for inclusion is outlined in Graphic 5. Graphic 5: Matters for inclusion in a voluntary code of conduct for the travel industry

Part 1 Code purpose An overview of the objectives of the code and any pertinent definitions. Part 2 Code rules The development of specific provisions which improve consumer protection outcomes without unduly burdening businesses. Possible provisions may include:23 Disclosure requirements, such as the obligation to inform consumers of: whether or not the business retains these funds in a separate client

account and in what circumstances monies are removed from that account;

whether or not the business is a member of a chain, franchise or affiliate group;

whether or not the business is accredited with AFTA; the availability of appropriate business insurance, for example

professional indemnity insurance; and the availability of an external dispute resolution scheme provided

by AFTA. Business conduct requirements, for example: fairness and accuracy in advertising; and specific rules for online traders, such as disclosure of registration

details and transparency concerning the flow of funds. Matters to address other issues that may arise in the industry. Part 3 Code administration criteria Provisions to facilitate development of a code administration

committee to oversee the successful implementation and ongoing effectiveness of the code. It is anticipated that this committee could include representatives from a wide range of stakeholder groups, and potentially a regulatory or consumer affairs agency, such as the ACCC.

Provisions relating to internal complaints management processes,

22 Australian Competition and Consumer Commission, Guidelines for developing effective voluntary industry codes of conduct (Commonwealth of Australia, July 2011). 23 Adapted from PriceWaterhouseCoopers, Review of consumer protection in the travel and travel-related services market, November 2010, p. 144-5.



including: • what constitutes a complaint; • the procedure to be followed by a signatory to the code in

resolving the complaint; • should the complaint not be resolved internally, processes to

escalate the complain to an independent decision-maker; and • performance criteria for effective complaints handling,

developed in light of Australian Standard 4269.24 Provisions facilitating a review mechanism by an independent

review body, should the complaint not be resolved through internal processes. It is also expected that matters relating to membership, tenure and qualifications of review body members would be included in this section.

Provisions requiring signatories to demonstrate in-house compliance with the code, arguably through Australian Standard 3806.25

Applicable sanctions for businesses which demonstrate non-compliance with the code.

A strategy to raise consumers’ awareness of the code. Provisions relating to instruction and explanation of the code to

signatories and their employees. Provisions necessitating collection of complaint data and

performance indicators to monitor code effectiveness, performance and trends.

Provisions necessitating monitoring and evaluation of the code to demonstrate progress made towards achieving its desired objectives.

Provisions necessitating regular review and updating of the code to ensure it remains up-to-date and reflective of community and industry needs.

Publication of annual reports on the operation of the code. At this stage, AFTA does not envisage that the code will be prescribed as an industry code of conduct under s 51AE of the CCA. Indeed, considerable evidence is required to demonstrate a need to prescribe an industry code of conduct, thus making it enforceable under the CCA – and measures such as this are only pursued in the event that the voluntary industry code of conduct has failed to meet its objectives.26 AFTA contends that its longstanding reputation as the peak body representing travel agents throughout Australia, and its continuing success seen in development of (and adherence to) its Code of Ethics, are indicative of the success it is likely to enjoy in developing and implementing a voluntary code of conduct. To this end, AFTA welcomes the opportunity to engage with the ACCC, the COAG Legislative and Governance Forum on Consumer Affairs, the Department of Resources, Energy and Tourism and other key stakeholders in designing and implementing a voluntary industry code of conduct for travel agents. Graphic 6 outlines the role of the ACCC in the establishment and ongoing administration of a voluntary industry-led code of conduct.

24 Council of Standards Australia, Australian Standard – Complaints Handling, AS 4269-1995. 25 Council of Standards Australia, Australian Standard – Compliance Programs, AS 3806-2006. 26 Australian Competition and Consumer Commission, Guidelines for developing effective voluntary industry codes of conduct (Commonwealth of Australia, 2011), p. 26.



Graphic 6: ACCC’s role in the establishment of a voluntary industry-led code of conduct

Case Study: Code of Banking Practice

AFTA recognises that there are a number of voluntary codes of conduct that currently exist – one such example is the Code of Banking Practice (‘the Code’) that exists in the banking sector. It is important to note that the matters prescribed in the Code align very closely with the provisions suggested for inclusion in a voluntary code of conduct for the travel industry by PwC in its 2010 Review. 27 AFTA has provided a short case study in Graphic 7, which outlines the key features of the Code. One point of difference between the Code and what AFTA is proposing is in relation to the consumer disputes mechanism through the Financial Ombudsman. Please see AFTA’s response in relation to industry-dispute resolution mechanisms on pages 26-27 of this Submission.

27 PriceWaterhouseCoopers, Review of consumer protection in the travel and travel-related services market, November 2010, p. 144-5.



Graphic 7: Case Study – Code of Banking

Code of Banking Practice The Code of Banking Practice (‘the Code’) is a voluntary code of conduct prescribing best-practice standards for the Australian retail banking industry. The Code is administered by the Australian Banker’s Association (‘ABA’) and has been adopted by Australia’s major banks including Commonwealth Bank, NAB, Westpac and St. George. The Code prescribes the key obligations banks have to customers, including: • providing information about consumer rights and obligations; • providing effective disclosure of information relating to banking

services (including fees and risks involved); • giving of banking advice through suitably qualified staff, and

recommending external legal and/or financial advice where necessary; and

• acting fairly and reasonably towards customers in a consistent and ethical manner.

Consumer disputes under the Code are typically resolved by the bank concerned. However, recourse is also available to the Financial Ombudsman Service. Further, the Code establishes a Code Compliance Monitoring Committee (‘CCMC’) to investigate breaches of the Code and anyone can report alleged misconduct to the committee. The CCMC may issue a written determination obliging a bank to take remedial action or give undertakings as to future behaviour. The CCMC may also publically name banks involved in serious breaches of the Code. Each signatory bank must lodge an annual report with the CCMC, detailing its compliance with the Code. The ABA ensures the ongoing effectiveness of the Code by commissioning an independent and transparent review of the Code every 3 years (or sooner if appropriate). The reviews occur in consultation with banks, consumer organisations, industry associations and relevant regulatory bodies. Of particular note, the ACCC has been a key stakeholder in the ongoing review and development of the Code over the years (having made a number of submissions to the review process) to further strengthen the consumer protection aspects that exist within the Code.

Questions

Section 3.2.5(b) of the TITP Consultation Draft includes the following questions:

AFTA Response: (a)

Yes The AFTA members and other travel-related businesses that endorse this Submission are outlined at the front of this Submission.

Questions

a) Is there support amongst travel agents and/or consumers for industry-led accreditation?

b) Who should administer an industry accreditation scheme?



AFTA’s membership have been actively supportive of, and involved in, the development of a concept accreditation scheme. AFTA’s March 2012 Scoping Paper has the support of the AFTA board, who represent the interests of travel agents throughout the AFTA membership. AFTA members support a voluntary industry accreditation scheme which strikes a fairer balance between effective consumer safeguards and a dynamic and competitive travel market in Australia. Such a scheme would follow the guidelines established by the ACCC and would allow for the requisite dynamism and robustness necessary to ‘future proof’ the Australian travel industry, in an already highly competitive and evolving market. AFTA members believe that a voluntary industry accreditation scheme can deliver increased consumer protection while being cost-effective. As noted in Commonwealth Treasury’s Policy Guidelines on Prescribing Industry Codes under Part IVB of the CCA:

AFTA Response: (b)

As the peak industry body and proven industry leader, AFTA is uniquely placed to administer a voluntary industry accreditation scheme that takes into account the needs of the modern travel industry.

Questions

Section 3.2.5(c) of the TITP Consultation Draft includes the following questions:

AFTA Response: (a)

Yes AFTA believes that a voluntary industry accreditation scheme should be developed, which incorporates a voluntary industry code of conduct developed in accordance with the ACCC’s Guidelines for developing effective voluntary industry codes of conduct. Such an accreditation scheme will provide an efficient and effective safeguard of consumer interests. An industry-specific dispute resolution scheme will form part of a new voluntary industry accreditation scheme for the travel industry. AFTA already handles a customer complaints and dispute resolution service for consumers, which will assist in the development of such a mechanism within the voluntary industry accreditation scheme.

Questions

a) Should an industry-specific dispute resolution scheme be considered?

b) If so, should this scheme be stand-alone or form part of an

accreditation scheme?

c) Who should administer such a scheme?

“in most cases, the net benefit of effective self-regulation will exceed that of government intervention”.



AFTA believes that an ombudsman scheme will be costly and unnecessary if a voluntary industry accreditation scheme is established and complies with the ACCC’s Guidelines for developing effective voluntary industry codes of conduct. AFTA is in a strong position to provide effective dispute resolution for accredited travel agents. In the event that a consumer has a dispute with a non-accredited travel agent, the Aviation Industry Ombudsman could be able to provide necessary assistance. AFTA recommends that the Federal Government consider further supporting and expanding the role of the Aviation Industry Ombudsman.

AFTA Response: (b)

It is envisaged that the dispute resolution scheme will form part of the voluntary industry accreditation scheme. The mechanism will draw on AFTA’s existing customer complaints and dispute resolution service for consumers.

AFTA Response: (c)

As the peak industry body and proven industry leader, AFTA is uniquely placed to administer a voluntary industry accreditation scheme, incorporating an industry-specific dispute resolution scheme, which takes into account the needs of the modern travel industry. AFTA already administers a customer complaints and dispute resolution service for consumers.



4. Approval Requirements AFTA broadly supports the indicative implementation plan and timeframe for transitioning out of the current scheme as set out in Section 4 of the TITP Consultation Draft. However, AFTA has proposed a number of minor modifications to the implementation plan and timeframe. AFTA has prepared a modified implementation timeline to assist the COAG Legislative and Governance Forum on Consumer Affairs to plan for necessary legislative amendments to oversee: 1. the development and roll out of the voluntary industry accreditation

scheme and code of conduct;

2. the reform of State and Territory Travel Agents Acts to facilitate the implementation of the voluntary industry accreditation scheme; and

3. the wind-up of the TCF.

Graphic 8 below outlines AFTA’s modified transition plan implementation timeline. Graphic 8: AFTA’s proposed transition plan implementation timeline

Further details regarding AFTA’s implementation plan and timeframe are outlined in Sections 4.1 and 4.2 of this Submission.

This section considers the implementation plan and timeframe for transitioning out of the current scheme and into the Transition Plan.



4.1 Implementation steps

Questions

Section 4.1 of the TITP Consultation Draft includes the following questions:

AFTA Response: (a)

A staged approach should be adopted for the removal of prudential supervision. For existing members with a valid TCF membership as at 30 June 2013, the prudential supervision should be removed all at once at the end of the 2012-13 financial year. The recent collapse of Kumuka, a large UK-based travel agency, demonstrates that travel agencies can still fail even with all the prudential supervision of the TCF in place. This being the case, there is little merit in adopting a phased removal of the prudential supervision for existing members. However, for new members who join in the 2013-14 financial year, the prudential supervision (and TCF membership renewal fees) should be removed at the end of the 2013-14 financial year as a means of retaining interim barriers to entry for new entrants and thus maintaining the integrity of the National Scheme for this period.

AFTA Response: (b)

As noted above in (a), for existing members with a valid TCF membership as at 30 June 2013, the prudential supervision should be removed all at once at the end of the 2012-13 financial year. For new members who join in the 2013-14 financial year, the prudential supervision should be removed at the end of the 2013-14 financial year. Recognising the outdated, costly and market-distorting features of the existing National Scheme, AFTA supports a ‘clean slate’ approach whereby none of the existing laws and regulatory burdens be carried forward. This will allow for fast tracking of the ‘future-proofing’ of the travel industry through the implementation of the industry accreditation scheme.

Questions

a) Should prudential supervision be removed all at once, or should a staged approach be adopted?

b) What other TCF compliance requirements should be considered for

immediate removal and why?



4.2 Implementation timeframe

Questions


AFTA Response: (a)

AFTA broadly supports the indicative implementation plan and timeframe for transitioning out of the current scheme with some minor modifications. These minor modifications are reflected in AFTA’s modified draft transition plan implementation timeline, which is outlined in further detail below. 2012-13 financial year • December 2012: Ministers agree to proposed reforms and

implementation plan. • December 2012: Development of new TCF Trust Deed, which

incorporates all steps needed to close the fund, pay out claims, honour any liabilities and distribute any remaining funds, as well as setting out implementation deadlines.

• April 2013: 10 per cent of the TCF reserves released to assist the development and implementation of the voluntary industry accreditation scheme and code of conduct.

• 30 June 2013: Prudential oversight ends for existing members of the TCF. • Consumers continue to be compensated under the TCF for the 2012-13

financial year.

2013-14 financial year • From 1 July 2013: Nominal fee payable and no prudential supervision

for existing members with a valid TCF membership as at 30 June 2013. • 1 July 2013 to 30 June 2014: TCF fees payable and prudential

supervision for new members who join in the 2013-14 financial year as a means of retaining interim barriers to entry for new entrants and thus maintaining the integrity of the National Scheme for this period.

• July 2013 to June 2014: States and Territories to repeal the Travel Agents Acts, with effect from 1 July 2014.

• January 2014: 20 per cent of the TCF reserves released to assist with the communications and education strategy.

• 30 June 2014: Existing members with a valid TCF membership as at 30 June 2014 placed on a ‘Legacy List’, which determines: - the members who are liable to have a claim made against them

under the TCF’s consumer compensation scheme until 31 March 2015; and

- the final distribution percentages of TCF reserves by State and Territory.

• Consumers continue to be compensated under the TCF for the 2013-14 financial year.

Questions

a) Is the proposed implementation timeframe too long / short / adequate?

b) When should licensing and TCF membership renewals cease?

c) Are there any other adjustments or events that need to be factored

into this timeframe?



2014-15 financial year • 1 July 2014: Voluntary industry accreditation scheme and code of

conduct commence and are fully operational. • 1 July 2014: TCF participation and operation is wound up and there is

no TCF operational activities. • 1 July 2014: State and Territory Travel Agents Acts repealed; in order to

avoid the need to table a regulation to cover the transition period the repeal will need to have effect from 1 July 2014.

• 31 March 2015: Final day for payment of any TCF claim. During the 9-month transitional window from 1 July 2014 to 31 March 2015, claims should be accepted if they relate to either: - services bought during the transitional window, where the

consumer purchased services from a Legacy List member; and - collapses that occur during the transitional window where the

consumer purchased services from a Legacy List member prior to 30 June 2014.

• 30 June 2015: TCF and its mechanics cease to exist.

AFTA Response: (b)

For existing members with a valid TCF membership as at 30 June 2013, TCF membership renewal fees should end in the 2012-13 financial year and a nominal fee should be payable in the 2013-14 financial year. For new members who join in the 2013-14 financial year, TCF membership renewal fees should end in the 2013-14 financial year.

AFTA Response: (c)

The State and Territory Travel Agents Acts will need to be repealed with effect from 1 July 2014 in order to avoid the need to table a regulation to cover the transition period.



5. Transitional Arrangements 5.1 Preservation of TCF compensation

Questions


AFTA Response: (a)

As outlined above, the voluntary industry accreditation scheme will be fully operational from 1 July 2014 and all existing members with a valid TCF membership as at 30 June 2014 will be placed on a ‘Legacy List’. Those members who are on the Legacy List will be potentially liable to have a claim made against them under the TCF’s consumer compensation scheme until 31 March 2015. This would allow for a 9-month transitional window from 1 July 2014 to 31 March 2015.

AFTA Response: (b)

Claims should be accepted if they relate to either: • services bought during the 9-month transitional window where the

consumer purchased services from a Legacy List member; and • collapses that occur during the 9-month transitional window where the

consumer purchased services from a Legacy List member prior to 30 June 2014.

AFTA Response: (c)

As noted above in (a), those members who are on the Legacy List will be potentially liable to have a claim made against them under the TCF’s consumer compensation scheme until 31 March 2015. This would allow for a 9-month transitional window from 1 July 2014 to 31 March 2015. Eligible claimants will have until 31 March 2015 to lodge such a claim.

Questions

a) How much time should be allowed for accepting eligible claims? For example, would a 6-month window suffice?

b) Should claims be accepted if they relate to services bought during

the transitional period, or should they relate to collapses that occur during that period?

c) When should this period start?

This section considers the transitional arrangements that will need to be considered as part of the phase out of the TCF’s compensation function to ensure that as a great a proportion as possible of its existing reserves is dedicated to consumer protection.



5.2 Communications Strategy

Questions

Section 5.2 of the TITP Consultation Draft restates the questions previously included in Section 3.2.2 of the TITP Consultation Draft.

AFTA Response: (a)-(c)

Please see Section 3.2 of this Submission.

Questions

a) Are there any particular consumer or trader information needs that should be addressed by a national communications campaign? For example, should any particular messages be conveyed?

b) When dealing with travel agents, what sort of information would

consumers find useful?

c) Are there any special audiences that should be targeted?



6. Existing Measure of Oversight AFTA acknowledges the complexity that currently exists in the regulation of the travel industry due to the convergence of multiple agencies and regulatory mechanisms. The regulatory devices currently providing oversight for the travel industry include:

The Australian Consumer Law (overseen by the ACCC and Fair Trading Agencies);

Alternative Dispute Resolution (including tribunals); Corporations Act 2001 (administered by ASIC and the ASX); National Business Names Register (administered by ASIC); ASX Public Company Listing Rules (administered by the ASX); ACCC Franchising Code; Code of Banking Practice 2004 (overseen by the Code

Compliance Monitoring Committee); ASIC’s E-Payments Code; IATA Industry Accreditation; International Cruise Council of Australasia (ICCA) Industry-Specific

Accreditation; AFTA Industry Association membership; and Insurance schemes (various providers).

Many of these regulatory devices incorporate financial audit requirements and, in certain instances, offer industry-wide coverage rather than being limited to travel intermediaries. In many instances the TCF duplicates these existing laws and regulatory requirements. AFTA acknowledges that these measures of oversight provide adequate and effective protection for consumers and travel agents, and can continue to do so following the winding up of the TCF.

This section considers the existing measures of oversight that travel service providers are required to comply with, many of which are general in their application across a wide range of industries.

AFTA endorses a vigorous and effective pursuit of inappropriate travel intermediary business behaviour by the ACCC and other relevant bodies, to ensure compliance with these regulatory devices.



7. Conclusion The COAG Legislative and Governance Forum on Consumer Affairs’ TITP Consultation Draft presents a reform pathway that can help ensure the ongoing viability of the Australian travel industry. The present regulatory regime in Australia is outdated and is no longer ‘fit for purpose’. Now is the time to ‘future proof’ the Australian travel industry to ensure that it is globally competitive, and has a robust and appropriate regulatory structure. In this Submission, AFTA has demonstrated its strong support for the five key recommendations made in the TTIP Consultation Draft to reform the regulatory framework for travel agents in Australia. The TITP Consultation Draft represents sensible reform to ensure that Australia has a fair, efficient and competitive travel industry that meets the needs of consumers and industry alike. AFTA has proposed that central to the development of a voluntary industry accreditation scheme is the requirement for the travel agent or travel service provider to adhere to the voluntary industry code of conduct, to be developed in accordance with the ACCC’s Guidelines for developing effective voluntary industry codes of conduct. Reform to the regulatory framework for Australia’s travel industry will enable greater accreditation coverage than exists under the current National Scheme. As a voluntary industry accreditation scheme, travel intermediaries that are currently out of scope within the national scheme (for example off-shore internet-based travel sellers) will be able to opt in and commit to the terms of an industry code of conduct and other essential entry criteria. AFTA broadly supports the indicative implementation plan and timeframe for transitioning out of the current scheme as set out in Section 4 of the TITP Consultation Draft. AFTA’s proposed minor modifications to the implementation plan and timeframe in Chapter 4 of this Submission, reflect the industry’s commitment for a realistic transition timeframe that maintains adequate consumer protection safeguards during the development of the new regulatory framework. AFTA congratulates policy makers for the progress so far.AFTA is fully committed to continue working with governments and consumers to develop a collaborative travel industry transition plan that will incorporate a voluntary industry accreditation scheme and code of conduct. This approach will take into account the needs of the modern travel industry in a globally competitive environment.



Bibliography Australian Banker’s Association, Code of Banking Practice, available at http://www.bankers.asn.au/Industry-Standards/ABAs-Code-of-Banking-Practice, accessed 12 September 2012, May 2004 Australian Competition and Consumer Commission, Guidelines for developing effective voluntary industry codes of conduct, (Commonwealth of Australia, July 2011) Australian Federation of Travel Agents, 2006 (AFTA 2006), Constitution of The Australian Federation of Travel Agents Limited, available at http://www.afta.com.au/Assets/74/1/Constitution26Apr06.pdf, accessed 15 February 2012, April 2006 Centre for International Economics, 2002 (CIE 2002), National Co-Operative Scheme for the Regulation of Travel Agents: Working Party Report to Ministers on the National Competition Policy Review, August 2002 Competition and Consumer Act 2010 (Cth) Corporations Act 2001 (Cth) Council of Australian Governments (COAG) Legislative and Governance Forum on Consumer Affairs, Travel Industry Transition Plan Consultation Draft, August 2012 Council of Standards Australia, Australian Standard – Complaints Handling, AS 4269-1995 Council of Standards Australia, Australian Standard – Compliance Programs, AS 3806-2006 KPMG, Study into the red tape burden associated with the regulation associated with the regulation of travel agents, April 2012 PriceWaterhouseCoopers, Review of consumer protection in the travel and travel-related services market, November 2010 The National Co-operative Scheme for the Uniform Regulation of Travel Agents – Participation Agreement (Schedule)

Appendix 1: AFTA’s proposed transition plan implementation timeline

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