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CMA Issue an Open Letter to the Wedding Sector

The Competition & Markets Authority have issued an Open Letter to the Wedding Sector today (7/9/20)- you can read it verbatim here.

Dear Sir/Madam
CMA open letter to the weddings sector

  1. The purpose of this letter is to help businesses in the weddings sector
    understand how the CMA considers that consumer protection law applies to
    the wedding contracts they have with consumers during the COVID-19
    (coronavirus) pandemic. The crisis has highlighted the importance of
    businesses ensuring their contracts meet the requirements of the law and that
    they recognise consumers’ rights in the current situation.
    Introduction
  2. The CMA appreciates that we are in unprecedented times resulting in
    significant challenges for both businesses and consumers. We understand
    that many wedding businesses and consumers have agreed voluntary
    arrangements to handle the effects on their contracts which work well for both
    parties. The CMA is not seeking to disrupt these arrangements provided they
    were fairly agreed and the business has not pressurised the consumer in any
    way to accept the new arrangements at the expense of their rights under the
    law.
  3. The CMA has published a statement which sets out its views on how the law
    operates in relation to contracts for wedding services which have been or will
    be affected. We are encouraging businesses in the sector to familiarise
    themselves with it and to take any necessary steps to ensure they comply
    with consumer law. We are also encouraging consumers to read up on and
    understand their rights.
  4. This letter, and the statement the CMA has published, does not introduce new
    laws or rules for wedding businesses. Rather, they explain how, in the CMA’s
    view, the current law applies in the present circumstances. They address
    specific issues which have been drawn to the CMA’s attention by consumers
    as being problematic.
  5. Where businesses do not comply with consumer law, they risk action by the
    CMA or any other enforcer under consumer protection law, such as local
    authority trading standards services. Consumers may also take action
    themselves, through the courts if necessary, to challenge breaches of contract
    and terms and practices which they think are unfair.
    Consumer law and the weddings sector
  6. On 20 March 2020, the CMA established its COVID-19 Taskforce. Its purpose
    is to monitor market developments in the wake of the pandemic, to identify
    any commercial practices that adversely affect consumers, and to consider
    appropriate responses to help businesses comply with the law and protect
    consumers’ rights.
  7. Through this work we received reports alleging some unfair practices by a
    minority of businesses, including some in the weddings sector, mainly relating
    to the cancellation of contracts and services in the context of coronavirus
    lockdown restrictions. As a result, on April 30 2020 the CMA published a
    statement on how, in its view, the law applies to consumer contracts, refunds
    and cancellations and announced it would examine weddings as one of three
    sectors of concern. The CMA has also recently updated that statement.
  8. Our investigation found the majority of wedding businesses were striving to
    reach fair arrangements with consumers in very challenging circumstances. In
    many cases, couples have reached new agreements to re-schedule their
    wedding. However, we also found some points of concern, and other issues
    on which we think businesses and consumers would benefit from more
    detailed clarification. These are explained in more detail in the weddings
    statement we have published.
    1. In summary, the issues are:
      (i) wedding businesses refusing to offer or give appropriate refunds where
      weddings are (or were) prevented from taking place by lockdown laws;
      (ii) uncertainty about weddings that are affected by legal restrictions and
      government guidance as lockdown laws are eased; and
      (iii) businesses seeking to rely on unfair contract terms.
      (i) Wedding businesses refusing to offer or issue appropriate refunds
      where weddings are (or were) prevented from taking place by lockdown
      laws
      10.In the earlier part of the pandemic the government put in place lockdown laws
      which required wedding venues to close and prohibited people leaving home
      and attending gatherings. Those laws prevented weddings taking place.
      Governments or local authorities may also introduce local lockdown rules at a
      later date that have similar effects.
      11.Where lockdown laws mean (or meant) a wedding cannot go ahead on the
      date agreed, the contract between a wedding business and a consumer is
      likely to come to an end. It will be what the law describes as ‘frustrated.’
      12.Where lockdown laws prevent (or prevented) a wedding from going ahead as
      agreed, the consumer should be offered a refund. The CMA’s view is that the
      starting point under the law is that this should be a full refund, and a refund
      would be due even where the consumer has paid what the business says are
      ‘non-refundable’ deposits.
      13.Wedding businesses may be able to withhold some amounts from a refund
      where they have already provided some services to the consumer and
      incurred some costs before the wedding was prevented from taking place.
      Our statement sets out the sums that, in the CMA’s view, a business may or
      may not retain. In summary, we think it may be fair for a business to retain:
      (i) a sum for services or products it has already provided to the consumer
      (such as bespoke goods made for them) which have an ongoing value
      that the consumer will continue to benefit from even after the contract
      has ended; and
      (ii) a limited contribution to other costs which have a sufficiently direct
      connection with the contract, are incurred before the wedding was
      prevented from taking place and have gone to waste (such costs may
      include the buying of food and flowers for the wedding which cannot
      take place).
      There are, in the CMA’s view, likely to be few if any sums which fall into the
      first category and only limited amounts falling within the second.
      14.There are also costs which the CMA considers that the business should not
      recover by withholding sums from refunds. These include:
      (i) costs which produce ongoing, reusable benefits to the business (such
      as general refurbishment and maintenance costs for wedding venues),
      as the business will get value from these in other contracts for
      weddings that can go ahead;
      (ii) fixed costs of doing business (such as general staff costs (other than
      those identified as potentially recoverable above), general IT system
      costs, and other general business costs (like utility costs, bank charges
      and business rates)) as these are costs incurred in any event whether
      or not a wedding contract was entered into;
      (iii) costs which can be recovered from other sources (such as the furlough
      scheme or other Government support schemes); and
      (iv)costs of administering a refund.
      (ii) Weddings affected by legal restrictions and government guidance
      15.As circumstances surrounding the coronavirus have changed, the government
      has sought to ease lockdown laws and replaced parts of them with guidance
      about what people and businesses should do. These changes have removed
      or modified some of the legal restrictions requiring business to remain closed
      and prohibiting individuals from leaving home and attending gatherings.
      Governments have also issued guidance about where and how wedding
      ceremonies and receptions can safely take place. The position is likely to
      evolve further as restrictions change in response to the coronavirus.
      16.In these circumstances, wedding businesses have to assess whether and
      how the wedding can take place and the effect on the wedding contract.
      Where a key element of the contract (such as venue, catering service or the
      reception and entertainment) cannot safely and lawfully be provided as
      agreed, the more likely the contract is to be frustrated. In that case, the
      consumer would be due a refund as set out above.
      17.The same is likely to be true if the number of guests who can safely and
      lawfully attend the wedding and/or reception is radically different to that
      agreed in the contract. The number of guests is likely to be another key part of
      the wedding contract and the fewer who can attend compared to the number
      agreed, the more likely it is that the contract is frustrated and the consumer is
      due a refund of the kind described.
      18.However, where there is a more limited impact, for example where the
      wedding can go ahead at the agreed venue, with catering and a reception
      mainly as agreed, for a substantial majority of the agreed number of guests,
      there is less likelihood that the contract is frustrated. The consumer may still
      be due a pro-rata price reduction for the parts of the wedding that are not
      provided, or provided in a different way to that agreed, but they are less likely
      to be due a fuller refund as set out above. This is explained further in the
      second part of our weddings statement.
      (iii) Unfair Contract terms
      19.We have seen examples of wedding businesses using what, in the CMA’s
      view, are unfair contract terms to try to deny consumers refunds. These
      include terms which seek to:
      (i) avoid or limit the business’s liability to refund consumers where the
      wedding cannot go ahead (sometimes called ‘force majeure’ clauses);
      (ii) allow the business to change the services it provides after the contract
      has been agreed (often called ‘variation clauses’); and
      (iii) impose excessive cancellation charges on consumers (‘unfair
      cancellation terms’).
      Where wedding businesses use terms that are unfair, those terms are
      unenforceable. They would not have the effects the business intends, and the
      business cannot rely on the term at all.
      20.In the CMA’s view, force majeure clauses (or similar terms which seek to
      limit a wedding business’ liability to refund consumers whose weddings
      cannot go ahead) are likely to be unfair if they seek to prevent consumers
      obtaining refunds as set out above.
      21.Variation clauses are also at risk of being unfair if they have the effect of
      giving the business a ‘blank cheque’ allowing it to change important parts of
      the contract to suit itself. In the CMA’s view, such terms are more likely to be
      fair if they are limited so that they only allow the business to change what it
      provides in a narrow range of circumstances genuinely outside its control
      (such as changes in the law); give the consumer the right to advance notice of
      any proposed changes; and give the consumer the option of a pro-rata price
      reduction or (where the change is significant) to cancel the contract and get a
      refund.
      22.Where a consumer cancels they should not face disproportionately high or
      extra charges for ending the contract. In practice, this means the consumer
      should not be liable for anything more than a proportion of the price of the
      wedding, based on costs which can be legitimately recovered. Terms saying
      no refund is available in any circumstances, or that a consumer must pay in
      full if they cancel, without taking into account any savings to the business for
      not having to provide the wedding are likely, in the CMA’s view, to be unfair
      cancellation terms.
      Next Steps
      23.We strongly encourage businesses to examine their contracts with wedding
      couples and ensure they comply with consumer law. For further information,
      please see our guides on consumer protection law or contact your local
      trading standards service. If you need to redraft your contracts in light of this
      letter and the statement we have published, please also refer to our unfair
      contract terms guidance and in particular our guidance for businesses on how
      to write fair contracts.
      Yours faithfully
      Gordon Ashworth
      Director – Consumer Group

To find out more please take a look at the Government site links below.

https://www.gov.uk/government/publications/wedding-services-coronavirus-covid-19-cancellations-and-refunds/wedding-services-affected-by-covid-19-statement-of-the-cmas-position-on-cancellation-and-refunds

https://www.gov.uk/government/publications/wedding-services-coronavirus-covid-19-cancellations-and-refunds

https://www.gov.uk/government/publications/wedding-services-coronavirus-covid-19-cancellations-and-refunds

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