Protecting Consumer Rights in the Tour Industry:

Who Is Responsible?

CED-79-108: Published: Jul 23, 1979. Publicly Released: Jul 23, 1979.

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In 1977, American households took an estimated 312 million trips, of which 18.7 million were package tours. It is estimated that at least $4 billion was spent on these package tours. The growing number of complaints received by Federal agencies attests to the fact that the consumer rights of travelers taking package tours are not adequately protected. A Federal Trade Commission (FTC) investigation of the industry revealed that as many as 800,000 travelers a year may encounter problems with the tour they purchase. In early 1976 the FTC initiated an investigation of the package tour industry. During the investigation, FTC received about 3,000 complaints from travelers. Complaint files of subpoenaed tour operators were also checked.

FTC estimated that the most common unpleasant experience of traveling consumers is the failure to receive one or more advertised items. Almost all tour operators have a high incidence of complaints involving the notification or lack thereof of changes in tours. Another problem is the traveler's inability to ascertain easily from the brochure who the tour operator is and who is liable if something goes wrong. FTC uncovered only one operator who did not have an extremely broadly phrased limitation of liability clause, typically inserted in the fine print of the brochure. FTC found that almost invariably operators limit their liability for the failure of third parties to fulfill their contractual obligations. In a significant number of cases, operators attempt to exculpate themselves from their own negligent acts. GAO concluded that greater controls to protect the touring public are needed, but realized that this may be difficult to achieve under the current disjointed Federal regulatory structure. Although FTC is responsible for preventing unfair practices in industry, the various transportation regulatory agencies, such as the Civil Aeronautics Board, Interstate Commerce Commission, and the Federal Maritime Commission, are responsible for regulating the modal aspects of tours. FTC is precluded from exercising jurisdiction over transportation carriers, and the responsibility of the regulatory transportation agencies is unclear. A regulatory gap has resulted.

Matter for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should enact legislation providing FTC with primary responsibility for preventing unfair and deceptive practices concerning ground or nontransportation parts of package tours. This can be accomplished by further amending the Federal Trade Commission Act to add the following to section 5(a)(2): "provided, however, that nothing in this subsection shall exclude from its coverage carriers, or others, insofar as ground or nontransportation parts of package tours are concerned." In addition, the Congress should direct FTC to assist the tour operator industry in gradually implementing a consumer protection trust fund.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: After receiving authority from the Congress, the Chairman of the FTC should focus on the following: (1) requiring greater affirmative disclosure of basic tour information in brochures and contracts; (2) modifying the typical liability limitation clause in contracts to strike out language which is clearly unconscionable and unenforceable; (3) requiring that travelers be promptly notified of important changes in a package tour and that they be given the option to cancel without penalty; and (4) making it easier for travelers to sue the tour operator in the jurisdiction where they purchased the tour package. This could be accomplished by requiring tour operators to designate travel agents which sell their tours as their agents for accepting service of process.

    Agency Affected:

 

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