Last reviewed 27 September 2012

Paul Clarke reports on a recent court case concerning the selling of flight cancellation insurance in online transactions.

Is it fair to consumers if flight cancellation insurance is on a default setting when tickets are sold online? That was the question referred by a German court to the EU's Court of Justice (CJEU) recently in Case C-112/11 ( Deutschland GmbH). As always applies in the CJEU, it is immaterial which national court asks the question: the resultant ruling will define any relevant EU legislation for all Member States.

In this particular case, the legislation at issue is Regulation 1008/2008 on common rules for the operation of air services in the EU. This seeks, among other requirements, to provide greater transparency in air fares for flights departing from anywhere in the Union. Persons selling air tickets are required at all times to indicate the "final price", ie the price of the flight in addition to all taxes, fees and surcharges that are essential for the purposes of that flight. On the other hand, "optional price supplements" relating to additional services that are not compulsory must be communicated clearly at the start of any booking process and accepted by the customer on an “opt-in” basis.

Case C-112/11 arose when a consumer protection association brought proceedings against before the German courts, with a view to requiring it to refrain from automatically including cancellation insurance with the air fare. The company operates an online portal and, when a customer selects a specific flight during the booking process, the costs are listed in the top right-hand corner of the internet page, under the heading "your current travel costs". In addition to the price of the flight, that list also contains amounts in respect of "taxes and fees" and "cancellation insurance", calculated automatically. The total of those costs represents the "total price of travel".

A notice at the bottom of the page indicates how the customer should proceed if he or she wishes to reject the cancellation insurance, which has been included as a default setting. That procedure is by means of an opt-out. Once the customer pays after finalising the booking, then pays the flight costs to the air carrier, the taxes to the appropriate authorities and the insurance premium to the insurance company, which is legally and economically separate from the air carrier.

In that context, the Higher Regional Court, Cologne, asked the CJEU whether the prices of such services provided by third parties, which are charged to the customer by the company offering the flight, together with the air fare, as part of a total price, constitute "optional price supplements", with the result that the services in question must be offered on an opt-in basis. The CJEU noted that it would be at odds with the objective of protecting customers if that protection were to depend on whether the optional service is provided by an air carrier or by another party that is legally separate from that carrier. What matters, it emphasised, is that the optional additional service and the corresponding price are offered in relation to the flight itself during the booking process. The Court went on to rule that a person selling air travel may not include flight cancellation insurance as a default setting when selling over the internet. The concept of "optional price supplements", it insisted, covers costs, connected with the air travel, arising from services — such as flight cancellation insurance — supplied by a party other than the air carrier and charged to the customer by the person selling that travel, together with the air fare, as part of a total price. As an "optional supplement", flight cancellation insurance may be offered only on an opt-in basis.