CMA FAILS CONSUMERS ON WEDDING REFUNDS, WITH A DEAL WHICH CONTRADICTS ITS OWN PREVIOUS POSITION

The Competition and Markets Authority (CMA) has let consumers down greatly in relation to the outcome of its investigation into Bijou Weddings Group; I am calling upon the CMA to reconsider its position as a matter of urgency, and to recognise the position it has reached is based on a methodology that is fundamentally flawed and contradictory to its previous guidance.

Background

The wedding industry was one of the victims of the period of lockdown between March – July, causing widespread disputes between consumers and wedding venues. Brides and grooms-to-be argued (rightly in my opinion) that they were due full refunds for their cancelled weddings. Many venues however took the stance that they were entitled to simply move the wedding date, rather than provide a refund.

On 7^th September, the CMA waded in by posting a guidance online, setting out its view, and warning it would investigate any venues seen to be flouting consumer laws.

The advice provided on 7^th September was clear, and stated where weddings had been cancelled, venues had an obligation to refund consumers. It stated:

Where lockdown laws prevent or prevented a wedding from going ahead on the agreed date, the starting point under the law is that the consumer should be offered a full refund (see section 1(2) of the Law Reform (Frustrated Contracts) Act 1943).

I agree that this was the correct position.

The CMA then went on to state that venues may, however, withhold certain limited amounts relating to expenses already incurred in respect of the wedding.  Usefully, it went on to provide guidance on this point as well, stating:

Each case will have to be assessed on its own merits but, in the CMA’s view, it is likely to be just for the wedding business to retain:

• category A: money to cover services or products which it has already provided, like bespoke goods made for the consumer, which have an ongoing value that the consumer will continue to benefit from even after the contract has ended
• category B: a limited contribution to other costs incurred by the business which have a sufficiently direct connection with the contract in question, such as the costs of staff time spent specifically on planning the wedding.

Given the nature of wedding contracts, the CMA considers that there are likely to be few sums falling within category A and some costs the business could retain under category B.

Again, I fully agreed with this advice, and agreed with the notion that: i) the amounts which could be withheld by venues would be ‘limited’; and ii) any monies withheld would have to represent costs directly linked to the actual wedding in question.

The CMA provided examples of what could represent such expenses, such as: bespoke items or goods, staff time utilised in the planning of the wedding (prior to lockdown), and any other expense directly linked, and actually incurred, before the wedding was prevented from going ahead. The CMA also usefully provided a list of expenses that it considered would not be recoverable by the venue. This was split into three categories, and stated as follows:

Unrecoverable costs

• costs which produce ongoing and re-usable benefits for the wedding business, such as general refurbishment costs for the wedding venue
• fixed costs of doing business
• duplicate costs (such as costs the business could recover from another source)
• the costs of administering a refund

In the CMA’s view, unrecoverable costs in this category include the costs of a venue’s general refurbishment and maintenance. These would not have been incurred for the provision of specific weddings, and the business would have the benefit of the refurbishments and maintenance under other contracts (e.g. for other weddings that do take place).

Fixed costs of doing business

• costs associated with the right to operate the venue (such as depreciation or rental payments)
• general staff costs (other than those identified as potentially recoverable above)
• general IT system costs
• other general business costs (such as utility costs, bank charges and business rates)

Those are the costs a business incurs in any event, whether or not any particular wedding contract was entered into. In the CMA’s view, a court would not regard it as just to recover these from specific consumers whose weddings were prevented from happening.

Duplicate costs

The business may not, in the CMA’s view, recover the same costs twice.

It cannot therefore, for example, recover the same set of costs twice from different consumers or require a consumer to pay costs that it could recover from some other source (such as from a government support scheme aimed at helping businesses during the pandemic).

This guide was a victory for the consumer, as it clearly (and in my view, correctly) set out the law, and sent a very firm message to wedding venues/suppliers. What followed was an open letter to wedding venues along the same lines.

The CMA then announced on the same day (7^th September), that it had secured a refund promise from the Bijou Weddings Group. This was welcomed news for customers of Bijou, and sent a clear message to other wedding venues/suppliers that they needed to follow suit. The announcement lacked detail, but made clear that it would represent a ‘fair’ outcome for consumers.

However, Bijou customers have now received letters from the CMA outlining this ‘fair’ outcome, and have been devasted to find that it is anything but fair. In fact, not only is it clearly unfair, it represents a clear contradiction, on the part of the CMA, of its position set out in its 7^th September guidance, and is not in line with consumer laws.

THE CMA OUTCOME

The CMA has concluded that the appropriate retention which it considers ‘fair’ in the case of Bijou, or, in other words, the amount of money that it is fair for it to deduct from consumer refunds, is 37.2% of the cost of the wedding. So, if you paid £15,000 for a wedding with Bijou, you will be looking at a £9,420.00 refund, therefore losing £5,580.00.

Extract of CMA letter

This is far too high, and an analysis of how this has been arrived at reveals fundamental flaws in the methodology the CMA has adopted.

1. The CMA says that 85% is a contribution to wedding planning services and includes IT support. How has this figure been arrived at, and how can IT costs be included? Further, on 7^th September, the CMA specifically excluded the likes of IT costs, which it classified as a fixed cost of doing business.

2. The CMA says that 10% is a contribution to the cost of venue repair and renewal. This is a direct contradiction to the CMA’s position on 7^th , when it classified this type of cost as an unrecoverable cost .

3. The CMA says that 5% is a contribution to the cost of venue gardening and cleaning. This is a direct contradiction to the CMA’s position on 7^th , when it classified this type of cost as an unrecoverable cost.

NEXT STEPS

It is fair, and indeed in accordance with the law, for venues to deduct fair and reasonable costs that have ‘actually’ been incurred, and have a direct connection with the ‘actual’ wedding in question.

Staff time spent planning a wedding would fall within this. But for a business which does this professionally, and therefore has slick routines in place for doing so, how long would this really take? If the venue has spent monies on bespoke goods or services for the wedding, which they cannot recover or re-sell, this too is a cost which the venue can recoup.

All other costs will not be directly connected to the wedding, and will not therefore be recoverable. For example, the upkeep and cleaning of a venue is a cost associated with the running of the business, and benefits all future weddings. Why should a consumer have to pay for this?

The CMA needs to revert to its 7^th September guide and, in light of this, reassess its position with Bijou. Also, each case should be assessed on its individual merits and circumstances, rather than adopting a blanket methodology. I accept that the CMA has provided for an adjustment to the calculation depending on the proximity of the wedding date to the start of lockdown. However, closer analysis of the actual costs incurred should be undertaken in each case.

FORBEARANCE

I do have complete sympathy for Bijou and other wedding venues/suppliers. This is really hard on them and catastrophic to their businesses. If you have a wedding booked and can live with moving the date, rather than a refund, I would urge you to do this instead.

I also urge the insurance providers that have provided business interruption insurance to these businesses to do the right thing and pay out.

Finally, any consumers who have an insurance policy covering their wedding plans should make a claim under this. You will not be able to double recover, so if your claim is successful, you will not be able to then claim from the venue.