“I’d Like a Refund, Please” – The Impact of COVID-19 on Refunds and Returns
June 15, 2020
By Amanda Branch and Jasmine Godfrey
The COVID-19 pandemic has led to changes in several industries about how, and if, items can be returned or refunded. Because coronavirus is spread by close contact, some retailers have suspended product returns of any kind during physical store closures and have extended the time consumers have to return an item after the store reopens (e.g. 90 days after re-opening). Clothing retailers have long restricted the return of personal items such as undergarments and bathing suits. However, owing to the personal nature of many items such as all clothing items, hats, and jewelry, some retailers have made these items final sale. The Government of Alberta recently released General workplace guidance for business owners re-opening or continuing operations and suggested that, as part of preventing the risk of transmission of COVID-19 to workers, volunteers, and patrons, retailers should consider revising return policies to make certain items final sale only.
Similarly, due to the recent restrictions on mass gatherings of people to slow the spread of the coronavirus, hundreds of events such as concerts and sporting games have been cancelled. Many organizations are struggling to refund tickets when faced with cash flow issues; however, it is not uncommon for sporting event or concert tickets to be several hundred to several thousand dollars each, which can have a significant impact on consumers who may have financial issues of their own.
This article will look at examples of transactions where consumers may want or expect a refund following cancellation or postponement and how organizations have handled these types of requests during the COVID-19 pandemic.
General consumer rights and common consumer transactions
In Canada, there is no general law that says all sellers must take back an item; however, there may be provincial or territorial legislation that gives consumers the right to return certain products (e.g., products that are defective) or cancel specific contracts. For example, under the Ontario Consumer Protection Act consumers have a “cooling off period” for certain types of contracts which allows a consumer to cancel a contract without reason or penalty within a certain number of days. This applies only to specific contracts, such as direct agreements (i.e., products or services purchased from a door-to-door sales person) and personal development contracts (i.e., paying in advance to join a fitness club or gym). Further, products must be delivered within 30 days of the promised delivery date, or the consumer has the right to request a refund (however, this right is lost should the consumer keep the item that was delivered late). Similarly, the Alberta Consumer Protection Act grants consumers a right to cancel certain sales or contracts within 10 days (e.g., door-to-door sales, pre-paid contracting, timeshare sales contract).
Due to social distancing requirements and restrictions on mass gatherings, many events have been cancelled or postponed. Whether a promoter or ticket agent can refuse refunds depends partly on the terms and conditions of the original ticket and also on local consumer rights laws. The rules for the sale of tickets to events in Ontario are outlined in the Ticket Sales Act, which seeks to promote fairness, transparency and consumer protection in the ticket industry in Ontario. When making a ticket available for sale, ticketing businesses are required to make various disclosures, such as the face value and total price of the ticket, the currency (if not CAD), and the seat location.
There is no express legal requirement for primary ticket sellers to refund for cancellation or postponement of an event (although secondary sellers are obligated to refund in certain circumstances). Typically, the ticket seller is able to set the terms of sale.
During the COVID-19 pandemic, we have seen a few high-profile instances of organizations allegedly changing their refund or return policies, detailed below.
In an April 13, 2020 announcement, Live Nation Entertainment—Ticketmaster’s parent company—stated that eight thousand shows were impacted by the event stoppage and, of the 15 million tickets sold for those shows, 90% of tickets were for shows that were postponed, with the remaining 10% of tickets being for cancelled shows.
Ticketmaster faced swift backlash from consumers and politicians after allegedly changing the wording of its refund policy to state that only “cancelled” events and not “postponed” or “rescheduled” events, were eligible for a refund. Ticketmaster has since stepped back from this position and agreed to issue refunds for postponed events too; however, various class action lawsuits have already been launched in the U.S. and Canada.
In Canada, the class action lawsuits are claiming, among other things, breach of contract arising from Ticketmaster’s failure to provide refunds in accordance with the refund policy that was in place at the time of purchase and that Ticketmaster engaged in unfair practices contrary to various provincial consumer protection legislation and the federal Competition Act.
Similarly, StubHub, one of the world’s largest resale ticket websites, is facing class action lawsuits in the U.S. and Canada for refusing refunds to people who bought tickets for events that have been, or will likely be, cancelled as a result of the COVID-19 pandemic. Up until recently, StubHub provided a “FanProtect Guarantee” which gave consumers a cash refund if an event was cancelled and not rescheduled. In late March, StubHub altered the terms so that in some circumstances, customers would be forced to take the time-limited credit for use on future purchases instead of a cash refund.
Similar to the Ticketmaster class action, the lawsuit against StubHub is alleging, among other things, breach of contract for failing to abide by the refund policy that was in place at the time of purchase and various breaches of provincial consumer protection legislation.
Border and non-essential travel restrictions have significantly impacted the travel and tourism industry. Many consumers found themselves with cancelled flights or vacations.
The Canadian Transportation Agency’s Air Passenger Protection Regulations set out the obligations of the airline in various situations to passengers regarding airline tickets, including situations that are within and outside the airline’s control. Certain situations will entitle the consumer to a rebooking, refund or compensation. In the event that a situation is deemed outside the airline’s control, the airline’s obligation is to ensure customers can complete their trip (e.g., by being rebooked on another flight), but refunds are not mandated.
The CTA identified a number of situations related to the COVID-19 pandemic that it considers “outside the airline’s control”, including:
- flight disruptions to locations that are covered by a government advisory against travel or unnecessary travel due to COVID-19;
- employee quarantine or self-isolation due to COVID-19; and
- additional hygiene or passenger health screening processes put in place due to COVID-19.
This has frustrated consumers who were unable to get a refund for their ticket. Several airlines instead offered a time-limited travel voucher. This move was criticized for a number of reasons, including that in light of the uncertainty surrounding how long this pandemic may last, ticketholders will not have the opportunity, desire, or ability to redeem their vouchers. Class action lawsuits have been launched in both the U.S. and Canada, including an action against Air Canada, WestJet, Sunwing, Air Transat and Swoop, alleging that the airlines must provide cash refunds instead of issuing future credits.
In navigating these unprecedented times, it is important for organizations to exercise transparency and understanding towards their customers. Organizations should be mindful of legal requirements but should also take into account how the pandemic has impacted their audience or consumer base, and act to ensure that consumer base returns when restrictions lift.
Content shared on Bereskin & Parr’s website is for information purposes only. It should not be taken as legal or professional advice. To obtain such advice, please contact a Bereskin & Parr LLP professional. We will be pleased to help you.