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Does Increasing Market Complexity Benefit Consumers? High Court Ponders

Holiday SunsetThe emergence of ever more complex trading algorithms has enabled once simple markets to become increasingly sophisticated and, in an important decision relating to the market in holiday timeshare exchanges, the High Court has analysed the impact of such developments on consumers.

The case concerned a company that provided a service to timeshare owners whereby their rights to ‘weeks’ of occupation of holiday properties could be pooled and exchanged with others so that they did not have to take the same holiday every year. The company, which was established in the 1970s, at first operated using a manual card index and arranged exchanges solely between its subscription-paying members.

The advent of computers, however, created a sea change in the company’s business model. Amongst other things, it began to acquire timeshares in its own right to put into the pool and to rent out parts of its inventory to non-members. This resulted in a large number of members complaining that the company was being operated primarily for its own, rather than their, benefit and that the quality and breadth of choice of exchanges available to them had been greatly reduced.

A group action against the company was launched by almost 500 of its members, who alleged that the company had removed, withheld or used timeshares from the exchange pool to their detriment and in breach of contract. However, the company argued that its methods ultimately benefited members. Its confidential algorithms enabled it to balance timeshares across its network, increasing opportunities for members to make fair exchanges.

The Court noted that there was little doubt that members had a grievance in that the holidays they wanted were not always available. However, in rejecting their claims, it noted that they were aware that the company was profit driven. There was no express or implied term in their contracts that the company would not remove, withhold or use timeshares to their detriment. It had in any event not been proved that the company’s treatment of its member-deposited inventory caused a shortfall in the suitability or quality of exchange opportunities available to them.