Carnival to Refund $40 million

rogue · April 1, 2008

Carnival Corp. will refund $40 million to cruise passengers who were forced to pay extra fuel charges even after they had booked their trips, part of a deal the company announced Monday to settle an investigation by Florida Attorney General Bill McCollum.

The refunds will cover more than 1.1 million bookings.

McCollum said in an interview that the settlement came together last week.

"I think Carnival's being a good corporate citizen, and I'm pleased with it," McCollum said. "The concern I've always had is the fact that people who booked and then got something charged to them . . . were being treated unfairly. You just can't do that."

Under the agreement, Miami-based Carnival, the world's largest cruise operator, can continue to levy its fuel surcharge -- a $5-a-day fee, up to $70 a passenger or $140 per cabin. But the company must clearly disclose the fee to customers before they buy a trip and must display the amount "directly above, beneath or next to the cruise-fare price."

The agreement is modeled after a deal McCollum's office struck last month with Royal Caribbean Cruises Ltd., the world's No. 2 cruise operator. The latest agreement covers six Carnival brands, including Carnival Cruise Lines, Holland America Line and Princess Cruises.

Carnival said in a prepared statement Monday night that passengers who were retroactively charged and have sailed or will sail on cruises departing as of Friday will receive refunds in the same form they used to purchase their cruise. Retroactively charged passengers on voyages between April 5 and June 23 will get an onboard spending credit. Anyone retroactively charged sailing on later cruises will have their bookings adjusted to remove the surcharge.

A Carnival spokesman added that the company was "pleased" that a settlement had been reached.

The cruise company announced Nov. 7 that it would begin levying a new charge to help cover soaring fuel costs. The charge applied to passengers sailing on cruises departing as of Feb. 1 -- even those passengers who had already booked their trips.

The announcement set off a stampede of similar charges at rival cruise lines. Royal Caribbean, for instance, adopted a nearly identical charge the next week.

The maneuvers spawned more than 400 complaints to the attorney general's office and prompted McCollum to open an investigation. He contended that the decision to retroactively charge some passengers violated a 1997 agreement the major cruise lines had signed with the state that restricts the kinds of fees they can charge beyond advertised fares.

Royal Caribbean announced March 10 that it would refund $21 million worth of retroactive surcharges to settle its part of the investigation.

But McCollum's probe into Carnival was complicated by the fact that Carnival argued it had been given permission to levy a fuel charge by the attorney general's office when it was run by McCollum's predecessor -- Gov. Charlie Crist.

The Orlando Sentinel reported last week that records showed Carnival approaching then-Attorney General Crist's office in October 2006, seeking approval for a new charge to help absorb rising fuel prices.

Crist's office agreed to allow the charge, provided Carnival made it temporary, tied it to actual fuel-cost increases, and adequately disclosed it to consumers ahead of time.

That same month, Carnival subsidiaries Holland America Line and Princess Tours gave a combined $250,000 to the Republican Party of Florida, which was at the time paying for television advertisements, staff and more to help Crist get elected governor. Carnival said last week the contributions were unrelated to the surcharge discussions.

McCollum's office argued that Carnival violated even the conditions outlined under Crist's administration, because the retroactive charge wasn't adequately disclosed to customers.

As recently as two weeks ago, Carnival executives were still publicly standing by their decision.

"I'm sure that their perceptions were somewhat influenced by that opportunity they had. But the reality was they did not have permission even in 2006 for a retroactive [charge]," McCollum, a former Republican congressman from Longwood, said Monday.

"They may have thought so. But that's not what my understanding was."

McCollum's office is in the midst of a separate antitrust investigation into whether cruise lines colluded to adopt the surcharges. That investigation is still open.

Carnival says it intends to eliminate the surcharge when the price of oil drops below $70 a barrel for 30 days. Oil closed Monday at $101.58 a barrel.