LONDON—Britain’s competition regulator has scrapped its action against Ryanair and British Airways over their failure to offer refunds to passengers prevented from flying by COVID-19 restrictions, saying the legal position was unclear. During pandemic lockdowns, instead of offering refunds to those legally unable to fly, IAG-owned British Airways offered vouchers or rebooking, and Ryanair providing the option to re-book. The Competition and Markets Authority (CMA) started action against the airlines in June, saying passengers who were legally unable to take flights booked in good faith should have their money back. But it said on Thursday the law did not provide passengers with a sufficiently clear right to a refund in such unusual circumstances. Chief Executive Andrea Coscelli said the CMA “strongly believed” the passengers should be offered a full refund. “However, after considering the relevant law and gathering evidence in our investigation, we have concluded that the length of time …