The UK Government is in the process of implementing EU legislation designed to allow consumers to access a straightforward and low-cost service to help resolve disputes as an alternative to going to court.

The two key pieces of legislation are the Alternative Dispute Resolution ("ADR") Directive and the Online Dispute Resolution ("ODR") Regulation.

The ADR Directive

The ADR Directive requires the Government to ensure that ADR, provided by a certified ADR body, is available for any dispute between a consumer and a retailer regarding the purchase of goods or services.

Competent authorities will be appointed to assess bodies wishing to qualify as a certified ADR provider to ensure they meet the required standards and monitor their performance.

The use of ADR is not mandatory under the Directive although some retailers operating in regulated sectors (such as financial services) may be required to use ADR under separate legislation.

All retailers, irrespective of whether or not they are required to or have agreed to use ADR, will be required to provide consumers with information about certified ADR providers in the event of an unresolved dispute, and confirm whether or not they are willing to refer the complaint to an appropriate ADR provider. Businesses that use ADR are required to provide consumers with further information.

The deadline for implementing the ADR Directive is 9 July 2015.

The ODR Platform

The ODR Regulation is primarily focussed on cross border disputes relating to online sales.

The ODR Regulation requires the EU Commission to establish an online platform which allows a consumer to electronically submit a complaint which is then channelled, via the service, to the appropriate ADR scheme. The platform will also provide an electronic case management tool for those that choose to use the service.

Businesses that sell goods or services online, or provide a platform for other businesses to sell goods or services online, will be required to provide a link to the ODR platform on their website. Businesses that use ADR are required to provide consumers with further information.

The ODR Regulation will come into force on 9 January 2016. However, the UK Government has to appoint a contact point to assist with disputes submitted via the online platform on 9 July 2015.

UK Government proposals

The UK Government launched a consultation in March 2014 regarding the implementation of the ADR Directive and ODR Regulation.

The response paper was published in November 2014. The key proposals included:

  • Creating a single residual ADR scheme to plug the existing gaps and ensure that ADR is widely available across all sectors. The supplier of the residual scheme is due to be announced early this year following a procurement process. Businesses that are not required to, or are not committed to, using another ADR scheme will be free to use the service but it is not mandatory.
  • Working with Citizens Advice to create a consumer complaints "helpdesk" to provide assistance to consumers.
  • Appointing a contact point to help consumers with cross-border disputes submitted via the EU Commission’s online platform website. The supplier is due to be appointed following a procurement process. The UK Government intends for this service to assist with cross border disputes but it will not stop the domestic disputes from being considered in certain instances.
  • Appointing a number of existing regulators (including, for example, Ofcom, Civil Aviation Authority and Gambling Commission)  as competent authorities. It is proposed that the Trading Standards Institute will act as the general competent authority for non-regulated sectors and act as the point of contact with the EU Commission.
  • Issuing guidance to assist businesses with understanding and complying with their obligations.

The UK Government will now seek to pass legislation to implement these requirements in to UK law, and appoint a supplier of the residual ADR scheme (covering currently non-regulated sectors) and contact point for complaints submitted via the online platform.

Commentary

There are currently a number of ADR schemes in operation across a number of sectors which can make it confusing for consumers. The Government's proposal to appoint only one residual ADR scheme for non-regulated sectors therefore seems to be sensible way forward in this regard.

However, the practical impact of these reforms remains to be seen as the use of the residual ADR scheme is voluntary. This follows the Government's concerns there is insufficient evidence to show that the benefits of imposing a blanket obligation upon all businesses to use ADR outweigh the costs. Whether we see a proliferation in disgruntled consumers turning to the residual ADR scheme without going through a retailer's own complaints process (even though safeguards are in place to prevent this from happening) or after an "unsatisfactory" outcome also remains to be seen.

It is proposed that businesses operating in the sectors which generate the most consumer complaints will be targeted in the first year to agree to use the residual ADR scheme. The sectors identified by the Government are: home maintenance, improvements or installation services, retail, second hand cars and, car repair and servicing. Retailers will no doubt come under pressure to sign up to the scheme in the coming months, despite already having robust complaints procedures in place.

Retailers should exercise a degree of caution if approached by third party providers of ADR especially before the legislation comes in to force. ADR providers have to be appropriately certified by the relevant competent authority under the ADR Directive, and the supplier of the residual ADR scheme has not yet been appointed.

We recommend that retailers sit tight for now, keep an eye out for Government announcements and factor in time to review existing complaints procedures to ensure compliance with the information requirements before the legislation is in force.