By virtue of the Consumer Rights Directive (2011/83/EU) (the “CRD”) coming into force in the EU in December 2011, the UK was required to introduce measures necessary to implement the Consumer Right Directive by no later than 13 December 2013, to apply to all consumer contracts within the scope of the Directive by no later than 13 June 2014.
The main instruments by which the UK has chosen/proposed to implement the CRD are:
- Consumer Rights (Payment Surcharges) Regulations 2012;
- Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013; and
- Consumer Protection from Unfair Trading (Amendment) Regulations.
The implementation of the CRD will have a significant effect in modernising consumer law, much of which was written around thirty years ago, particularly in relation to digital content which was not previously catered for. The CRD has introduced a new distinct category to deal specifically with “digital content”, which will sit along-side existing categories dealing with the provision of goods and services.
Set out below is a list of some of the key changes that the CRD will introduce into UK law, together with a summary as to the extent to which these changes are likely to impact the TMT sector. All TMT businesses who are consumer-facing companies will need to ensure their business models are compliant with these requirements by no later than 13 June 2014.
Provision of information to consumers
The information TMT businesses will need to provide its consumer customers with will largely depend on the nature of the type of contract being entered into. The information requirements will change depending on whether the relevant contract is classified as an “on-premises”, “off-premises” or a “distance” contract.
Key change – information requirements for “on-premises” contracts
There are new requirements for specific information to be provided to the consumer, albeit these are similar to the information requirements currently required under the Consumer Protection (Distance Selling) Regulations 2000 (“DSR 2000”) in relation to distance contracts. These changes are most likely to affect contracts entered into with consumers who attend a TMT business’ premises to order goods or services.
The information requirements include in particular:
- the main characteristics of the goods or services;
- the identity of the trader; and
- the total prices of the goods and/or services (including taxes).
Key change – information requirements for “distance” contracts
These provisions will affect TMT businesses concluding distance contracts with consumers.
TMT businesses will be required to provide certain information in a clear and comprehensible manner when concluding a distance contract. Such information will include in particular: (i) the main characteristics of the goods; (ii) the identity of the trader; (iii) the total price of the goods (inclusive of taxes); and (iv) all additional delivery charges and any other costs. These are similar to provisions currently under the DSR 2000 and may be provided on catalogues or other documents and/or confirmed verbally to the customer.
Key change – additional information requirements for “distance” contracts concluded by electronic means
Where contracts are concluded with consumers by electronic means (for example, where orders are made via a website or where a smart phone application is utilised), the consumer will need to be provided with specific information in a clear and prominent manner before a consumer places an order. This will include in particular:
- the main characteristics of the goods;
- the total price of the goods (inclusive of taxes); and
- all additional delivery charges and any other costs.
These are largely the same requirements currently provided for under the DSR 2000.
In addition, there is a completely new requirement that businesses must ensure that the consumer, when placing an order electronically, explicitly acknowledges that the order implies an obligation to pay and where the ordering process requires activating a button or a similar function, the TMT business must ensure that the button or similar function is labelled in an easily legible manner, only with the words ‘order with obligation to pay’ or a corresponding unambiguous formulation indicating that placing the order entails an obligation to pay the company. This is a new and fundamental requirement and it is therefore essential that businesses accepting online orders carefully consider how to adopt their systems to comply with this new obligation by 13 June 2014.
Key change – information requirements for digital content
TMT businesses providing digital content will also need to provide the consumer with pre-contractual information regarding any digital content's functionality, and information on the digital content’s interoperability with hardware and software.
Key change – confirmation of distance contracts
In respect of distance contracts, TMT businesses will be required to provide consumers with confirmation of the distance contract within a reasonable time after the conclusion of the contract, but in any event no later than the time of the delivery of any goods supplied under the contract, or before performance of the services commences. This information must be provided on a “durable medium” (e.g. by paper or by email).
Key changes to cancellation rights
TMT businesses’ customers will now be able to cancel contracts and receive a refund up to 14 calendar days from the conclusion of the contract (for services), or from the date the consumer has received the items (for goods).
Note that for digital content, consumers will have a right to withdraw up until the downloading process has begun unless they have consented to the commencement of performance during the cooling-off period and acknowledged that the right to withdraw will be lost if they allow the delivery of the digital content before the end of the cancellation period.
Businesses will need to provide consumers with a model cancellation form to use when cancelling contracts. Whilst the design of the form is not mandatory, businesses will need to ensure that any cancellation form made available to their customers contains all of the information required. Many online businesses will elect to provide a suitable cancellation form on their websites, rather than using a hard copy form. However, where a distance contract has been concluded on the telephone, it is best practice for hard copy cancellation forms to be sent to the consumer.
Surcharges and “pre-ticked” additional payment boxes
From 6 April 2013, TMT businesses have no longer been entitled to apply payment surcharges which exceed the cost to the business of such payment methods (whether such contracts are entered into on or off the company’s premises). Traditionally, such surcharges have been imposed on the use of credit or debit cards by consumers. Businesses can now only pass on the actual cost.
Key change – a ban on the use of “pre-ticked” boxes for additional items/payments
There will be ban on the use of “pre-ticked boxes”, meaning that consumers will have to pro-actively opt-in to purchase extras which incur additional charges. Customer will therefore need to actively select boxes where additional charges will be incurred in order to show their desire to purchase the relevant item or delivery option. Consumers will not be obligated to incur any charges resulting from a businesses’ use of a “pre-ticked” box.
Ban on the use of telephone lines where the cost of calling is above the basic rate
Businesses who provide consumers with a telephone line for the purposes of contacting them in connection with their contracts will not be able to charge the consumer more than the applicable basic rate for that call. For those businesses who operate one telephone line for all enquiries (whether pre-contract or post-contract), steps will need to be taken to ensure that the number being used complies with these requirements.
For the reasons set out above, it is important that businesses closely examine the way in which they conduct business with consumer customers to ensure that they are compliant with the changes being introduced into the UK. All businesses will need to be compliant with these requirements by no later than 13 June 2014