Earlier this year we sent you our website compliance checklist, setting out how to comply with the requirements of distance selling and e-commerce regulations. However, these rules are set to change, and after three years in the making, the Consumer Rights Directive has now made it onto the books.
The Directive seeks to harmonise consumer law in Europe, in particular for sales made at a distance (e.g. online or mail order) and doorstep sales. This alert looks at the impact of the Directive on retailers.
Consumer law is a problem area, both domestically and from a European perspective. It seems so easy at a high level - consumers should be able to make purchases with confidence, to encourage spending here in the UK, and cross-border within Europe.
However, the devil is in the detail. For example, the refund of all sums paid, including postage charges if a customer doesn't like the product bought online, might be reasonable for one retailer. For another, it might put it under undue financial pressure, where the cost of postage is sometimes as much as the cost of the product. This is an issue online book retailers felt acutely when the Distance Selling Regulations first came into force. Each additional protection for a consumer can potentially mean an additional burden, even if just administratively, on a business.
Add to that the complex warren of consumer rights across Europe, and you can understand why the various regulations created in the early part of this century didn't do much to increase consumer cross-border trade.
So in 2008, the European Commission set about consolidating and harmonising all the relevant legislation. Three years later, what has come back is primarily a consolidation of the distance selling and doorstep selling regulations; a much narrower scope than initially anticipated. But while a quick glance at the Directive may suggest very little has changed, in reality some of the changes are more extensive than first appears.
More time to change your mind
A key change will be in relation to cancellation rights, as they are currently known in the Distance Selling Regulations; these are called withdrawal rights in the Directive.
The time period in which a consumer can withdraw from a contract entered into at a distance (e.g. online) or at home has been extended to 14 (calendar) days, replacing the current seven (working) days. Annex 1 of the Directive provides model wording to be inserted into terms and conditions to deal with the right of withdrawal.
In addition, under the current distance selling rules, if you fail to inform a consumer of their right of cancellation together with other information, this period is extended by three months. Under the new Directive, the time limit will only be extended if you fail to inform the consumer of their right to cancel (and no other information), when the period of extension will be 12 months instead of three.
And retailers don't just have to tell consumers about their rights to change their mind. They have to make it easy too, but providing a withdrawal form, as set out in the Directive. The consumer does not have to use this - any unequivocal notice of withdrawal will count - but it is another administrative step for the retailer.
Refund faster - but possibly less
Alongside the extended period for cancellation, retailers will need to refund all sums paid within 14 days, rather than the current 30.
However, the controversial requirement to refund 'all' sums paid has been watered down a little in relation to delivery costs. The retailer will not be obliged to return these costs if the consumer has chosen a type of delivery which is not the retailer's least expensive, standard option.
Both of these changes could have a significant impact on retailers, particularly those selling lower value individual items (such as books or CDs) and may prompt changes in business models.
And get your goods back
Under the distance selling regime, a consumer was only required to take reasonable care of goods cancelled, and the retailer had to make contractual provision for their return. The default position will be that the consumer will bear the cost of the return (although as set out above they will have the postage to them refunded), but it is incumbent on the retailer to inform the consumer of this, otherwise it will bear the liability.
Not so technologically neutral
The draftsmen have tried to be practical - they have provided model forms for consumers to fill in if they want to withdraw, and have considered how websites currently require consumers to commit to terms and conditions. For example, the Directive requires that the consumer must explicitly acknowledge that an order implies an obligation to pay. In response to this the draftsmen have suggested that the button to be clicked to activate an order should be labelled with the words 'order with obligation to pay'.
They have also contemplated mobile purchasing, where there is limited space or time to display the information required by the legislation, and have prioritised what information retailers should provide. Specific provision is also made for digital content, both in terms of information provision and rights of cancellation.
General consumer rights
The Directive also imposes information requirements on retailers where consumers are entering into contracts other than at a distance or off premises. Although these are mostly common sense (covering the main characteristics of the goods, the total price, arrangements for performance etc), those who contract with consumers by any means will need to ensure compliance.
In addition, requirements for delivery of goods to be within 30 days, unless otherwise agreed, is extended to all sales contracts and not just those made at a distance. Retailers in sectors where lead times are longer than 30 days - such as car dealers or companies selling furniture - must ensure they make this clear to the consumer.
The Directive is clearly targeting extra costs which consumers are often surprised to be charged. Retailers are prohibited from charging more than the actual cost to them of using different methods of payment. This should bring an end to high fees for credit card payments.
In a further attempt to limit additional fees paid by consumers, telephone lines provided for contacting retailers about sales contracts must be chargeable only at the basic rate. If additional payments to those set out at the time of the contract become payable, they must be expressly agreed to by the consumer; not inferred by being the default position which the consumer is required to reject.
The Directive is required to be implemented by 13 December 2013, so there is some time to get business practices into line. The Government is likely to roll these changes up into the Consumer Rights Bill, which is due to be announced in September this year. The Bill seeks to consolidate a vast range of UK consumer legislation and, specifically, to repeal and replace the following legislation:
- Cancellation of Contracts Made in a Consumer's Home or Place of Work, etc. Regulations 2008.
- Consumer Protection (Distance Selling) Regulations 2000.
- Consumer Protection (Distance Selling) Amendment Regulations 2005.
- Sale and Supply of Goods to Consumers Regulations 2002).
- Unfair Terms in Consumer Contracts Regulations 1999.
- Unfair Terms in Consumer Contracts (Amendment) Regulations 2001.
The Bill also proposes to repeal, or substantially amend, the consumer law aspects of the following Acts, leaving intact aspects that apply to business-to-business transactions:
- Misrepresentation Act 1967.
- Sale of Goods Act 1979.
- Sale and Supply of Goods and Services Act 1994.
- Supply of Goods (Implied Terms) Act 1973.
- Supply of Goods and Services Act 1982.
- Unfair Contract Terms Act 1977.