As of 1 August 2012, businesses engaged in the provision of goods or services to German consumers via the Internet face considerable new information requirements. According to new legislation adopted by the German Parliament in March 2012, German consumers must be provided with all the relevant information required to conclude a contract in a clear, understandable and prominent manner directly before they place an online order, otherwise a binding contract will not be formed.
By way of an early implementation of Article 8 (2) of the new EU Directive on Consumer Rights 2011/83/EU (the Directive) – due to be implemented into national law of the Member States by 13 December 2013 – the German Federal Legislator incorporated mandatory rules on how to structure an online ordering process in a consumer-friendly manner into the existing Section 312g of the German Civil Code (BGB).
The new rules – included into the Directive on the initiative of Germany – are deemed to protect consumers from cost and subscription traps on the Internet and other electronic platforms.
Who Does This Concern?
From 1 August 2012, any contract entered into through electronic means of communication and leading to payment obligations for a consumer will only come into force if, directly before placing an order, the consumer has been clearly and visibly notified by their contractual partner of:
- The main characteristics of the goods or services;
- The minimum duration of the contract, if the contract provides for permanent or periodic services;
- The total price of the goods or services inclusive of taxes and all price components, or – where the nature of the goods or services is such that the price cannot reasonably be calculated in advance - the manner in which the price is to be calculated; and
- Any additional charges (such as freight, delivery or postal charges).
What Has to Be Done?
The new law further provides that businesses shall structure the ordering process so consumers explicitly acknowledge that the order implies an obligation to pay.Where placing an order entails activating a button, or a similar function, the last button (or function) of an order process shall be labeled in an easily legible manner only with the words 'order with an obligation to pay' (“zahlungspflichtig bestellen”) or a similarly unambiguous communication to indicate that placing the order entails an obligation to pay.
Against this background the widely used label “Confirm Order” (or “Bestellung bestätigen”), currently in operation, will no longer suffice.
What Transactions Are Covered?
The new law generally applies to any contractual transaction between a business and a consumer entered into using electronic means of communication and leading to payment obligations for the consumer, such as e.g. the purchase of an app, the order of a chair via an online shop or a subscription to a movie streaming service. However, certain financial services, such as banking services and those in connection with the granting of credit, insurance, a pension fund or investment are expressly excluded from the scope of the new rules.
It is worth noting that, in general, the requirements imposed by the new law apply to contractual transactions concluded under German law only and that it is permissible under German law to draft and use contracts governed by a foreign jurisdiction for consumers in Germany. However, when the targeted consumer is in Germany, the mandatory rules of German consumer protection law – including the information requirements as implemented by the new Sec. 312g BGB – will apply regardless of whether or not the underlying contracts drafted are subject to a jurisdiction other than Germany.
What Consequences Can Arise?
Once entered into force, the new law provides that if the requirements imposed by the new Sec. 312g BGB (regarding consumer information and the structuring of the ordering process) are not met, the underlying contract will be null and void. The burden of proving fulfillment of these obligations lies with the business and not the consumer. Thus, in case of a breach of the new requirements, those doing online business with consumers in Germany will not be able to demand payment from the consumer but may only claim return of any goods already delivered under the void contract.
Moreover, businesses failing to comply with the new rules run the risk of warnings, claims for injunctive relief, or claims for information and damages from consumer protection organizations and/or competitors based on Germany’s laws on unfair commercial practices.
Businesses with online offerings directed towards German consumers should adjust their ordering processes before 1 August 2012 to conform to the information obligations imposed by the new German law on “cost traps” and, in particular, the “button solution”. In cases of doubt over the scope and content of the new information requirements, competent legal advice should be obtained before that date. Otherwise, businesses run the risk of void contracts as well as of warnings, claims for injunctive relief, or claims for information and damages from both competitors and consumer protection organizations.