The European Commission has issued guidance on the Consumer Rights Directive which, in some areas, raises more questions than it answers.
What's the issue?
European Member States were required to implement the Consumer Rights Directive (CRD) by 13 June 2014. In the UK, this was done in the form of the Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013 (Regulations).
What's the development?
The Directorate-General for Justice of the European Commission has published detailed guidance on the Consumer Rights Directive (EC Guidance).
What does this mean for you?
The EC Guidance is more detailed than that published by BIS (BIS Guidance) as it goes through the CRD more or less clause by clause and also provides a table showing overlap with other European legislation. It is, in the main, helpful although certain ambiguities remain, for example in terms of what constitutes a separate contract for the supply of digital content, when accessing digital content is outside the scope of the CRD, and in relation to the dividing line between contracts for online services and contracts for the supply of digital content. It should be noted that the EC Guidance is not legally binding as only the CJEU can issue binding interpretation of European law.
Some of the interesting areas dealt with in the EC Guidance are:
Mixed contracts for goods and services
The EC Guidance contains quite a lot of discussion about deciding on whether a contract is a sales or service contract where both a mix of goods and services are provided. The key thing is to look at the main purpose of the contract. This is important as it determines how the cancellation period is calculated. The EC Guidance suggests the cancellation period for services supplied under a sales contract expires at the same time as the cancellation period for the goods supplied i.e. 14 days after the day of delivery, rather than 14 days after the day of conclusion of the contract
The EC Guidance points to recital 50 of the CRD which states that "for contracts having as their object both goods and services, the rules provided for in this Directive on the return of goods should apply to the goods aspects and the compensation regime for services should apply to the services aspects". The EC Guidance emphasises that it is the compensation regime which will apply to services provided under a sales contracts i.e. the fact that the trader should be compensated for any services provided prior to cancellation. The cancellation period to be applied will be the one applying to a sales contract for goods.
The EC Guidance suggests that, in line with other European legislation, a contract which is negotiated on premises and then concluded by distance communication should not be treated as a distance contract. In addition, the CRD applies only to distance contracts concluded under an organised distance sales or service provision scheme. If a trader exceptionally concludes a contract with a consumer by email or telephone after being contacted by a consumer over the phone or by email, the contract should not be treated as a distance contract under the CRD.
In relation to contracts for goods or services, the CRD applies only where they are paid for. The EC Guidance makes it clear that this can include where vouchers, gift cards or loyalty points with monetary value are used in payment. Service contracts which consist of a free trial period followed by automatic payment on expiry of that period are also covered. Digital content does not have to be paid for in order to be covered.
Pre-contractual information binding in off-premises/distance contracts
The EC Guidance states that information provided on the trader's website is binding on the parties and the trader needs the consumer's express consent if he wishes to alter it. This can be done, for example, by exchanging emails but not by a vague provision in the website terms and conditions allowing the trader to vary them. The Commission Guidance states that the CRD would not apply to any changes made by the trader to the terms of the contract after conclusion of the contract as this would be dealt with under the Unfair Contract Terms Directive (93/13/EC). This is not clear from the wording of the CRD which states that "a change to any of that information made before entering into the contract or later is not effective unless expressly agreed…". The wording in the CRD is mirrored in the Regulations.
Place of establishment
If the trader's place of business is different from the geographical address at which it is established then both addresses should be provided. The EC Guidance states that the place of business should mean the place where the essential decisions concerning the trader's general management are taken and where the functions of its central administration are carried out. European case law is cited as the basis for this.
The requirement to state the main characteristics of what is being supplied refers to goods or services but should also be taken to apply to online digital content according to the EC Guidance.
Goods in conformity with the contract in off-premises and distance contracts
Under the CRD, there is a requirement to provide the consumer with a reminder of the existence of a legal guarantee of conformity of goods. The Regulations state that traders must provide "a reminder that the trader is under a legal duty to supply goods that are in conformity with the contract". The EC Guidance suggests that the trader should specify that he is liable for lack of conformity for a two year period from delivery of goods and that national laws may give consumers additional rights.
Under UK law, the consumer has a remedy in respect of defective goods for a period of six years. It is unclear whether the type of reminder set out in the Regulations is sufficient given the EC Guidance. Is it necessary to mention the additional remedy and, if so, how much detail needs to be gone into? The OFT has previously indicated, in relation to other legislation, that a simple reference to legal rights without any further explanation of what those rights are or how to enforce them, is undesirable.
In addition, while the EC Guidance deals with this information requirement in relation to off-premises and distance contracts, there is a similar requirement in relation to on-premises contracts. The EC Guidance doesn't deal with this specifically but, by analogy, the same principle might apply to on-premises contracts. This is already fairly awkward to achieve; other than through means of a written notice at the cash desk, it is difficult to see at what point this information should be given to a consumer on-premises and this becomes even more cumbersome if the additional remedy needs to be explained.
Pre-contractual information and contracts concluded by electronic means
The EC Guidance elaborates on the requirement to make the consumer aware of prescribed pre-contractual information "in a clear and prominent manner and directly before the consumer places his order" in relation to contracts concluded by electronic means. It states that information should be presented at the moment the consumer is asked to verify the order in line with the e-Commerce Directive requirements. This means "immediately before". In order to satisfy the 'clear and prominent' requirements, the consumer should be able to see and read the relevant information before placing the order without being required to navigate away from the page used to place the order.
Timing of confirmation of distance contracts
The EC Guidance states: "There is no explicit absolute deadline for the confirmation of contracts for the supply of… online digital content. By way of analogy, the rules on service contracts should apply to these contracts i.e. the confirmation should be provided at the latest before the performance of the contract begins". The EC Guidance goes on to agree with 16(5) of the Regulations that confirmation is treated as provided as soon as it has been sent: "In the light of this, the requirements of Article(7) [of the CRD] are met if the confirmation email is sent immediately before the digital content is supplied i.e. before the streaming or download starts".
Information about the cost of returns for distance contracts
Under the CRD, the trader must provide the consumer with the following information: "where applicable, that the consumer will have to bear the cost of returning the goods in case of withdrawal and, for distance contracts, if the goods, by their nature cannot normally be returned by post, the cost of returning the goods." (Article 6(1)(i)).
Recital 36 of the CRD states: "As to the requirement to inform the consumer of the cost of returning goods which by their nature cannot normally be returned by post, it will be considered to have been met, for example, if the trader specifies one carrier (for instance the one he assigned for the delivery of the goods) and one price concerning the cost of returning the goods. Where the cost of returning the goods cannot reasonably be calculated in advance by the trader, for example, because the trader does not offer to arrange for the return of the goods himself, the trader should provide a statement that such a cost will be payable, and that this cost may be high, along with a reasonable estimation of the maximum cost which could be based on the cost of delivery to the customer".
In terms of the Regulations, the requirement to provide information about bearing the costs of returns is in Schedule 2(m). This is one of the sections which, under 14(4) may be provided by other means than the form of distance communication used where space is limited. The information requirement itself is to inform the consumer: "where applicable, that the consumer will have to bear the cost of returning the goods in case of cancellation. And, for distance contracts, if the goods, by their nature cannot normally be returned by post, the cost of returning the goods".
The EC Guidance suggests that the return cost may be estimated based on the cost of the specific method of delivery chosen by the consumer and that it should not require the trader to provide this information for different possible return scenarios, for example, flat packed furniture being returned in assembled form.
Given the approach taken in Recital 36, would it be reasonable to apply this sort of process to a case where delivery charges have to be refunded on cancellation but only part of the order is being cancelled i.e. would it be reasonable to give estimates of what will be refunded, based on a maximum (or minimum) refund? The position is currently unclear under the Regulations and guidance on this issue would be welcome.
Cancellation forms and contracts formed by telephone
The EC Guidance takes a common sense approach in relation to provision of a model cancellation form for a contract concluded over the phone and suggests it is sufficient to explain the contents of the form orally and then supply the withdrawal form with the confirmation of the contract provided on a durable medium.
Order with obligation to pay
The EC Guidance suggests that any clear message about the obligation to pay can be used in online contracts. Anything which is wordy or unclear is unlikely to be acceptable.
Express request/consent to receipt of services and digital content during cancellation period
The EC Guidance suggests express consent and express request to receive services or digital content can be used as equivalent terms. By analogy with the rules on additional payments, both require some sort of positive action, including ticking a box. Pre-ticked boxes will not work. Consent to receive services/digital content and acknowledgment of the loss of cancellation rights can be obtained by a single formulation. The EC Guidance suggests the following:
"I hereby request immediate performance of the service contract and acknowledge that I will lose my right of withdrawal from the contract once the service contract is fully performed."
In relation to service contracts, express consent may be in the form of an explicit agreement between the parties.
Digital content not on a tangible medium
While the CRD applies to free digital content supplied by a trader to a consumer, it will not apply to the provision of online digital content by means of information on the internet without express conclusion of a contract. Access to a website or download from a website should not, by itself, be considered to be a contract for the purposes of the CRD according to the EC Guidance.
The EC guidance goes on to say that a contract for the supply of digital content may include a contract for multiple items offered under a single contract and to a subscription contract covering the supply of digital content. Under these types of arrangement, each new supply of content will not constitute a separate contract. However, where a subscriber purchases an additional product from the trader which is outside the scope of the subscription, that will count as a separate contract.
There are grey areas here in relation to both the above points which may only be resolved if they come before the CJEU.
Where a digital product includes optional additional or built-in purchases, these must be covered under the pre-contractual information. Traders must get express consent for any extra payments and consumers must be clearly informed, up-front and in a prominent manner about payment arrangements for these additional purchases before signing up to the main product which they are offered. Default settings should not allow additional purchases to be made without express consent.
Loss of cancellation right for services
The EC Guidance suggests that cancellation rules for service contracts also apply to paid services provided by electronic means e.g. subscriptions to online newspapers or internet based storage of the consumer's photos. It is unclear, certainly in relation to online newspapers, why these contracts would qualify as contracts for services rather than contracts for supply of digital content not on a tangible medium. This is an issue on which further guidance may be needed.
Information about online digital products
The EC Guidance suggests that due to the range of digital products available, it is not feasible to provide an exhaustive list of functionality and interoperability parameters. The suggestion is that the trader should assess what information to provide on a case by case basis. A non-exhaustive list of the types of information which might be given is provided depending on the product. This includes things like the language of the content, the method by which it is provided, any limitations to use of the product and any functionalities that are dependent on additional purchases. In terms of interoperability, it can be described by giving information on devices the content can be used with, including, where appropriate, operating systems, processing speeds and version numbers.
Compliance and conflict with other applicable law
The table at the back of the EC Guidance summarises various information requirements and other rules across the CRD, the Services Directive and the e-Commerce Directive. This is a useful tool for cross-checking although obviously reflects the European Directives rather than the UK implementing legislation. The EC Guidance says that in the case of conflict, the CRD should take precedence. This includes where provisions go beyond what is required under the CRD in terms of provision of pre-contractual and contractual information.
Information about online digital content
Annex 1 has a model for the display of consumer information about online digital content, including various suggested icons to give consumers information.