The European Commission published on 8 October a new draft directive on consumer rights. This follows a green paper on this issue published on 8 February 2007 and an extensive consultation process in which all interested parties were invited to comment. The directive is designed to simplify four existing EU consumer rights directives into one set of rules. The proposal moves away from the minimum harmonisation approach in these directives to embrace one of full harmonisation. Accordingly, provisions diverging from those laid down in the directive may not be maintained or introduced by the member states.
Although the draft was triggered by problems identified in the e-commerce business environment, it will – due to its wide approach – also have an effect on players in the automotive industry.
From the Commission’s perspective, it is necessary to harmonise the legislation on consumer rights to stimulate cross-border sales and thus to remove obstacles resulting from legal disparities. The consumer should be in a better position to take advantage of the existing price differences between member states. The Commission refers in particular to cars as products with significant price differentials across Europe.
The directive comprises a comprehensive list of substantive rules. In line with its wide approach, it concerns contracts for sales of different types of goods and services from businesses to consumers and, thus, all contracts in the automotive industry concluded with customers.
According to the directive, every trader is obliged to provide the consumer with a set of information before the conclusion of a contract if such information is not already apparent from the context. The customer should be enabled to make an informed decision on whether to buy. The trader has to disclose, among other things, the following information: the price, including all additional charges; the identity of the trader; arrangements for payment; arrangements for delivery; the complainthandling policy; and the existence and conditions of after-sales services.
If additional charges are not disclosed to the consumer before the conclusion of the contract, the consumer is not obliged to pay them.
Furthermore, the consumer has to be informed if his counterpart is acting on his own behalf or as an intermediary for another consumer – if it is the latter, the directive will not be applicable.
Rules on delivery and passing on risks to the consumer
The proposal, moreover, comprises rules on delivery and determines the time when the risk should be passed on to the consumer. According to article 22 of the directive, the trader shall deliver the goods by transferring the material possession to the consumer within 30 days from the conclusion of the contract. The consumer will have a right to a refund on any sums paid if delivery is late or does not occur.
Distance and off-premises contracts
In the case of distance sales and off-premises contracts, the consumer has the right of withdrawal in the first 14 days following the conclusion of the contract, via a newly introduced harmonised standard withdrawal form. If the consumer does withdraw, the trader has to reimburse all payments received from him, including the costs of delivery.
If the trader has failed to inform the consumer about his right of withdrawal, the withdrawal period will be extended to three months.
Repairs, replacement and guarantees
The proposal contains detailed provisions on what should happen if the delivered good is not in conformity with the contract. The consumer shall first have the possibility of requiring the trader to repair or replace the goods (the trader chooses which) unless the trader is able to demonstrate that such remedies are unlawful or impossible or cause him disproportionate effort. In such a case the consumer may choose to have the price reduced or the contract rescinded (only if the lack of conformity is not minor). The consumer shall not bear any costs for remedying the lack of conformity.
If the trader has refused or more than once failed to remedy the lack of conformity the consumer may elect to reduce the price, rescind the contract or request again repair or replacement.
The consumer has to notify the trader within two months of detecting the lack of conformity. Any lack of conformity that becomes apparent within six months of the time when the risk passes to the consumer shall be presumed to have existed at that time. In total the directive proposes that the trader will be held liable for two years from the time the risk passes to the consumer.
If the trader offers a commercial guarantee, it should include certain information, such as duration, territorial scope and a statement that the guarantee does not affect the consumer’s legal rights.
Unfair contract terms
The directive proposes a new black list of unfair contract terms that are prohibited across the EU and a grey list of contract terms deemed to be unfair unless the trader proves the opposite.
The Commission will have the right to amend and add to the black and grey lists following the so-called ‘comitology’ procedure as set out in article 39 of the directive. This procedure is a simplified legislative process in which the Commission and representatives of the member states agree on a draft text, which can be vetoed by the European Parliament and the Council.
Following the Commission’s draft, the directive must be approved by the European Parliament and the Council in the co-decision procedure before coming into law.
The concept of full harmonisation leads to a fixed level of protection for European consumers. While some of the proposed provisions already exist in some European member states, several rules that may be introduced are stricter than the existing legislation.