New EU rules on consumer rights

The EU Consumer Rights Directive, adopted on 25th October 2011 and published in the Official Journal of the European Union on 22nd November 2011, requires member states to pass laws by 13th December 2013 making a number of important changes to the rules governing contracts made at a distance (such as by mail order, internet, telephone or fax) or off-premises (such as in the street, on the consumer’s doorstep, at a tupperware party, during an excursion organised by the trader, or anywhere else away from the trader’s premises), and to bring them into force no later than 13th June 2014.

The UK government has announced plans to consolidate consumer protection laws even further by merging all existing consumer protection laws and regulations, with the new law implementing the Consumer Rights Directive, into a single new “Consumer Bill of Rights”. It will be consulting on its plans for doing so and, although the new laws may not be passed for nearly two years, businesses need to be aware of the changes which are on the horizon, and begin planning accordingly.

The present EU consumer protection directives have developed in a rather piecemeal fashion, and the original version of the Consumer Rights Directive proposed the wholesale introduction of a common set of consumer rights across the EU. The final version is somewhat watered down, and now only harmonises the rules on distance selling and off-premises contracts. It seeks to simplify and update them, removing inconsistencies, closing unwanted gaps, laying down standard rules and prescribing standard forms. The declared intention is to create a level playing field for businesses and consumers throughout the EU and, hopefully, reduce transaction costs and encourage cross-border sales over the internet.

The Directive establishes stricter rules on the information which must be provided to consumers contracting with businesses at a distance or away from business premises, tightens up the cancellation rights and harmonises certain provisions dealing with the performance and other aspects of B2C contracts. It is not concerned with B2B contracts, but a person who contracts for purposes partly within and partly outside his business will be considered a consumer unless the business purpose is “predominant”.

The definition of distance contract covers all cases where a B2C contract is made exclusively through the use of distance communication, including where the consumer visits the trader’s business premises to collect information but subsequently negotiates and concludes the contract at a distance. It does not apply where the contract is negotiated at the trader’s premises but concluded by means of distance communication, or vice versa, and it does not apply where the consumer uses distance communication simply to make a reservation or book a service, such as telephoning to request an appointment with a hairdresser.

Contracts concluded off-premises are regulated, whether or not the consumer initiated the contact. The definition of an off-premises contract includes situations where the consumer is originally addressed off-premises but the contract is subsequently concluded at the trader’s premises or at a distance. It does not apply where the trader comes to the consumer’s home simply to take measurements or give an estimate, without any commitment by the consumer, and the contract is concluded subsequently.

Member states may choose not to apply the Directive where low level goods or services are sold off-premises, and may set the threshold at any amount so long as the total (including all related goods and services sold at the same time) does not exceed €50.

The Directive does not affect other aspects of national contract law, regulating for example the conclusion or the validity of a contract, general remedies for breach of contract, or the rules on matters such as excessive or extortionate prices or unethical transactions. Member states are permitted to require contractual information to be in their national language to ensure it is easily understood by consumers.

The most important changes to existing law are as follows:

1. Traders will be obliged to sell to consumers in every country in the EU.

2. Offering any additional options through pre-ticked boxes, which consumers must untick if they do not wish to purchase, will be banned. If the consumer wishes to purchase any add-ons, he must expressly choose to tick the option.

3. Traders will be banned from charging consumers more than the basic rate for calls to telephone hot lines, or more than the actual processing costs for paying by credit card or other means of payment.

4. To protect consumers against on-line traps, traders will have to disclose the total cost of the goods or services, including any extras, and consumers will not have to pay any costs or charges which were not properly disclosed before they placed the order. They must be expressly and unambiguously warned before placing the order that this will entail an obligation to pay.

5. The main elements of the contract must be displayed in a clear and prominent manner, immediately before the consumer places his order, so as to be capable of being fully read and understood before the order is placed and, when placing his order, the consumer must be required to acknowledge explicitly that this implies an obligation to pay. Trading websites must indicate clearly and legibly, no later than at the beginning of the ordering process, whether any delivery restrictions apply and which means of payment are accepted. The consumer is not bound by the contract or order if the trader has not complied with these requirements.

6. The information rights in the Electronic Commerce Directive are “completed” by requiring traders to give consumers clearer and more detailed information, which is mandatory and cannot be altered before completion of the sale. In the case of distance contracts, the specified information must be made available to the consumer in a way appropriate to the means of distance communication used, and in plain and intelligible language.

7. More detailed information will also be required when selling digital content, such as computer programs, games, music, videos or texts, (whether accessed through downloading or streaming, or supplied on a CD or DVD), including clearer information about the operating system, version and hardware features it requires, whether it can be used to track consumer behaviour, and whether or not it incorporates technical restrictions such as DRM protection or region coding. Provided they have been given the specified information, consumers will lose the right to cancel a purchase of digital content, such as music or video downloads, at the moment the actual downloading process begins.

8. Where certain media are subject to technical constraints (such as limits on the number of characters on a mobile telephone screen or on the time of television adverts), it will be sufficient for the trader to refer the consumer to another source of information, such as by giving a freephone telephone number or a hypertext link to the trader’s webpage where the relevant information is easily accessible.

9. Similar information requirements apply before the consumer is bound by a contract other than a distance or an off-premises contract, although member states may choose not to apply these requirements to contracts which involve what the Directive calls “day-to-day transactions”, which are performed immediately at the time of their conclusion.

10. The trader will have to deliver the goods to the consumer within a maximum of 30 calendar days, and cannot transfer to the consumer the risk of loss or damage in transit.

11. The cancellation right for contracts concluded at a distance or off-premises will be strengthened. Firstly, it will be extended from 7 to 14 days throughout the EU. Secondly, the period will run from when the consumer receives the goods, rather than from when the contract was concluded. Thirdly, if the consumer has not been clearly informed about the cancellation right, it can be extended up to a maximum of one year. Finally, it will apply to solicited visits (such as when a trader called beforehand and pressed the consumer to agree to a visit) as well as to unsolicited visits, and it will also apply to online auctions (such as eBay) when the goods are bought from a business seller.

12. If the consumer exercises the cancellation right, the trader must make a full refund without undue delay, and in any event within a maximum of 14 days (rather than the present 30 days). No deduction can be made for any reduction in the value of the goods, provided this resulted from their being handled or used no more than was necessary to establish their nature, characteristics and functioning. In the case of off-premises contracts where goods which, by their nature, cannot normally be returned by post have been delivered to the consumer’s home at the time of the contract was concluded, the trader must collect the goods at his own expense.

13. Unless the consumer has expressly agreed otherwise (and he must not incur any fees by doing so), the refund must be made by the same means as the consumer used for the initial payment. The refund cannot be offered in the form of a voucher unless the consumer has used vouchers for the initial transaction or has expressly agreed to accept them.

14. Unless the consumer arranged this himself, the refund must include the cost of the original delivery. This applies even where the consumer has chosen a particular delivery method from a range of options offered by the trader but, if the consumer expressly chose one which was more expensive than a common and generally acceptable alternative, the trader is only required to refund the lower amount. The consumer cannot be made to bear the risk of loss or damage in transit.

15. If the consumer is to be required to bear the cost of returning goods after exercising the cancellation right, the mandatory information must include an estimate of the maximum cost. Where the cost of returning the goods cannot reasonably be calculated in advance, the trader must state that a cost will be payable, and that this may be high, and must give a reasonable estimate of the maximum cost. If the goods cannot normally be returned by post, it will be sufficient for the trader to specify one carrier and one price for return.

16. Consumers will be entitled to use a prescribed model form of cancellation anywhere in the EU. However, they remain free to use any other unequivocal means of confirming their decision to cancel the contract. The trader must also offer the option of a web-based cancellation and if this is exercised, he must acknowledge receipt without delay.

Peter Stevens
Partner
TWM Solicitors LLP