Extra Armoury for Consumers:
The New Distance Selling Regulations
With the increase in trade over the internet, and growth of telephone sales, television shopping channels and the use of e-mail, there have been concerns over the protection a consumer has when buying goods and services from a business he has never met. Such concerns led the EU Parliament and Council to introduce new legislation to protect consumers from the activities of unscrupulous distance suppliers. A minimum level of protection is now given to all EU consumers entering into distance contracts with suppliers by means of the Directive on the Protection of Consumers in respect of Distance Contracts which was adopted on 20 May, 1997 (Directive 97/7/EC).
The Consumer Protection (Distance Selling) Regulations 2000 (SI 2000 No. 2334), which implement the 1997 EU Directive, will come into force on 31 October 2000 and provide an extra layer of protection for consumers (whose current armoury includes the Unfair Terms in Consumer Contracts Regulations 1999 and the recently-adopted Electronic Commerce Directive (Directive 2000/31/EC) which Member States must implement into national law by 17 January 2002). This Article focuses on the significant provisions of the Regulations and identifies those aspects which overlap with the Electronic Commerce Directive.
This is a Commentary published on 31 October 2000.
Citation: Youngerwood A and Mann S, 'Extra Armoury for Consumers: The New Distance Selling Regulations', Commentary 2000 (3) The Journal of Information, Law and Technology (JILT). <http://elj.warwick.ac.uk/jilt/00-3/youngerwood.html>. New citation as at 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/2000_3/youngerwood/>
The Consumer Protection (Distance Selling) Regulations 2000 (the 'Regulations') will come into force on 31 October 2000. The Regulations, although overlapping to some extent with the Electronic Commerce Directive, will affect all businesses which provide goods and services to consumers by mail order, over the Internet, by telephone, fax and other means of non-face-to-face communication. They do not cover business-to-business transactions, nor the supply of financial services (which is to be regulated independently by the Directive on the distance marketing of consumer financial services (COD/1998/0245) - currently awaiting a Council common position). The Regulations will give consumers significant new rights. The text of the Regulations can be found at: <http://www.hmso.gov.uk/si/si2000/20002334.htm >.
2. Contracts caught by the Regulations
Certain distance contracts are excepted from the Regulations and are set out in Regulation 5 and Schedule 2 to include disposals of interests in land, construction contracts, contracts made by vending machines, auctions and those made with a telecoms operator using a public pay-phone. Most importantly, the Regulations do not apply to any contract relating to financial services. Furthermore, many of the key provisions of the Regulations will not apply to contracts for the supply of food, drink or other groceries; and to contracts for the provision of transport, accommodation, catering or leisure services; or to contracts under which services are supplied on only one occasion.
3. Obligation to Provide Information Prior to Contract
Suppliers must provide consumers with certain specified information in a clear and comprehensible manner before the contract is concluded. This information includes the name and address of the supplier; a description of the goods or services being sold or supplied; the price of those goods or services (including all taxes); details of arrangements for payment, delivery and performance; for how long the offer will remain open and the consumer's legal right to cancel the contract (if applicable). In respect of 'cold calling' consumers at home, the representative must, at the beginning of the conversation, identify clearly the company he represents and the commercial purpose of his call.
These information requirements overlap with those in the Electronic Commerce Directive which impose similar obligations on internet service providers, whether they are contracting with consumers or other businesses. The text of the E-Commerce Directive can be found at: < http://europa.eu.int/eur-lex/en/lif/dat/2000/en_300L0031.html>.
Under Articles 5, 9 and 10 of the E-Commerce Directive, a service provider must provide certain basic information to the customer about itself, its activities and the contracting process in an easily accessible form. In addition, service providers must ensure that prices are indicated clearly and unambiguously and, in particular, must indicate whether they are inclusive of tax and delivery costs.
4. Written Confirmation of Information
Regulation 8 provides that the supplier must give the above information 'in writing, or in another durable medium which is available and accessible to the consumer'. The supplier must also at that stage give additional information, including the conditions and procedures for exercising the right to cancel the contract; information about any after-sales services and guarantees and where to address complaints; the requirement to return the goods to the supplier in the event of cancellation (if this is intended); and information as to who will be responsible for the cost of returning or recovering the goods where the consumer cancels the contract.
The above information may be provided by the supplier at any time prior to the conclusion of the contract and, at the latest, at the time of delivery (in the case of goods) or during the performance of the contract (in the case of services).
There is presently some debate as to whether confirmation by e-mail will suffice as confirmation 'in writing or in another durable medium'. The Regulations add nothing to that debate, ignoring the question totally. On the basis that an email (as opposed to an oral communication) can be printed off, suppliers might well succeed with an argument that an email communication is enough. Indeed, the DTI currently takes the view that e-mail will constitute a durable medium for the purposes of the Regulations. Ultimately this issue will be determined by the courts.
5. Right to Cancel the Contract
Subject to certain exceptions, the consumer will have an unconditional right to cancel the contract within seven working days beginning on the day after the delivery of the goods or from the day after the date of the contract where it relates to the provision of services - the 'cooling off period'. Where the supplier fails to provide the necessary information in writing or in another durable medium, the cooling-off period is extended by a further three months and where the information is provided after the seven day time limit, the seven day cooling off period begins from the date on which the information is provided by the supplier. Once the contract has been cancelled, the supplier must reimburse any money paid by the consumer within 30 days of the day on which notice of cancellation was given and any related credit agreement is automatically cancelled.
Certain contracts cannot be cancelled (unless the parties agree otherwise), namely where services have begun with the consumer's agreement before the end of the cooling-off period; where the price of the goods/services depends on fluctuations in the financial market; where the goods are made to order or to measure; for the supply of audio or video recordings or computer software if they are 'unsealed' by the consumer (therefore a consumer would not be able to cancel a software supply contract where he has downloaded the software from the internet as the software does not remain 'unsealed'); for the supply of newspapers, periodicals and magazines; and for gaming, betting or lottery services.
If a contract has been cancelled in accordance with the Regulations, the supplier must refund payments received under the contract, but may (in certain cases) deduct from that the direct costs of recovering the goods. The Regulations are unclear as to whether the supplier is required to refund the consumer even if the consumer has yet to return the goods. Regulation 14(3) requires the refund to be made as soon as possible and in any event within 30 days of the consumer's cancellation. The implication is that the refund must be made irrespective of whether the goods have yet been returned. It is the notice of cancellation itself that triggers the refund obligation.
6. Performance of the Contract
Unless the parties agree otherwise, the supplier must perform the contract within a maximum of 30 days beginning with the day after the consumer sends his order to the supplier. If the supplier is unable to perform the contract within the required period for any reason, the supplier must inform the consumer and refund any sums paid as soon as possible and, in any event, no later than 30 days from the day after the day on which the period for performance expires.
A contract which is not performed within the period for performance will be treated as though it had not been made (subject to any rights or remedies the consumer has under it for non-performance).
Where the supplier is unable to supply the goods or services ordered by the customer, the supplier may perform the contract by providing substitute goods or services of equivalent quality and price so long as this is provided for under the terms of the contract, and the supplier informed the consumer of this possibility in the necessary manner prior to the conclusion of the contract.
The Electronic Commerce Directive (Articles 9 & 10) provides that, for the execution of on-line contracts between service providers and consumers, and where a consumer places his order through technological means (e.g. clicking on an icon), the following conditions apply:
(a) the service provider must acknowledge the receipt of the user's order without delay and by electronic means; and
(b) the order and the acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them.
The acknowledgement of receipt by a service provider may take the form of the on-line provision of the service paid for (Recital 34). However, this does not apply to contracts concluded exclusively by exchange of e-mail. For business-to-business contracts, the parties can 'opt-out' of these provisions.
7. Unsolicited Goods or Services
Where unsolicited goods are sent to a consumer, the consumer will be able to deal with the goods as if they are an unconditional gift. The supplier sending the goods will cease to have any rights over the goods. In addition, the supplier will be guilty of a criminal offence and liable to pay a fine where he makes a demand for payment in relation to unsolicited goods or services, or threatens to bring legal action against a consumer to enforce such a demand.
8. Sanctions for Non-Compliance
A term contained in a contract will be void if it is inconsistent with a provision for the protection of the consumer contained in the Regulations. Furthermore, the Director General of Fair Trading will have a duty to consider genuine complaints received from a consumer concerning a breach of the Regulations, and will have the power to apply for an injunction against any person responsible for a breach in order to secure compliance with the Regulations.
The original draft of the Regulations issued by the DTI provided for the criminalisation of certain failures to comply with the Regulations. However, the Regulations have removed criminal sanctions for non-compliance other than in relation to unsolicited goods and services. The DTI considers that the sanction of an extended period during which the consumer can cancel the contract where the supplier fails to comply with the Regulations, and the availability of the injunction procedure, will be sufficient to ensure adequate compliance with the Regulations. However, the DTI has announced that it will keep under review the need for any additional sanctions (including criminal sanctions and consumer compensation) and will amend the Regulations at a later date if it decides that this is necessary.
9. Restricted Use of Certain Means of Communications
It was envisaged that the Regulations would contain provisions to regulate the sending of unsolicited communications by e-mail (known as 'SPAM') although it was unclear what form these would take. However, the Regulations contain no reference to or prohibition of SPAM communications. The DTI considers that in respect of postal and e-mail communications, the self-regulatory schemes which are currently in place offer adequate protection to consumers and, moreover, the Telecommunications (Data Protection and Privacy) Regulations 1999 already restrict unsolicited communications with consumers by telephone and fax.
Furthermore, the Electronic Commerce Directive (Articles 6-8) restricts certain 'commercial communications' (which it defines as any form of communication designed to promote goods, services or the image of the company e.g. advertising and direct marketing, with certain exceptions). Commercial communications include discounts, promotional competitions or games. In the interest of consumer protection and fair trading, the E-Commerce Directive provides for a number of transparency requirements, e.g. the commercial communication must be clearly identified as such and be clear on whose behalf the communication is being issued; and promotional offers must be clearly identified as such and the conditions attaching to them must be easily accessible, presented clearly and unambiguously (with similar rules in respect of games and competitions).
Under the E-Commerce Directive, any unsolicited commercial communication sent by e-mail must be clearly and unequivocally identifiable as such as soon as it is received, and service providers must respect 'opt-outs' whereby persons not wishing to receive such communications can register their objection.
10. Fraudulent Use of A Credit Card
The Regulations provide that where the consumer's payment card is used fraudulently in connection with a distance contract, the consumer will be entitled to cancel the payment. If the payment has already been made the consumer will be entitled to a re-credit or to have all sums returned by the card issuer. The Regulations amend the Consumer Credit Act 1974 by removing the potential liability of the debtor under a regulated consumer credit agreement for the first £50 of loss to the creditor from misuse of a credit-token in connection with a distance contract.
As regards the UK, the Regulations provide a welcome safeguard for consumers who, until now, may have been cautious in buying over the internet. The DTI has published a short guide for businesses which sets out the main features of the Regulations and is designed to help businesses to prepare for when the Regulations come into force (<http://www.dti.gov.uk/cacp/ca/bisguide.htm>).
Looking at the bigger picture, the implementation of an EU-wide definitive legal structure will encourage cross border transactions, harmonise and integrate the market as well as opening it up for the ultimate benefit of the consumer. The Regulations create a level playing field for all suppliers across the EU, and sets a minimum standard that must be complied with. However, criticism has been levelled at the Commission for not dealing with consumer protection rules generally - suppliers will still need to consider the mandatory consumer protection rules of the particular country in which it hopes to sell its services to ensure that it can supply the service in the way in which it intends. This could hinder full market harmonisation.
Bristows (1999) 'The Distance Selling Directive: impact on e-commerce', IHL, July/August
Clark K (2000) 'Distance Selling Directive', PLC Global Counsel, Volume 5
Rose A (2000) 'A hard Act to follow?', E-Commerce, Law & Policy, Volume 2 Issue 9
Directive 97/7/EC on the Protection of Consumers in respect of Distance Contracts
The Consumer Protection (Distance Selling) Regulations 2000 (SI 2000 No. 2334)
Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market ('Directive on electronic commerce')
DTI Guide for Business