Who: Department for Business, Innovation & Skills
When: 18 November 2014
Law as stated at: 4 December 2014
The Department for Business, Innovation & Skills (“BIS”) has issued a response to its consultation earlier this year on alternative dispute resolution (“ADR”) for consumers (see marketinglaw article BIS consults on “rectifying consumer disputes”). The consultation was published in March ahead of the implementation of the EU ADR Directive and Online Dispute Resolution (“ORD”) Regulation.
The ADR Directive and ORD Regulation
The ADR Directive came into force in July 2013 must be implemented into national law by the UK by 9 July 2015. Under the Directive, Member States are required to ensure that ADR provided by a certified body is available for any dispute concerning contractual obligations between a consumer and a business. The Directive does not give a consumer the right to force a business to use ADR, or to use a particular ADR provider. However, ADR must be available if both parties agree to use it. There are also requirements on businesses to provide information about certified ADR providers on their websites or sales contracts in certain circumstances.
The ODR Regulation obliges the Commission to establish an online platform to facilitate communication between the parties and a certified ADR provider in the event of a contractual dispute arising from an online transaction. The platform will not seek to resolve the dispute itself, but will channel the dispute to a relevant ADR scheme. The UK is obliged to designate an ODR contact point to help with disputes relating to goods and services bought online that are submitted through the ODR platform. The ODR Regulation will come into force automatically in the UK on 9 January 2016, although the requirements relating to the creation of an ODR contact point will apply in advance from 9 July 2015.
BIS response to consultation
After considering the responses to its consultation, the Government has set out the following proposals and next steps on the implementation of the ADR Directive and the ODR Regulation:
1. The decision has been taken to establish a residual ADR scheme that will be available to businesses that are not obliged or committed to using another ADR scheme (e.g. due to the sector they operate in).
2. To make the ADR system easier for consumers to navigate, the Government is intending to work with Citizens Advice to create a consumer complaints helpdesk to provide assistance and advice to consumers attempting to resolve a dispute with a trader.
3. The Government will appoint the Trading Standards Institute (“TSI”) to act as the UK’s competent authority covering ADR schemes in the non-regulated sectors. Sector specific regulators will also be appointed as competent authorities for their sectors alongside the TSI.
4. To help traders meet the statutory information requirements concerning the provision of ADR (see below), the Government will work with the TSI to produce appropriate guidance for businesses.
5. In relation to those elements where the UK has a choice as to how to implement the ADR Directive: the Government will allow certified ADR providers to use the full set of criteria given in the Directive as grounds on which they can refused to deal with inappropriate disputes (e.g. if the dispute is frivolous or vexatious); it will allow certified ADR providers to make decisions that are binding; and an 8 week extension will be given to the 6-year window an individual has to initiate litigation if an ADR process is on-going at the time that window expires.
6. The ODR platform will allow consumers buying online from traders outside of the UK but within the EU access to ADR across Europe, but the Government will not make it a requirement for the ODR contact point to assist with domestic online purchase disputes (though it may do so if it wishes), and will not permit disputes initiated by businesses to be submitted via the ODR contact point.
Both the ADR Directive and the ODR Regulation impose information requirements that businesses have to comply with:
• Any business that is obliged by legislation or membership of a trade association or has otherwise committed to use a certified ADR provider to resolve disputes, must provide information about the ADR provider on its website and, if applicable, in the terms and conditions of any sales contract.
• Businesses who sell their goods or services online, and those who act as a platform for other businesses to do so, must provide a link to the ODR platform on their website. Further information must be provided about the ODR platform if the online business is obliged or committed to using ADR (including providing a link to the platform in any e-mails in which offers are made and in any applicable terms and conditions).
• In the event of an unresolved dispute, all businesses must provide information about an appropriate certified ADR provider who could handle that dispute to the consumer, and must notify the consumer whether or not the business will use ADR in an attempt to attempt to settle the dispute. Businesses which belong to sectors with mandatory ADR schemes will have to advise consumers that their dispute can be referred to the relevant ADR body. Businesses operating in sectors where the use of ADR is voluntary will have to advise consumer whether or not they are willing to refer the complaint to an appropriate ADR body.
The cost of these information requirements is estimated by the Government to be a one-off cost of £25.3m to £38m, and then £0.5m to £0.7m per year. In order to minimise this cost, the Government will work with the TSI to produce appropriate guidance on ADR information requirements. It will not, however, look to introduce any statutory wording. The information requirements and related sanctions on businesses will be set out through secondary legislation.
Why this matters:
It is helpful to have an indication of the Government’s intentions on the implementation of the ADR Directive and the ODR Regulation, in particular confirmation of the fact that it does not plan to impose requirements that are over and above those set by the legislation.
In the long term, businesses may find that more consumers are seeking redress when unsatisfied with goods and services and how their complaints are handled, due to having been given access to the quicker and cheaper ADR option. This certainly appears to be the purpose of the reforms.
The information requirements for communicating access to ADR schemes to consumers will be applicable to many retailers. Off the back of the recent introduction of the Consumer Rights Directive and the forthcoming Consumer Rights Bill, it may seem that the list of information traders are required to supply to consumers is constantly growing. The Government appears to have recognised this and intends to use the opportunity provided by the implementation of the Consumer Rights Bill to provide comprehensive information to businesses on the requirements placed on them by recent changes in consumer legislation, including ADR.
The BIS consultation response document is available here.