Advertisers and marketers should be aware that to bolster consumer confidence in buying elsewhere in the EU than their home country, the EC is looking to create new rights for consumers to resolve disputes with businesses out of court. Miah Ramanathan looks at two recent proposals.
Topic: Consumer protection
Who: European Commission
When: 29 November 2011
Law stated as at: 28 December 2011
The growth and increased profitability of e-commerce has highlighted deficiencies in the alternative dispute resolution ("ADR") and online dispute resolution ("ODR") procedures currently available to consumers and businesses for contractual disputes arising from cross-border online transactions. In order to bolster consumer and business confidence in cross-border online transactions and facilitate the development of the digital internal market, the Commission have adopted 2 key proposals:
(1) a directive to establish out-of-court ADR providers to deal with contractual disputes between consumers and businesses (the "Directive"); and
(2) a regulation to establish an EU-wide ODR platform to facilitate the resolution of disputes between consumers and businesses arising from cross-border online transactions (the "Regulation").
The Commission's proposals have been hailed as a shift towards a more efficient, affordable and accessible mechanism for resolving disputes. The European Parliament and the EU Council expect to adopt these proposals by the end of 2012. Therefore, the Directive and the Regulation should be implemented into the national laws of Member States by the end of 2014 and early 2015, respectively.
Key elements of the Directive on ADR
The Directive is intended to tackle 3 problems identified by the Commission:
– Geographical and sector-specific gaps in the coverage of ADR mechanisms
Under the Directive, ADR providers will determine complaints filed by consumers as well as businesses. The Directive will not apply to direct negotiations between the parties, or to consumer complaint handling systems operated or financed by businesses.
When implementing the Directive, Member States may decide how best to tackle the current geographical and sector-specific gaps in the coverage of ADR mechanisms. This may be by way of creating new ADR providers or overhauling the existing network of ADR providers.
– The lack of consumer and business awareness of ADR mechanisms
To ensure ADR is easily accessible to consumers, and to incentivise businesses to adopt ADR mechanisms, the Directive will require businesses to inform consumers about the ADR providers which cover their particular business. Information about the ADR providers and their contact details will need to be included on their website and in any contracts, terms and conditions, invoices and receipts generated by any transaction between the parties. Businesses will also need to state whether or not they are committed to using ADR to resolve online disputes.
– Uneven quality in the ADR procedures offered by existing ADR providers resulting from the fact that the principles of impartiality, transparency, effectiveness and fairness set out in the Commission Recommendations 98/257/EC and 2001/310/EC are not binding on ADR providers
In order to improve consumer confidence in cross-border online transactions and the ADR mechanisms available to them, the Directive will require all accredited ADR providers to comply with the key principles of impartiality, transparency, effectiveness and fairness.
To ensure impartiality and expertise, ADR providers must not have a conflict of interest with either party to the dispute and will need to possess the necessary knowledge and expertise.
The Directive will require ADR providers to publish certain information on their websites, including the rules of procedure governing the dispute resolution process, the types of dispute they are competent to deal with, the language of the procedure, costs, timing and the legal effect of the outcome.
To increase the efficiency of ADR procedures, the intention is that they will be free of charge or at moderate cost to the consumer and all disputes should be resolved within 90 days of submitting the complaint. If the matter is complex the ADR provider will be able to extend this time period.
The measures to ensure fairness are designed to enable each party to express its views and hear the arguments and facts put forward by the other party. The ADR provider will also be required to put the outcome, together with an explanation of the grounds on which it is based, in writing to both parties.
If the ADR procedure is geared towards suggesting a solution, to ensure that each party makes an informed decision to resolve the dispute, the ADR provider must explain the legal effect of any agreed solution and inform the consumer that the suggested solution may be less favourable than a court determined outcome.
Member States will also be under an obligation to monitor ADR providers to ensure their adherence to these principles and publish their findings in regular reports.
Key elements of the draft Regulation on online dispute resolution
– Establishing an EU-wide ODR platform
The ODR platform is expected to take the form of an interactive website, accessible free of charge to consumers and businesses and in all of the official languages of the EU. Consumers and businesses will submit any complaint arising out of a cross-border online transaction to the ODR platform, which will process and assign the dispute to the appropriate ADR provider for resolution. To ensure that the ODR procedure is efficient and cost effective, ADR providers will be required to resolve the dispute within 30 days.
The Regulation intends to address the perceived lack of consumer and business confidence in cross-border online transactions. By effectively establishing a "one-stop shop" for disputes, consumers and businesses should be able to utilise the cost benefits offered by the wider EU market as was originally envisaged by the free movement of goods and services.
– Maintaining the quality of the ODR platform
The Regulation intends to establish rules on the way ADR providers process and resolve disputes and measures to ensure the confidentiality and security of personal data and other information handled by ADR providers.
Each Member State will also be under an obligation to monitor the ADR providers and ensure their compliance with the Regulation.
– Information on the ODR platform to be made readily available to consumers
The Regulation requires businesses to publish information about the ODR platform on their website and in any electronic communications to consumers that relate to an online transaction. A network of "ODR facilitators" will be created under the Regulation to capture individual experiences that will contribute to a model of best practice.
– The ongoing development of ODR
Going forward, the ODR platform will gather information on the outcome of disputes and feedback from parties on individual ADR providers to enable the Commission to gauge the effectiveness and success of the Regulation.
Why this matters:
The Commission intends for the ADR and ODR procedures to be an accessible and effective alternative to court proceedings which tend to be expensive and time-consuming and, therefore, disproportionate to the high volume, low value disputes likely to arise. By improving the mechanisms to resolve disputes between consumers and businesses arising from cross-border online transactions, the Commission's proposals should bolster consumer and business confidence in the digital internal market.
The proposals address the absence of an effective redress for complaints resulting from such transactions hence consumers and businesses may be encouraged to utilise the benefits of buying and selling across the wider EU market. On the back of strengthened consumer confidence, online advertisers and traders may also be incentivised to market their goods and services on a wider EU scale which in turn will promote competition and create new opportunities for businesses to trade in the internal retail market.
In 2008 the Organisation for Economic Cooperation and Development identified that “today, as a global platform for commerce and social interaction, confidence in the internet is vital if full use is to be made of its potential, [such as] buying and selling goods online” . The Commission's proposals should be a step towards achieving this.