Who: Department for Business, Innovation & Skills
When: 11 March 2014
Law as stated at: 2 April 2014
The Department for Business, Innovation & Skills (“BIS”) has issued a consultation paper seeking views on alternative dispute resolution (“ADR”) for consumers ahead of the implementation of the EU ADR Directive and Online Dispute Resolution (“ORD”) Regulation.
The Directive came into force in July 2013 must be implemented into national law by the UK by 9 July 2015. The purpose of the ADR Directive is to give consumers greater access to redress if something goes wrong with their purchase of goods or services. To this end, 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.
Under the Directive, the Government also has to ensure that certified ADR providers follow specific operational rules, such as ensuring that ADR is available to consumers free of charge or at a nominal fee, and that disputes are concluded within 90 days.
Disputes such as discrimination claims, disputes between businesses and disputes initiated by a business against a consumer fall outside the scope of the Directive. Further exclusions apply to health services and public providers of education.
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 Government proposes that the ODR contact point should only be required to assist with cross border disputes involving a UK consumer or a UK business (in order to ease their potential work load).
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.
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.
• 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 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).
ADR and the UK
The UK currently has several compulsory ADR schemes in regulated sectors, such as in financial services, telecommunications and legal sectors. In some other sectors (e.g. glazing installers), businesses belong to voluntary ADR schemes which are often likened to trade associations. In order to comply with the ADR Directive, the Government proposes to introduce a residual ADR scheme to operate alongside existing schemes and to deal with any dispute not currently covered by such schemes.
The BIS consultation seeks views on:
• whether one or several ADR bodies should operate as part of the residual scheme
• whether a particular operating model would work best (e.g. mediation or ombudsman model, with the decision being binding on the business if accepted by the consumer)
• how businesses could be encouraged to use a voluntary scheme
• an appropriate fee structure and whether it would be feasible for businesses to access (and pay for) a residual ADR scheme on a case-by-case basis
• what an appropriate minimum and maximum claim accepted by the scheme should be
• whether it would be beneficial to set up a complaints helpdesk to help consumers and businesses access ADR and to direct them to appropriate providers
• whether it would be helpful to provide some suggested wording and guidance for businesses to meet the information requirements
In addition to consulting on the practical implementation of the ADR Directive and the ODR Regulation, BIS is seeking views on the general long term landscape of ADR in the consumer sphere in the UK, in particular whether a rationalisation of the number of available schemes is required and whether use of ADR should be made compulsory for businesses.
Why this matters:
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, more significantly, cheaper ADR option. A study carried out by Consumer Focus in 2012 estimated that 2 million out of 6.4 million consumer complaints made to businesses were unresolved. While the use of ADR by businesses (except in certain regulated sectors) will continue to be voluntary, businesses may be encouraged to go down the ADR route for reputational purposes.
Retailers, in particular online retailers, should take note of the information requirements for communicating access to ADR schemes to consumers. While businesses in regulated sectors and those who belong to trade associations or professional bodies which currently provide access to ADR will already be complying with some of these requirements, all businesses will need to be providing this information by July 2015.
The BIS consultation document is available here.
The consultation closes on 3 June 2014, and the Government aims to publish its response by early September.