Consumer Rights Act receives Royal Assent

Who: HM Government

Where: Westminster

When: 26 March 2015

Law stated as at: 15 May 2015

What happened:

The Consumer Rights Bill (now the Consumer Rights Act 2015 (the “2015 Act”)) received royal assent on 26th March 2015. Most of the 2015 Act will come into force on 1 October 2015 (the secondary ticketing provisions will come into force in two months’ later).

As part of ambitious plans to change the landscape of consumer law in the UK, the 2015 Act will consolidate and amend existing consumer law from eight separate pieces of existing legislation covering goods, services, digital content and unfair contract terms, including:

• Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 – The 2015 Act is distinct from the EU Consumer Rights Directive (2011/83/EU), which was implemented by separate legislation in April 2013 and June 2013, including the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2014 (the “Regulations”). Provisions in the Regulations which overlap with the 2015 Act will be repealed in October, but as the Regulations will still include certain provisions not covered by the 2015, (for example the requirement to inform consumers of their “obligation to pay” directly before any online contract is formed) online businesses will need to comply with both the 2015 Act and the Regulations from October onwards.
• Legislation on unfair terms – the 2015 Act will consolidate legislation governing unfair terms current contained in the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”) and the Unfair Contract Terms Act 1997 (“UCTA”): the UTCCRs will be revoked in full, and UCTA will continue to apply to B2B contracts only.
• Sale of Goods Act 1979 and the Sale of Goods and Services Act (1982) – both Acts will be amended to reflect the enhanced consumer protections under the 2015 Act.
• Other consumer protection law – the enforcement powers in more than 60 legislative instruments will be amended to reform and consolidate the investigatory powers for enforcement bodies like Trading Standard.

Key changes

An in-depth analysis of the wide reaching changes being implemented by the 2015 Act is beyond the scope of this article, but a summary of the key changes for advertisers and online businesses to consider are set out below.

Scope

• The 2015 Act applies to contracts and notices between “traders” and “consumers”. The definition of “consumer” under the 2015 Act is wider than existing definitions found in EU and UK law: it includes individuals who enter into contracts for purposes that are “wholly or mainly” outside of the individual’s trade, business, craft or person. This definition therefore now captures individuals who enter into contracts for a mixture of business and personal.

Goods

• Under current legislation, consumers can only reject faulty goods before goods are deemed “accepted”, and such acceptance is demonstrated by consumers acting in a manner which is inconsistent with the seller’s ownership or retaining the goods beyond a “reasonable time”. Under the 2015 Act consumers will have a new right to reject faulty goods and obtain a full refund within 30 days from the date of purchase or delivery of goods, whichever is latest (the 30-day period will be paused if the faulty goods are repaired or replaced during that period). Online businesses will need to consider the impact of this on their returns policies.

Digital content

• As previously reported , among other reforms, the 2015 Act introduces a new framework of consumer’s rights in respect of “digital content”. Digital content is defined widely as any data that is produced and supplied in digital form. The 2015 Act makes clear that this covers content that is “paid for”, as well as content that is paid for by means of an on-going subscription allowing access to content over a period of time, and content that is given away free with paid for products (e.g. a computer is sold with a free anti-virus software installed). The supply of digital content is treated in much the same way as the supply of goods in that consumers will now have a statutory right to a repair or replacement from a trader where digital content is not of satisfactory quality, fit for a particular purpose and/or matches its description.
• The 2015 Act implies a term in every contract for digital content that the information required by the CCRs (such as information regarding digital content’s functionality, interoperability and any technical restrictions, as well as the more general pre-contractual information requirements that generally apply across all goods and services) be provided to consumers pre-contract. If it is not, the consumer he has the right to recover costs incurred as a result of the failure to provide this pre-contractual information.
• Online businesses and marketers such as ISPs and mobile phone service suppliers will not be responsible for compliance with the digital content elements of the 2015 Act where they are a trader which merely “supplies a service by which digital content reaches the consumer.” The involvement of ISPs or such other service providers that meet that description will not take away responsibility from traders for compliance.

Services

• Consumers now have statutory remedies of “repeat performance” and a price reduction if a service was not provided with reasonable care and skill or fails to match its description.
• The “description” of services will now include spoken or written voluntary statements made by businesses about itself or its services, regardless of whether the statement is actually captured in the relevant contract. Previously if a consumer was given misleading information, the only remedy available to it would be for misrepresentation. As any misleading statements made by traders can now be treated as contractual terms, a consumer will now be entitled to pursue the trader for breach of contract; considerably more easy to prove than misrepresentation.

Unfair Terms

• The 2015 Act consolidates existing legislation governing unfair terms, currently contained in the UTCCRs and the UCTA. Much like under UCTA and the UTCCRs, only “fair” contract terms and notices will be binding on consumers, and the test for “fairness” remains largely unchanged. Under the 2015 Act, terms relating to the subject matter of the contract or the price paid will be exempt from this “fairness” test” if they are both “transparent” and “prominent”. This requirement for “prominence” is new, and indicates that businesses will need to take care to make sure that key contract terms are brought to the attention of consumers pre-sale.
• The 2015 Act adds the following terms to the “Grey List” – an indicative list and non-exhaustive list of contract terms which may be regarded as “unfair”:
• A term that allows the trader to decide characteristics of the subject matter after the consumer is bound by contract;
• A term that allows disproportionate charges or requires the consumer to pay for services which have not been supplied;
• A term that allows a trader discretion over the price after the consumer is bound by contract.

Why this matters:

Now the 2015 Act has received royal assent, and we have a clear deadline for when it will come into force, advertisers and online businesses should:

• Pay particular attention to any information provided as part of ad campaigns (whether through point of sale, packaging, social media or any other medium) that could be caught by the new rules requiring that the goods, services or digital content provided will need to comply with all pre-contractual information given to the consumer, whether or not the information is included in the final contract;
• Review current practices for dealing with faulty goods, faulty digital content, substandard services and repair, replacement and refund policies;
• Review all consumer contracts and notices to ensure that terms are easy for consumers to understand and fair (in reference to the updated “grey list”), paying particular attention to ensure terms which are especially onerous or unusual or contain key information on the subject matter or price, are brought to the attention of consumers pre-sale;
• Factor in potential costs for updating business practices, amending consumer contracts and training staff before 1 October 2015;
• Review the guidance issued by the Trading Standards Institute to help businesses understand how their rights and responsibilities will change under the new legislative framework; and
• Don’t forget that whilst the 2015 Act does consolidates a substantial bulk of existing consumer law, other legislation such as the CCRs, the SGA, the SGSA will continue to apply in amended form  to consumer contracts.