New Brussels marketing law threat

Topic: Consumer protection

Who: European Commission

When: October 2008

Where: European Union

Law stated as at: October 2008

What happened:

Hot on the heels of the Consumer Protection from Unfair Trading Regulations 2008, still more consumer protection legislation appears to be in the offing from the EU. The European Commission is proposing to harmonise some existing consumer protection laws and introduce new consumer rights across Europe by replacing four existing directives on:

• the sale of consumer goods and associated guarantees (Directive 1999/44/EC);
• unfair contract terms (Directive 93/13/EEC);
• distance selling (Directive 97/7/EC); and
• doorstep selling (Directive 85/557/EEC).

Background

These proposals form part of the Commission's "Review on the Consumer Acquis" (adopted on 8th February 2007) and related impact assessment and consultation process. The Commission's concern is that because existing consumer protection legislation is based on "minimum harmonisation", member states can introduce more stringent local rules if they so choose – this results in differing protection throughout the EU (potentially 27 different sets of rules) which in turn affects cross-border trade by increasing legal compliance costs for traders.

The intention is to create a true internal retail market, by increasing consumer confidence in cross-border shopping. According to EU press releases, although there are 150 million EU on-line shoppers, only around 30 million shop on-line across borders. Harmonising the relevant rules, and modernising them to better apply to new shopping methods like e-commerce, mobile commerce and on-line auctions, would potentially increase competition, leading to better shopping choices and prices for consumers.

The new directive would be a "full harmonisation" directive, so member states will not be able to legislate any more or less stringently than is dictated by the directive.

The proposed rules

The directive would generally apply to all sales and services contracts concluded between traders and consumers. The key subject areas covered by the proposals are extensive, but include the following:

• harmonised definitions are introduced for significant terms such "consumer", "traders", "sales contracts", "goods" and "service contracts" which may not have been treated in a consistent manner across the EU to date.
• pre-contractual information will have to be provided to consumers by traders. This covers:
  • the main characteristics of the product, and the address and identity of the trader;
  • pricing information – including taxes plus any additional freight, delivery or postal charges (or at least that such charges are payable in cases where they can't be calculated in advance). Failure to provide additional charges information means that the consumer is not obliged to pay them;
  • arrangements for payment, delivery and performance, and complaints policies;
  • the existence and details of any withdrawal rights, after-sales services, commercial guarantees, and any deposits/guarantees payable by the consumer; and
  • the contract duration (or if its open ended the conditions for terminating it), and the duration of any minimum consumer obligations.

Member states will have to ensure that their national laws provide effective contract law remedies for any breach of these information provisions.

• Traders concluding distance and off-premises contracts are also required to give the pre-contract information above (with some additions) in the order form "in plain and intelligible language" and in a legible manner. Importantly, the order form will have to include a particular form of cancellation notice as set out in the directive. This is intended to simplify cancellation processes for consumers. They can cancel using this form (which member states will not be allowed to complicate with any other formal requirements) or just inform the trader in their own words on a durable medium. In the case of distance contracts over the Internet the trader can also give the option of an electronic cancellation form on their website.Where distance contracts are concluded through a medium with limited space, then only the main product characteristics and price need be given up front, but the rest must follow in a manner appropriate to the particular medium, with confirmation in a durable medium after the contract is concluded (in a similar manner to the Distance Selling Directive's requirements).
  Consumers will also have a fourteen day cooling off period to withdraw from a distance or off-premises contract, without giving any reason (and if the trader failed to inform the consumer about their withdrawal rights, that period will be extended to 3 months). This is longer than currently applies in the UK and many other EU states, which have cooling-off periods ranging from seven to fifteen days. There are detailed exceptions to the right to withdraw from a contract, which apply to special types of goods and services (e.g. perishable or personalised goods).
• Delivery and risk. Unless otherwise agreed goods must be delivered within 30 days from the contract being concluded, failing which the consumer is entitled to a refund. The risk of loss or damage to goods will pass to consumers when they acquire possession of them (but if they fail to take reasonable steps to acquire possession, the risk will pass to them at the time delivery should have happened).

There are detailed rules governing when goods are to be regarded as conforming with a contract, and the rights of consumers if they don’t, so that EU consumers now have one standard set of remedies for faulty products, and will know that they are entitled to repair or replacement (at the trader's election) or (where a trader can show that is not possible or is too difficult) a price reduction or refund.

• Unfair contract terms – the directive adds significantly to the current unfair contract terms legislation applicable to traders' standard terms by introducing a new black-list of contract terms which will be automatically deemed to be unfair (Annex II), and a "grey-list" of terms which will be presumed unfair unless the trader can prove that they are fair, taking into account all the circumstances (Annex III). Unfair terms will not bind the consumer. Annex II terms include exclusions of liability for death/personal injury; hindering consumer's rights to take legal action; or providing that the trader determines whether goods conform with the contract. Annex III terms include exclusions or limitations on consumers' legal rights where traders fail to perform a contract; allowing traders to terminate contracts at will, but preventing consumers doing the same; and other imbalanced termination or amendment clauses.
• Miscellaneous: Protection is added in several other areas. For example, traders now have to get consumers' express consent to any "extras". Pre-ticked boxes adding additional charges (such as those which automatically add in travel insurance to the price of a holiday) mean consumers would be entitled to a refund of those charges.

Why this matters:

The new directive adds considerably to the current legislation protecting consumers, which can only be a good thing for shoppers, encouraging inter-state retail trade. Whether UK businesses and marketers will regard this initiative in a similar light is open to question, although the intention is to benefit retailers too. The plan is that retailers and marketers will have one clearer set of rules with which to comply across the whole of the EU in the areas covered. The Commission says that as a result, those dealing internationally should find themselves with a lower compliance bill (some 97% cheaper, the Commission suggests). It is unclear whether this takes into account the cost of any additional legal guidance needed to ensure procedures and documents are fully compliant.

The proposal still needs to be submitted to the European Parliament and the Council, so no indications yet as to when the directive might be adopted. As ever, watch this space.