In Germany it has long been unclear whether a consumer who buys on-line, takes delivery, then cancels can get a refund of any original delivery charges. Now the Court of Justice of the EU has pronounced on the issue, as Thao Tran of Osborne Clarke Cologne reports.
Topic: Distance Selling
Who: Heinrich Heine GmbH and the Court of Justice of the European Union ("CJEU")
When: 15 April 2010
Where: Germany and Luxembourg
Law stated as at: April 2010
What happened:
Based on the EC-Directive 97/9/EG on the Protection of Consumers in respect of Distance Contracts ("Distance Selling Directive"), a consumer in Europe is entitled, when ordering a product on the internet, to cancel within 7, in Germany within 14, days.
In the event of a cancelled order, the consumer may reclaim from the seller all the expenses he has incurred in order to return the product. In Germany, however, it was long disputed whether the seller also has to reimburse the delivery charges initially paid by the consumer.
This has now been decided by the Court of Justice of the European Union ("CJEU"), based on a reference for a preliminary ruling by the German Supreme Court (Bundesgerichtshof – BGH). And the answer is: Yes, the seller has to reimburse the delivery charges on cancelled orders.
Background of the CJEU decision
In their terms and conditions, the German mail-order company Heinrich Heine GmbH obliged the customer to bear delivery charges of € 4.95 which would not be repaid to the consumer in the event of cancellation. The consumer association of North Rhine-Westphalia found this business practice unfair and applied for a Cease and Desist order. After losing before courts of lower instance, Heinrich-Heine GmbH appealed to the BGH, who made the reference to the CJEU.
Reasons of Decision
In its reasons, the CJEU held that passing on delivery charges to consumer would prevent the latter from exercising his right to cancel. This would clearly cut across the purpose of the Distance Selling Directive giving the consumer such right, as he cannot test and check the good before buying as he would do when “normally” buying.
The CJEU further decided that this business practice is clearly contrary to the wording of the Distance Selling Directive: the only costs to be borne by the consumer because of the cancellation shall be the charges for resending the goods.
This contrasted with the view of the BGH, who found that the consumer was only entitled to reimbursement of costs resulting from the cancellation instead of those accruing before cancellation (such as delivery charges).
The CJEU on the other hand, decided that the Distance Selling Directive referred to all costs in connection with concluding, executing or terminating a distance contract, hence including delivery charges. Therefore, the consumer may only bear the charges for re-sending while the seller bears the delivery charges which is only fair.
Why this matters:
In Germany, sellers delivering goods of a value above 40 € are the most affected by this decision. Unlike most other EU member states, Germany transposed the Distance Selling Directive in such a way that those sellers have to bear both charges, for delivery and re-sending. Consequently, the fairness argument of the ECJ does not apply to Germany.
Apart from this, this decision creates more uncertainties for businesses:
- what happens if the consumer cancelled only part of the order e.g. a consumer orders three pairs of shoes but returns only one? To date, there is only a decision by the Higher Regional Court of Karlsruhe ruling that delivery charges cannot be split as they accrue just once. And what happens if the consumer chooses a special, more costly, delivery (e.g. express delivery)?
- in distance contracts, sellers must inform their customers about their cancellation rights; otherwise, the consumer may cancel the order at any time, with no time limit. It is not yet clear whether sellers are now obliged to inform consumers about the reimbursement of delivery charges. The German legislator has issued an information template for sellers to use; with effect from 11 June 2010, which will have the status of law. The current template does not deal with this matter yet. So what happens if sellers use this template even though they were obliged to inform the consumer about the delivery charges? Whose protection shall prevail: the seller’s trust in the statutory template or the consumer being wrongly informed?
- Also, German law is still silent on this issue. The question is now whether the current law has to be interpreted in the light of the Distance Selling Directive to honour the CJEU decision. The wording of the German law, however, does not really allow such an interpretation. For clarity reasons, the German legislator needs to act and issue a clear provision on this issue.
