Surveys showed many UK distance sellers of IT products were not complying with distance sales and unfair contract regulations. To help businesses comply, the OFT plan to publish “Guidance”.
Topic: Distance selling
Who: The Office of Fair Trading
When: November 2003
The Office of Fair Trading ("OFT") wants to publish Guidance for suppliers of IT products to consumers by way of "distance sales", such as mail order, the internet and other home shopping methods. In particular, the OFT wants to ensure that these businesses comply with the Consumer Protection (Distance Selling) Regulations 2000 ("DSRs") and the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCRs").
This initiative follows an OFT study of the market for consumer IT goods which found widespread non compliance with these two particular sets of regulations. The objective of the Guidance document is to provide suppliers with a clear idea of the law on fairness of contracts and distance selling in a user-friendly way.
The deadline for responses to the draft is 30 January 2004. More details can be found here, in the "Consultations" section of the site.
The Guidance explains the requirements of the DSRs and UTCCRs. The next section is organised by type of term typically occurring in these contracts (for example "Supplier's liability and consumer rights" or "Product warranties and support services") and explains what needs to be done to comply with the regulations.
Annex B to the draft Guidance is perhaps the most useful part of the document. This gives examples of standard terms used by businesses that the OFT has frowned on. These are followed by proposed ways of revising the terms in question so as to render them compliant.
Going back to the explanations of the DSRs and UTCCRs, the Guidance offers some helpful tips on interpreting the regulations.
Under the DSRs certain disclosures, for instance as to the product on offer and the existence of a right to cancel, have to be given in a "durable medium". There is no definition of this phrase, but the draft Guidance says that emails will qualify, but information on a website will not
On the cancellation right, the draft Guidance underlines that consumers cannot be forced to physically return the goods. A term can be included in the contract which requires the consumer to return the goods when the contract is cancelled, but if the consumer refuses to do so, the seller's remedy is not to force the return, but to charge the consumer for the direct costs of recovery. A related point is that cancellation cannot be made conditional on the return of goods.
The Guidance also reminds sellers that their websites should include the seller's company number, its registered office address and details of the country in which it is registered, information which in marketinglaw's experience is often very difficult to find on-line!
On the UTCCRs, "transparency" is emphasised as the watchword when it comes to bringing the full sale terms and conditions to the attention of the consumer. These should be readily available to the consumer from the outset.
The use of legalistic terms such as "indemnity" is strongly discouraged, as are wide exclusion clauses that are qualified by references to the preservation of statutory rights.
If there are potentially burdensome terms, then hiding them away in small print will be considered potentially unfair. Instead, significant points should be highlighted and if there are unavoidable technicalities these should be explained.
The draft Guidance also reminds sellers that under the Sale and Supply of Goods to Consumers Regulations 2002, any statements about the products on offer have to be factually correct and now form part of the sale contract.
Amongst the terms frowned on are ones that allow the seller absolute discretion as to what is actually supplied, exclude liability for delay in delivery, however caused, exclude liability for the consumer's foreseeable loss as a result of late delivery, omit to tell consumers whether, if they cancel, they will be liable for the cost of returning the goods, which allow the seller to cancel by relying on external circumstances which are in fact within the seller's control, terms which seem to deny the consumer's right to reject goods that do not conform with the contract, and qualifying statements such as "this does not affect your statutory rights" after a more explicit statement that appears to do exactly that.
Also objected to are clauses that purport to exclude the seller's liability for damage caused by faulty goods or where goods have been physically damaged, that exclude seller liability if the consumer has not paid or require the consumer to comply with unjustifiable formalities when returning goods after cancellation.
The OFT also objects to terms that require consumers to state that they "have read and understood" the terms and conditions as this effectively forces consumers to make statements that may not be true and may put them at a legal disadvantage. Preferable, is a clear and prominent warning that the consumer should read and understand the terms before agreeing to them and placing an order.
On choice of law terms, the draft guidance records the OFT's objection to terms that give exclusive jurisidiction to say, the courts of England and Wales despite the contract being used in another part of the UK having its own laws and courts, for instance Scotland.
Why this matters:
The OFT is clearly troubled by mass non-compliance on the part of distance sellers of IT products, and although the government took the trouble to publish detailed and helpful guidance on the impact of the Distance Selling Regulations and the Unfair Terms and Consumer Contract Regulations on publication, there is clearly felt to be a need for yet further explanation and guidance.
This draft guidance document certainly fits the bill in that regard, and as already indicated, annex B is particularly helpful in terms of the help it gives in the drafting of provisions of various types which should ensure compliance with relevant consumer protection legislation.
Even in its draft form, the guidance note is a helpful and clear read for sellers of all products at a distance, not just in the IT sector, and although at 70 pages it is not a small document, it is highly recommended.