When two concerned public bodies published a draft ‘Guide for Businesses’ on existing home shopping/distance sales regulations the marketing press howled about yet more restrictions. But no law changes were suggested, only helpful guidance on how to comply with existing rules.
Topic: Distance Selling
Who: The Office of Fair Trading ("OFT") and the Department of Trade and Industry ("DTI")
Where: Central London
When: August 2005
In an unprecedented move, the Department of Trade & Industry and the Office of Fair Trading jointly published a "Guide for businesses on home shopping." This was subtitled "Consultation on the text of guidance for businesses about the distance selling regulations."
As the sub-title suggested, the document was in fact only a proposed guide, with comments on the text requested by 11 November 2005, after which a final version of the guide will be published.
At the time, the marketing press went into "the end of marketing as we know it" mode. One weekly described the draft guidance as "Government proposals to tighten distance selling regulations" and another headlined a piece "Does mail order really need more regulation?"
Did the press get the wrong end of the stick? By and large we think it did.
The plan is that the final version of this guide will replace the existing home shopping guide for businesses currently available from the OFT. It comes with the health warning that although every effort has been made to ensure that the Guide represents the state of the law correctly as at the date of publication, ultimately only the courts can provide a definitive interpretation of the law. Accordingly, the Guide should not be relied on as a substitute for professional legal advice.
The Guide is in Q&A format. It confirms that the document relates to the Consumer Protection (Distance Selling) Regulations 2000 as amended by SI 689/2005 with effect from 6 April 2005 ("Regulations").
As reported at the time on marketinglaw.co.uk, these amendments change the requirements around cancellation rights and the provision of prescribed information when contracting to supply services by distance means. "Durable medium" clarification
The Guide includes a helpful explanation of some of the terms used in the Regulations. This confirms that where under the Regulations some of the product or supply information has to be disclosed in a "durable medium," this will not include information on a website, as this can be updated at any time. Media that will qualify as "durable medium" include an e-mail, a PDF, and of course hard copy disclosure.
Relevance to eBay?
One section focuses on when the Regulations will apply and looks at the example of online auction sites. A traditional auction will not be covered by the Regulations. The question is, without a statutory definition of "auction", will an auction on a site such as eBay fall outside the Regulations also?
The Guide suggests that fixed price sales through "buy now" slots on internet auction sites will not be exempt. The reason for this is that the sale is not concluded by a process of auction as this term is generally understood. On the other hand, if the sales are by private individuals not acting for business purposes, they will not be covered by the Regulations in any event because the sellers are not acting for business purposes.
Car hire excluded
The draft Guide also confirms the recent European Court of Justice judgment in the EasyCar case by stating that contracts for car hire will constitute contracts for the provision of transport services and will therefore be outside the Regulations for most purposes including the right to cancel.
In good time?
The Regulations require that certain product/supplier disclosures are supplied "in good time" before conclusion of the contract with the consumer. As for the meaning of the phrase "in good time", the Guide simply indicates that information will be received in good time if consumers have sufficient time to act on it when they receive it, for example, to enable them to exercise their right to cancel. Hmmm….
April 2005 changes explained
In relation to the cancellation right for contracts for the provision of services, the Guide deals with the position in light of the amendments wrought by the April 2005 changes.
"In some circumstances the customer may want the services to start before the usual cancellation period expires" … the Guide states "In that case it is possible to displace the usual timings providing that the required durable information has been supplied before the service starts and that the customer has agreed to the service starting before the usual cancellation period has expired. In such a case cancellation rights will end when the service starts."
The Guide goes on…"Where the customer agrees to such an early start but the required written information is not provided until the service has already started, but it is nevertheless provided in time for it still to be useful, cancellation rights will extend to 7 working days after the date a customer receives the information. However in this case, if the supplier completes providing the service within the 7 working days after the date a customer receives the required durable information, cancellation rights will end on the day of completion."
The cancellation right will not apply to goods which are made to the customer's own specifications. Examples cited by the Guide include custom-made blinds or curtains, but the Guide goes on to make it clear that the exception will not apply to upgrading options such as choosing alloy wheels when buying a car or opting for add-on memory or choosing a combination of standard off-the-shelf components when ordering a PC.
The draft Guide goes on to ask whether the provision of a link on a website from where customers on payment can download an electronic book or music would fall within the cancellation exemptions which state that the cancellation right will not apply to the supply of services where the seller has had the customer's agreement to start the service before the end of the usual cancellation period.
If electronic versions of books, downloadable music or ring tones for phones are being bought, there are no physical goods and the Guide advises that a service is being supplied. In such cases, the exception to the right to cancel will only apply if the seller has the customer's agreement to start the service before the end of the cancellation period. The seller must also provide the customer with the required written information before the start of the service, including information about cancellation rights ending as soon as the service begins. Again this picks up on the April 2005 amendments to the Regulations.
Also excepted from the cancellation right is the supply of audio, video recordings or computer software that the customer has unsealed and the supply of newspapers, periodicals or magazines.
The Guide asks whether other products which may be the subject of copyright, for example books or sheet music, might also fall within the exemption.
The Guide's answer is a fairly clear "no". There is no general exception for copyright products, the Guide states, and the exception will not extend to other products that may lend themselves to copying, such as books or sheet music.
This will not, however, stop suppliers from specifying in their terms and conditions how customers will be regarded as exercising the "reasonable care" required by the Regulations of customers examining the goods between taking delivery and exercising the cancellation right. If a customer has done no more, however, than examine the goods as they would have in a shop and if that requires opening the packaging and trying out the goods, then they would not, the Guide says, have breached their duty to take reasonable care of the goods. By analogy the Guide refers to books and sheet music being displayed unsealed in shops.
Another category of goods focused on in the Guide in this context is "lingerie" and other items of a personal or intimate nature.
If these products, when returned unsealed, may raise health and safety issues, how will they be treated under the Regulations?
The Guide comments that the only exception that might apply here is that which relates to "goods which by reason of their nature cannot be returned". The Guid states, however, that this exception will only apply in its view where returning the goods is a physical impossibility or where they cannot be restored in the same physical state as when they were supplied.
In light of this, whilst this exception may apply to items such as latex or nylon clothing which could become distorted once worn, the Guide does not see the exemption being applied to lingerie in general.
If there are continuing health/hygiene concerns, sellers might consider specifying in their terms and conditions what they consider "reasonable care" by the consumer to be, such as not removing hygiene seals.
Another question posed is whether the Regulations apply to the sale of gift vouchers. The Guide is quite clear that they would do. Would this be "goods" or "services"? In the Guide's view, this would be a contract for the supply of a service.
Other sections of the Guide focus on refunds. It asks if a seller can include a term in the contract that states that the customer must return goods within a certain number of days in order to obtain a refund.
The clear answer to this is "no". Such terms are void under the Regulations and a term making cancellation conditional on return of goods would be inconsistent with consumers' rights to receive a refund upon giving a cancellation notice.
As for precisely how much has to be refunded, the Guide confirms that the Regulations require the refund of any sum paid by or on behalf of the consumer under or in relation to the contract. This should therefore include the cost of delivery.
Returned gifts, wrappings costs?
What if additional services such as gift wrapping or express delivery have been supplied? The Guide replies that if (1) a customer has specifically requested services of this type and (2) they have been supplied under a separate contract pursuant to which it is clear that the customer has agreed to start the services before the end of the cancellation period and (3) the customer is provided with the required written information before the service starts, including information that the cancellation rights will end as soon as this additional service is carried out, then on cancellation the supplier can deduct from the refund any additional charges incurred by the supplier in respect of these services.
Returned as new?
Another question asks whether suppliers can insist on items being returned as new or in their original packaging. The answer is in the negative. Consumers are under a duty to take reasonable care of the goods while in their possession and they may stipulate what "reasonable care" will be regarded as requiring in any particular case. They cannot, however, insist on items being returned as new or in exactly the state as they were in when they were delivered.
Similarly, if self-assembly products are supplied, the supplier cannot insist upon cancellation on the consumer returning the disassembled product in cases where to do so will cause further damage to the item.
Another helpful section of the Guide deals with the E-commerce Regulations and their additional requirements, for instance in relation to disclosures that have to be given pre-contract.
Why this matters:
It was important that new guidance be published given the DTI's withdrawal of its previous guidance after the April 2005 amendments to the Regulations. The OFT amended its own guidance, but clearly the view was taken that there was little point in two different Government departments publishing different guides on the same Regulations.
The UK's Direct Marketing Association has expressed grave concern at this development, but Marketinglaw is not currently persuaded that this should be a source of major anxiety. As for the content of the draft Guide itself, this appears for the most part to be practical, plain English answers to questions that are commonly raised in this context and not the radical tightening of existing legal curbs that the marketing press has painted the document to be.