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Retail Speed Brief: Looming UK consumer law changes in June 2014 – key changes and the impact on retailers…

    • Retail - E-briefings

    13-02-2014

    The UK Government will implement the Consumer Rights Directive (2011/83/EU) with effect from 13 June 2014. The main instrument the UK Government will use to implement the Directive is the Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013. But what does this mean?

    The changes will affect retailers in different ways, mostly dependent on how the retailer contracts with consumers in each instance, namely: (i) “on-premises” (i.e. in the store); (ii) “at distance” (e.g. telephone or on-line sales); or (iii) “off-premises” (e.g. at the consumer’s home).

    Set out below are some of the key provisions of the Directive, together with a summary as to the extent to which these changes are likely to impact the retail sector.

    Changes affecting all consumer contracts

    1. Key Provision – a ban on excessive payment surcharges which exceed the cost to the business of using such payment methods

    From 6 April 2013, retailers have no longer been entitled to apply payment surcharges which exceed the cost to the business of such payment methods (whether such contracts are entered into on or off the company’s premises). Traditionally, such surcharges have been imposed on the use of credit or debit cards by consumers. Businesses can now only pass on the actual cost.

    1. Key Provision – a ban on help-line charge over basic rate

    Retailers will no longer be entitled to operate a telephone line allowing consumers to contact them in relation to contracts they have entered into with them which charge more than the basic rate (rather than “premium” telephone charges).

    Changes affecting “on-premises” contracts

    1. Key Provision – information requirements for “on-premises” contracts

    Where retailers enter into contracts with consumers “on-premises” (i.e. in the store), there are new requirements for specific information to be provided to the consumer. These are similar to the information requirements currently required under the Consumer Protection (Distance Selling) Regulations 2000 (“DSR 2000”) in relation to distance contracts. The information requirements include in particular: (i) the main characteristics of the goods or services; (ii) the identity of the trader; and (iii) the total prices of the goods and/or services (including taxes).

    However, the wording of the legislation means that these information requirements are unlikely to apply to some of the contracts entered into by retailers in their stores . This is on the basis that the information required under the relevant legislation does not apply to contracts which involve: (i) “day-to-day” transactions; and (ii) are performed immediately at the time when the contract is entered into.

    For this reason, a significant number of consumer contracts being entered into on the UK high streets and retail parks will fall outside of this requirement.

    The information requirements appear to apply to significant purchases which are not deemed to be “day-to-day” transactions, particularly those which are delivered to a consumer at a later date (e.g. white goods, furniture, fitted kitchens, beds etc.).

    Changes affecting “distance” contracts

    1. Key Provision – the increase to the statutory minimum "cooling off period" from 7 working days to 14 calendar days for distance contracts

    The increase in the statutory minimum “cooling off period” is likely to affect retailers’ core business where contracts are routinely made on-line or on the phone. Retailers must ensure that all their publications, order processes and returns procedures are amended to reflect the changes in the legislation.

    As with all the changes, there may be certain types of contracts which are expressly exempt from the general requirements. For the purposes of cooling off periods, the main contracts which are exempt include: (i) the supply of goods which are liable to deteriorate or expire rapidly; and (ii) personalised goods.

    1. Key Provision – information requirements for “distance” contracts

    Retailers will be required to provide certain prescribed information to a consumer before the consumer can be bound. Such information will include in particular: (i) the main characteristics of the goods; (ii) the identity of the trader; (iii) the total price of the goods/services (inclusive of taxes); and (iv) all additional delivery charges and any other costs. These are similar to the provisions included under the DSR 2000.

    1. Key Provision – information requirements for distance contracts concluded by electronic means

    Where retailers conclude contracts with consumers by electronic means (for example, where an on-line ordering service or smart phone application is utilised), the retailer will be required to provide the consumer with specific information in relation to the transaction. This will include in particular: (i) the main characteristics of the goods/services; (ii) the total price of the goods/services (inclusive of taxes); and (iii) all additional delivery charges and any other costs. These are similar to the provisions included under the DSR 2000.

    In addition, there is a new requirement that retailers must ensure that the consumer, when placing an order electronically, explicitly acknowledges that the order implies an obligation to pay. Where the ordering process requires activating a button or a similar function, the retailer must ensure that the button or similar function is labelled in an easily legible manner, only with the words ‘order with obligation to pay’ or a corresponding unambiguous formulation indicating that placing the order entails an obligation to pay the company. This is a new and fundamental requirement and it is therefore essential that retailers accepting online orders carefully consider how to adapt their systems to comply with this new obligation by 13 June 2014.

    1. Key Provision - harmonised rules on refunds

    In the event that a consumer withdraws or cancels a contract, the retailer must reimburse all payments (with the exception of non-standard delivery costs) received from the consumer within 14 calendar days.

    For the purposes of services, the period is calculated from the day on which the retailer is informed of the consumer’s decision to withdraw from the contract. For goods contracts, the period begins on the day on which the trader receives the goods back or, if earlier, the day on which the consumer supplies evidence of having sent the goods back.

    1. Key Provision – confirmation of distance contracts

    This is a new requirement.

    Under the new legislation, where a distance contract has been entered into, a retailer will be required, no later than the time of the delivery of any goods or before performance of any service supplied under the contract, to provide the consumer with confirmation of the contract on a “durable medium” (e.g. by paper or by email). The information to be included in the confirmation will include in particular: (i) the main characteristics of the goods/services; (ii) the total price of the goods/services (inclusive of taxes); and (iii) all additional delivery charges and any other costs.

    This requirement is wider than provisions currently contained under the DSR 2000 and it is important that retailers are familiar with the extent of information which must be provided to the consumer.

    1. Key Provision – a ban on the use of “pre-ticked” boxes for additional payments

    The use of “pre-ticked” boxes in relation to additional payments are no longer permitted.

    For retailers, this is likely to have the biggest impact on those which use electronic means to conclude contracts. For example, a company cannot pre-select delivery options which will incur a charge. In this example, the consumer will be required to provide express consent by selecting their own delivery charge when placing the order.

    Changes affecting “off-premises” contracts

    Whilst “off-premises” contracts may no longer be as common place as they once were, the changes being introduced by the Consumer Rights Directive include specific requirements in relation to information and cancellation rights for off-premises contracts (albeit, the requirements are broadly similar to those being introduced in relation to distance contracts).

    For the reasons set out above, it is vital that retailers closely examine the way in which they conduct business to ensure that they are compliant with the changes being introduced into UK consumer law (by virtue of the Consumer Rights Directive). With all changes due to be introduced no later than 13 June 2014, time is running out for retailers to familiarise themselves with the changes.