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Online Retailers - Are you ready for June 2014?

February 28, 2014 at 11:04 AM

From 13 June 2014, e-commerce businesses and other "distance sellers" will need to change the way in which they provide information to sellers and deal with cancellation rights.

 The Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013 (the "Regulations") come into force on this date and replace the two existing regimes on distance sales (currently set out in the Distance Selling Regulations) and doorstep sales.

 The key changes for distance selling are:

The Regulations also specifically recognise digital downloads as a separate form of product or service for the first time and contain different rules for cancellation rights in respect of these. 

Where the cancellation right is exercised, the retailer will still be obliged to refund delivery costs as well as the cost of the item; however, where the customer has paid for a delivery service over and above the basic service, the retailer will only have to fund an amount equivalent to the cost of the basic service will need to be refunded.

The customer will bear the direct cost of returning the product (unless of course the retailer has either agreed to do so or failed to inform the customer that they are responsible for this in their terms and conditions).

The information which retailers are required to provide before the contract is made has also increased (the number of items required has roughly doubled). The detail of this can be found in Schedule 2 of the Regulations, but the key points are the information which must be provided on cancellation rights and costs of returning goods as well as some specific new items (such as an obligation to specify any Digital Rights Management protections which apply to digital content).

All of this information has to be given either in paper form or (if the customer agrees) in a "durable medium". This can include email, but not simply presenting the information on a dynamic medium such as a website which may change and cannot be retained by the consumer. 

This is likely to require online retailers to review and update their e-commerce processes and underlying website functionality. 

The Regulations implement the European Consumer Rights Directive, which also contains provisions restricting excessive payment surcharges.

The excessive payment surcharge provisions are actually already part of UK law following the coming into force of the Consumer Rights (Payment Surcharges) Regulations 2012 in April 2013.

The Payment Surcharges Regulations ban excessive payment surcharges (for example for credit and debit card payments) which exceed the cost to the business of using such payment methods. These may also be relevant to some online retailers.

 Specific issues to be aware of

There are a few specific pitfalls for online retailers to be aware of as a result of the Regulations.

Confirming orders

Firstly, when an order is placed on your website, the Regulations state that the customer should be required to click on a button labelled "'order with obligation to pay' or a corresponding unambiguous formulation". Hopefully something a little snappier like "Order and Pay" will also be compliant.

The BIS guidance on the regulations state that this applies even if payment will actually be taken at a later stage (for example after a free trial period). This may cause concern for sites which operate a Freemium model or other form of free trial followed by a paid service.

Cancelling digital downloads

Secondly, consumers will generally not have a right to cancel once a digital download has started. However, this only the case if you have told them this and obtained their explicit acknowledgement.

This doesn't have to be in a "durable medium" (such as an email or letter) for distance contracts so it is likely that an online checkbox will be sufficient; however, the current widespread practice of simply including a statement to this effect in terms and conditions on the site is unlikely to be enough to constitute explicit consent. 

Deductions from refunds 

Thirdly, when processing a refund, the retailer has the right to levy a deduction to the extent that use of the goods by the customer has reduced their value. 

However, the consumer should be permitted to inspect items in the same way that they might in a shop to ensure it is as described. Money should not therefore be deducted for removal or opening of packaging if it is reasonable for the consumer to remove the packaging to inspect the item.

Help line charges

Finally, in relation to help line charges, these should be limited to geographic, free-phone or mobile numbers only. Using premium rate numbers for this purpose is no longer permitted. 

Which contracts aren't covered?

The Regulations don't apply to every kind of contract. There are a number of exclusions such as personalised or bespoke goods, investment items whose values may fluctuate and items where hygiene concerns apply such as earrings. In practice they will apply to most online retailers, who will need to review and amend their conditions of sale.

The Regulations go beyond online retail though; providers of professional services who sign up clients remotely will also need to consider the new rules and make sure that clients have given an express request for the supply of services to start before the end of the cancellation period.

It is important to note that under the new Regulations, the right to cancel is only lost once the service in question has been fully performed. If this isn't the case then even if the consumer has made an "express request" for the service to be provided before the end of the 14-day period then they will still be able to cancel, provided they pay a proportional amount based on the extent to which the service has been provided.

Regulation 36(5) also provides that where the total price quoted is "excessive" the consumer will only be required to pay the relevant proportion of the market value of the services (calculated by comparing prices for equivalent services from other traders). 

If the trader hasn't provided the required information on cancellation rights and the amount payable for cancellation (or the services weren't provided during the cancellation period at the "express request" of the customer) then the customer won't have to pay anything for the services provided during the cancellation period. 

The Regulations will apply to all contracts entered into after 13th June 2014, so time is running short for online retailers (and any other distance selling business) to review and update their terms and conditions. 

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