European Union: Consumer Rights And Wrongs: Are You Ready For The New EU Consumer Contracts Rules?

Last Updated: June 20 2014
Article by Susan McLean and Amy Collins

From 13 June 2014, the consumer rights landscape in Europe will change. The EU Consumer Rights Directive (2011/83/EU) (the "CRD") was introduced in 2011 with the aim of harmonising and simplifying consumer protection legislation in the EU. Incorporation of the CRD into national laws was required by 13 December 2013, and member states must apply the national laws implementing the Directive from 13 June 2014.

All businesses selling consumer products into the EU are affected by the changes required by the CRD and will need to take steps to ensure compliance with the new rules, if they have not already done so.

In this Alert, we summarise the new EU rules and examine the approach to implementation taken by five EU member states in particular.

The greatest challenge to organisations selling to consumers in the EU has been (and will continue to be) the practical application of the rules, that is, deciding which changes need to be made to existing order processes, website/app design and architecture, policies and terms and conditions. For example, companies are wrangling with issues such as (i) what wording to put on their order button, (ii) what level of detail to include in an order confirmation/receipt, and (iii) what changes need to be made when dealing with a mobile app as opposed to a website.

If organisations fail to comply with the CRD rules, they could find themselves with unenforceable contracts and reputational damage. In addition, they could face other penalties. The CRD gives member states the freedom to determine their own penalties, which may include both fines and criminal convictions. Accordingly, the consequences of non-compliance could be significant, and there may be differences in penalties between EU countries.

Some of the key changes required by the CRD are as follows.

KEY CHANGES

  • More detailed information requirements. The CRD sets out the information that a trader must provide to an EU consumer prior to the consumer being bound by the contract. The requirements differ as between: o distance contracts (i.e., contracts under an organised distance sales or service-provision scheme without the simultaneous physical presence of the trader and the consumer);

    • off-premises contracts (i.e., contracts concluded in the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader such as doorstep sales); and
    • on-premises contracts (i.e., contracts that are neither distance nor off-premises contracts).

Even with respect to distance contracts, there are differences between which (and how) information is to be provided when dealing with online contracts and when dealing with other distance contracts. There are also different requirements if the contract is concluded through a means of distance communication which allows limited space or time to display the information (e.g., space restrictions on a mobile phone screen, etc.).

  • Confirmation requirements. The CRD sets out the nature and content of the confirmation that a trader must issue following conclusion of the contract. When the order relates to digital goods, the confirmation should also include a statement that the consumer consented to the download and an acknowledgement that the consumer has accordingly lost the right to withdraw from the contract.
  • Extended cooling-off period.The CRD extends the period within which consumers can change their minds and withdraw from a distance or off-premises contract (for any reason) from seven working days and seven business days, respectively, to 14 calendar days. For the supply of services, this cooling-off period begins from the day of the conclusion of the contract and, for the supply of goods, from the day on which the consumer receives the goods. This period may be extended for up to 12 months (increased from three months) if the trader fails to inform consumers of their withdrawal right during the sales process. The withdrawal right does not apply in certain circumstances, including when the goods in question are bespoke or personalised or when the consumer has consented to the supply of services prior to the expiry of the cooling off period with the acknowledgement that the consumer will lose the right once the contract has been fully performed. The CRD introduces a template withdrawal form and includes model withdrawal rights wording for traders to include in their terms and conditions. An online retailer will need to make the form available on its website, for example, via a link in the Terms and Conditions. Although the trader must provide the form, consumers can communicate their decision to cancel in any way, whether in writing or otherwise.
  • Reduced refund period.The trader is required to reimburse all payments received from the consumer including, if applicable, the costs of delivery, without undue delay and in any event not later than 14 days from the day on which the trader is informed of the consumer's decision to withdraw from the contract. This is reduced from the previous 30-day period.
  • Automatic termination of ancillary contracts.If consumers exercise their right of withdrawal, any ancillary contracts, such as insurance or maintenance contracts for goods, will be automatically terminated. The CRD provides that member states must develop their own rules on the termination of such contracts.
  • Acknowledgement of obligation to pay. The CRD requires traders to ensure that the consumer, when placing an online order, explicitly acknowledges that the order implies an obligation to pay. This requirement addresses circumstances such as when a fraudster tricks consumers into paying for "free services". If placing an order entails clicking a button or a similar function, the button or similar function must be 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 trader. If the trader fails to comply with this requirement, the consumer will not be bound by the contract or order. One of the issues that companies have been debating is what wording to place on their button: "order with obligation to pay" is clearly unwieldy and less attractive than alternative formulations such as "Order and Pay", "Pay Now", "Confirm and Buy" or just "Buy". In fact, UK guidance – see below – refers to a "Pay now" button. Although we expect that existing formulations such as "continue", "order" and "register" would no longer be acceptable because they do not include any reference to payment, we will have to wait and see which of these alternative formulations are ultimately deemed acceptable.
  • Increased cost transparency.The trader must (i) ensure that the total cost of a product or service is disclosed prior to the conclusion of the contract, including VAT and any additional charges; (ii) inform the consumer in advance if it wants the consumer to bear the direct cost of returning goods; and (iii) not charge the consumer more than its actual costs for the use of credit cards or other payment methods, nor charge the consumer more than the basic rate for helpline telephone calls.
  • Banning pre-ticked boxes.The trader must seek the express consent of the consumer for any extra payment in addition to the remuneration agreed upon for the trader's main contractual obligation. The trader cannot rely on pre-ticked boxes or other default options which the consumer is required to reject in order to avoid the additional payment. If the trader fails to comply with this requirement, the consumer will be entitled to the reimbursement of such payments.
  • Delivery period.Unless the parties agree otherwise, the trader must deliver the goods to the consumer without undue delay and, in any event, no later than 30 days from the conclusion of the contract.
  • Digital content. The CRD includes within its scope a new category of contracts for the supply of "digital content", meaning data which are produced and supplied in digital form, such as computer programs, applications, games, music, videos or texts, irrespective of whether they are accessed through downloading or streaming, from a tangible medium or through any other means. In respect of these contracts: o Consumers have the right to withdraw unless they have consented to the download and have acknowledged that by downloading the content they will lose their right to withdraw.

    • The trader must inform the consumer about the functionality and the relevant interoperability of the digital content, including (i) the ways in which the digital content can be used (e.g., for the tracking of consumer behaviour), (ii) the absence or presence of any technical restrictions such as protection via Digital Rights Management or region coding, and (iii) the standard hardware and software environment with which the digital content is compatible (e.g., the operating system, the necessary version and certain hardware features).

The CRD is being implemented across Europe, with varying degrees of preparedness. Here is a flavour.

IMPLEMENTATION IN THE UK

In the UK, the bulk of the CRD is being implemented into law via the Consumer Contracts (Information, Cancellation and Additional Payments) Regulations 2013 (the "CCRs"). The CCRs have given rise to some confusion because the CRD was originally intended to be implemented by the Consumer Rights Bill (the "Bill"). However, the Bill has been delayed and is still going through the UK parliament. To meet the deadline for the implementation of the CRD, the UK government has therefore had to put in place the CCRs. When the Bill comes into force as an Act, the UK government will then repeal the provisions of the CCRs and the equivalent provisions of the Act will apply instead.

The CCRs replace the current UK legislation on distance selling, as set out in the Consumer Protection (Distance Selling) Regulations 2000, and UK legislation on doorstep sales, as set out in the Cancellation of Contracts made in a Consumer's Home or Place of Work etc. Regulations 2008. The UK Department for Business, Innovation and Skills has published guidance on the new rules, but it's fairly high level and so companies will need to do most of the work themselves in terms of interpreting the rules in the context of their business.

GERMANY

Germany has passed a bill on the implementation of the EU Consumer Rights Directive (the "Bill"). This Bill will enter into force on 13 June 2014. With this Bill, the relevant provisions on consumer contracts of (i) the German Civil Code (Buergerliches Gesetzbuch), Sec.312 et seq., Sec.355 et seq., Sec.443 et seq.; (ii) the Introductory Law to the German Civil Code (Einfuehrungsgesetz zum Buergerlichen Gesetzbuch), Art.46B para.3, Art.246 et seq.; (iii) the distance Learning Protection Code (Fernunterrichtsschutzgesetz), Sec.3, Sec.4; and (iv) Price Indication Regulation (Preisangabenverordnung) will be modified in accordance with the CRD.

The new provisions apply to all consumer contracts concluded from 13 June 2014. With regard to distance contracts with consumers concluded before 13 June 2014, the provisions in force at that date apply. However, if consumers were not correctly notified about their withdrawal right pursuant to the applicable provisions and the withdrawal right has therefore not yet expired, such withdrawal right will expire as follows: (i) delivery of goods: 12 months and 14 days after the receipt of the goods, however, not before end of 27 June 2015; (ii) recurring deliveries of similar goods: 12 months and 14 days after the receipt of the first good, however, not before end of 27 June 2015; and (iii) provision of services: upon 27 June 27 2015. With regard to doorstep contracts with consumers concluded before 13 June 2014 under which consumers were not correctly notified about their withdrawal right pursuant to the applicable provisions and the withdrawal right has therefore not yet expired, such withdrawal right will expire 12 months and 14 days after the full performance of both parties' obligations under such contract, however, not before end of 27 June 2015. This does not apply to distance and doorstep contracts for financial services.

FRANCE

In February 2014, the French parliament adopted a Consumer Law which implements the CRD in a way that is very close to its original wording. The Consumer Law involved changes to the French Consumer Code.

However, some provisions relating to consumers' right of withdrawal were strongly debated and the way in which Article 13 of the CRD was finally implemented is one example of a provision that is specific to France. French merchants criticized the proposed provisions implementing Article 13 of the CRD on the obligations of a trader in the event of a withdrawal and, as a result, various amendments were submitted to the French parliament in order to soften its implications. According to Article 13 of the CRD, the trader is required to reimburse all payments received from the consumer, including the costs of delivery, without undue delay – and in any event not later than 14 days from the day on which the trader is informed of the consumer's decision to withdraw from the contract. These provisions were implemented into article L121-21 of the French Consumer Code. While initially, the Bill set out high sanctions for merchants who do not reimburse those costs in time (10% of the amount of the order until 30 days of delay, 20% for a delay of between 30 and 60 days, and 50% of the amount after 60 days), the final Act retains penalties which are a lot lower. Accordingly, merchants have more time to reimburse the costs, and they may even wait to receive the product before repaying those costs.

NETHERLANDS

In the Netherlands, the majority of the new CRD rules were implemented into a new Section 2B of Title 5 of Book 6 Dutch Civil Code (DCC), entitled "Provisions for contracts between traders and consumers". In addition, a portion of the rules was implemented in Title 1 of Book 7 DCC. The old rules in (i) Section 9A of Title 1 of Book 7 DCC, entitled "distance contracts", (ii) the Door-to-Door Sales Act (Colportagewet), as well as (iii) Section 4.2.5 of the Act on Financial Supervision (Wet op het financieel toezicht) in relation to distance contracts for financial services, are repealed by entry into force of the new provisions. The new provisions enter into force on 13 June 2014.

POLAND

Poland has not managed to implement the CRD on time. The implementing law – the Consumers' Rights Law (the "CRL") – was only adopted on 30 May 2014. The CRL now needs to be signed into law by the Polish president and will then be officially published. It will then become effective six months after its official publication. This means the CRL will not be law before December 2014 and long after the 13 June 2014 deadline.

CONCLUSION

Many traders in the EU do not currently comply with the new requirements. Accordingly, traders will need to review their existing processes, website/app design and architecture, policies, and terms and conditions and make the necessary changes ahead of the deadline. These changes are likely to include rewriting the text on their order button, altering the layout and content of order pages and order confirmations, and amending their terms and conditions. Companies will also need to ensure that their employees are trained in the new rules and policies. In this social media age, news of bad customer service spreads fast. Companies need to take steps now to make sure it's not their organization trending on Twitter – for all of the wrong reasons.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Susan McLean
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions