As part of the European Union's drive to encourage the use
of alternative dispute resolution (ADR) in consumer disputes, the
European Commission has developed a new online dispute resolution
(ODR) platform, which has been available for use by traders and
consumers since February 15 2016.
The launch of the platform means that online traders –
which include any consumer-facing franchise concept in which the
franchisor or its franchisees transact with consumers online
– must now comply with certain requirements contained in the
EU Regulation on Consumer ODR.
The regulation follows other recent changes in EU consumer law,
such as the entry into force of the Consumer Rights Directive in
2014 and the implementation of new rules on ADR in 2015.
Franchise businesses that have not reviewed their websites and
general terms and conditions of sale or supply in light of these
changes should consider a more detailed review of their compliance
with consumer law.
The ODR platform allows consumers, online traders and ADR
providers to file, respond to and handle disputes online. The
platform can be used only if the consumer and trader are based in
the European Union and the dispute relates to a product or service
that the consumer has bought online. The trader and consumer need
not be based within the same EU country. The primary purpose of the
ODR platform is to facilitate the resolution of cross-border
disputes; it even offers a translation function to assist with
The ODR platform accepts complaints from consumers via an
electronic complaint form. When a consumer files a dispute through
the ODR platform, the platform will identify one or more suitable
ADR providers and notify the trader. If the trader and a relevant
ADR provider agree to it, and the consumer is happy to proceed,
then ADR will go ahead. In some cases the trader will have to
accept ADR because of a legal requirement, trade association
membership rule or contractual obligation. The ADR provider can
refuse to handle a dispute only on certain limited grounds (eg,
because the claim is frivolous or vexatious, or falls outside the
minimum or maximum value of claim that the provider handles).
In some countries the ODR platform can also be used by traders
that want to complain about a consumer over goods or services that
the trader has sold online.
Are franchise businesses "online traders" under ODR
The answer to this question is most likely yes: any
consumer-facing franchise concept in which the franchisor or its
franchisees transact with consumers online will be caught by these
requirements. An 'online trader' is defined very widely in
the regulation as a trader that intends to enter into online sales
contracts or online service contracts with consumers. This covers
scenarios where traders offer goods or services on a website or by
other electronic means and consumers can order those goods and
services via such means. 'Other electronic means' include
media such as telephone, email, social media and text message. The
definition incorporates online traders selling products or services
to consumers via retail websites and apps, including multi-channel
businesses that operate both offline and online.
New rules for online traders
All online traders must now provide a link to the ODR platform
and an email address on their websites.
The link to the ODR platform must be easily accessible for
consumers – an ideal location might be alongside existing
information on the trader's complaint-handling procedures.
Further requirements apply if a trader must use an approved ADR
provider – whether by law, trade association membership or
contract – in the event of a dispute with a consumer. In such
cases the trader must inform consumers about the existence of the
ODR platform and the possibility of using it to resolve disputes.
This information must be provided in the general terms and
conditions applicable to online sales and services contracts.
Offers of products or services made to a consumer via email must
also include a link to the ODR platform. Compliance with these
information requirements should not result in the replacement of
any information that traders are obligated to give (or voluntarily
provide) about ADR providers they use. Rather, such information
should be provided concurrently.
What should franchise businesses do?
Most franchisors and some franchisees will meet the definition
of an 'online trader' and so should carefully check their
websites, emails and general terms and conditions of sale or supply
for compliance with the new ODR requirements and wider developments
of EU consumer law.
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An assignment of rights under a contract is normally restricted to the benefit of the contract. Where a party wishes to transfer both the benefit and burden of the contract this generally needs to be done by way of a novation.
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