New Regulations for online retailers – are you compliant?

May 27, 2014

New concept of ‘Digital Content’ is introduced in to UK law for the first time as new Consumer Contracts Regulations to come in to force in June 2014

As part of the ongoing reform of UK consumer law, on 13 June 2014 the new Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the “Regulations”) will come in to force and applies to relevant contracts after this date.

Will it affect my business?

The Regulations will have an impact on nearly all UK businesses selling to consumers, addressing contracts made both on and off the trader’s premises, as well as businesses making online sales of goods, services and digital content.

Only contracts between traders and consumers will be affected, though the definition of consumer is now broader, being an individual or natural person who is acting for purposes that are wholly or mainly personal.  If there is a mixture of business and person purposes then the Regulations may still apply.  There are some categories of contract which are excluded, including gambling, most financial services and others such as residential lettings contracts.

Some other contracts are only partly covered by the Regulations, such as off-premises contracts costing the consumer less than £42 which are exempt from the information and cancellation provisions, but subject to those on additional payments and charges and delivery and risk.

What is ‘Digital Content’?

Under the regulations, ‘Digital Content’ has been defined as meaning ‘data which are produced and supplied in digital form’ (Regulation 5). Traditionally, digital content has been treated as falling within the scope of a ‘service’ for the purposes of regulatory compliance, but the new Regulations include specific provisions for the supply of Digital Content in certain key areas of the contract with the consumer.

What are the key changes?

The Regulations replace the Distance Selling Regulations of 2000 and make some significant changes to the law relating to distance contracts (such as online sales).

Set out below is a summary of some of the key provisions affecting the terms for supply to a consumer of Digital Content through a distance contract (please note this is not an exhaustive list).

Information

  • Consumers must be provided with certain information before they will be bound by a contract.  The existing list is extended by the Regulations and for Digital Content includes information on the functionality, usage rules and compatibility requirements of the Digital Content.
  • 24 information requirements are set out in the Regulations, including that confirmation must also be given to the consumer in a ‘durable medium’, such as by text, email or on paper, once the contract has been entered into (but not by reference to a website link).
  • A shorter list of information requirements is in place for mobile transactions, however the rest of the pre-contract information still has to be given; in an ‘appropriate way’, for example by email.

Cancellation and Returns

  • Where the consumer has the right to cancel the contract, a model cancellation form has to be provided by the supplier, though consumers are not actually obliged to use this form in order to cancel the contract.
  • The statutory cancellation period (often referred to as the ‘cooling off period’) has been extended to 14 days where previously it was only 7 days. Further, the Regulations prohibit a supplier from supplying consumers with Digital Content before the 14 day cooling off period has expired, unless the consumer has given their prior express consent to ‘early’ delivery; and acknowledged that upon receiving the content, they will lose their right of cancellation.
  • If the supplier fails to correctly provide certain pre-contract information, the cancellation period can be extended by up to 1 year.
  • A contract to supply Digital Content on tangible media (for example, on a disk) will constitute a sales contract, meaning the rules for return of goods will apply if the contract is cancelled.
  • Where Digital Content is supplied in a manner which is not on a tangible media (for example, content which is streamed to the consumer’s device), the consumer will have the right to cancel the contract but this right may be lost if the consumer consents to immediate delivery and acknowledges this will result in loss of their cancellation right.

Payment

  • The Regulations require that an online supplier make it completely clear to a consumer that proceeding with a transaction will trigger a payment. It has been suggested that suppliers do this by labelling the payment button with “Order with obligation to pay” or similar, unequivocal wording.

What if I don’t comply?

Regulation 19 makes it a criminal offence, punishable by a fine on conviction, to fail to inform consumers of their right to cancel off-premises contracts.

Non-compliance could also result in claims for breach of contract and scrutiny by The Office of Fair Trading, with consequent costs and other implications.

What do I do now?

More information can be found on the Government’s website of the Department of Business, Innovation & Skills.
All businesses trading with consumers, in particular online businesses, should review not only their terms and conditions but their entire order process to ensure compliance with the requirements noted above and those in the rest of the Regulations.

If you think any of the issues raised in this note apply to you or your business you should get in touch and discuss a cost-effective review of your terms and procedures.

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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