Keeping online in line
29 October 2001
7 October 2013
5 November 2013
5 February 2014
12 July 2013
Conflicts between domestic disclosure obligations and foreign illegality — a Hong Kong law perspective
19 June 2013
With the implementation of the E-Commerce Directive (31/00/EC) imminent, the Department of Trade and Industry (DTI) is currently consulting on regulations to this effect; and with the regulations implementing the Distance Selling Directive (7/97/EC) now a year old, business-to-consumer (B2C) regulation in the UK certainly has more substance, even if it is not always easy to interpret. Of course, the E-Commerce Directive is not aimed specifically at B2C but covers B2C trade by default in that it applies to all e-commerce services. There is now, therefore, more to B2C regulation than the Consumer Protection (Distance Selling) Regulations which implement the Distance Selling Directive in the UK (the regulations).
For example, Article 5 of the E-Commerce Directive requires member states to oblige online service providers to make certain information concerning their activities, such as name and geographic and e-mail addresses, available to recipients of their services. In the B2C arena, some of these requirements are replicated in the Distance Selling Regulations. However, the E-Commerce Directive has additional requirements, and the DTI intends to cover these by requiring that a service provider displays, for the benefit of customers and relevant authorities, information allowing the DTI to contact it and to see where it is located for the purpose of, for example, company registration, VAT or other supervision by the authorities. This would also require the display of membership of professional or other bodies (to whose details and rules a service provider should refer or link), and where prices are quoted, require that they be prominent and say whether they include taxes and delivery charges.
|"The heart of the E-Commerce Directive is the 'country of origin' approach to regulation. How strongly that beats, however, is open to debate"|
Distance Selling Regulations
The regulations cover the supply of goods and/or services to consumers where the contract is entered into at a distance, ie over the internet or by telephone, mail order, fax or interactive television. The regulations apply to all consumer contracts save for certain exemptions - property, financial services or auctions, for example. Some of the regulations will not apply to contracts relating to the deliveries of food or beverages, transport, accommodation, catering or leisure services provided on specific dates. However, the position may sometimes be unclear - for example, the regulations will apply where a sale is made in the course of a telephone call in response to a newspaper advertisement inviting such calls.
Failure to provide the required information before contracting will extend the period in which the consumer has the right to cancel the contract without penalty - the 'cooling-off period'. After entering into a contract at a distance, the consumer is entitled to this cooling-off period, during which the consumer can cancel the contract without reason or penalty. In the case of goods, the cooling-off period is seven working days, starting with the day on which the goods are delivered; for services, it is seven working days starting with the day on which the consumer agreed to go ahead with the contract.
If the consumer chooses to exercise their right under the cooling off period to return the goods or cancel the services, the consumer is not obliged to return the goods to the supplier. Such obligation can be addressed only through careful drafting of terms and conditions. Additionally, the consumer need take only reasonable care of the goods before returning them. On cancellation by the consumer, the supplier must refund any money paid by the consumer (less certain return costs only) as soon as possible after the contract has been cancelled and at the latest within 30 days of receiving written notice of the consumer's decision to cancel.
The regulations also ban supplies of unsolicited goods or services to consumers. Anyone found guilty of this offence may be fined up to £2,500. Where the supply of unsolicited goods or services is accompanied by a demand for payment, the threat of legal action, placing the consumer on a list of debtors or threatening or invoking a collection procedure, those found guilty of an offence may be liable for a fine of up to £5,000 per offence. It should be noted that it goes wider than the current provisions of the Unsolicited Goods and Services Act 1971, which covers only a limited number of services.
Country of origin
But what of the issue of cross-border sales? The E-Commerce Directive is supposed to clarify the application of national regulation to e-commerce directed to businesses and consumers in other EU member states. The heart of the E-Commerce Directive is the 'country of origin' approach to regulation. How strongly that beats, however, is open to debate.
Article 3 requires the member state in which the service provider is established to ensure that its activities comply with the national law of that member state. It also prohibits in principle all forms of restriction on the freedom to provide information society services. However, the DTI acknowledges that there is some uncertainty as to the precise ambit of the country of origin provisions, particularly around the definition of 'information society services', the extent of the 'coordinated field' of regulation to which it applies and the derogations and exclusions from it. The disapplication of Article 3 to consumer contracts has direct implications for the scope of the UK's regulations on distance selling. E-traders directing trade to other member states cannot therefore assume the emplacement of consumer legislation, such as regulations implementing the Distance Selling Directive, in the target country, which means that the UK rules will not apply to overseas e-traders.
Contracts concluded by electronic means
Are email contracts valid or void? The directive requires member states to remove any prohibitions or restrictions on the use of electronic contracts, but does not go so far as to harmonise the moment of conclusion of an electronic contract. That is left to national regulation, and UK contract law therefore continues to apply online as it does offline. However, the DTI is considering whether certain form requirements (for example, notices or copy documents) must be disapplied in the limited cases where these have to be satisfied for a contract to be enforceable or where the context makes it clear that a physical instrument is required. The obvious example is the requirement for writing in relation to contracts for the sale of land found in the Law of Property (Miscellaneous Provisions) Act 1989.
However, in relation to Article 11, which requires service providers to acknowledge receipt of a recipient's order without undue delay and by electronic means, the DTI does specifically ask exactly how it should be determined when a service provider has acknowledged receipt of that order. It also questions whether the regulations should require nothing other than that this is done "without undue delay".
So what if one fails to comply? Member states have to ensure that court action can be taken against infringements of the E-Commerce Directive, which provides for it to be added to the list of consumer directives in the annex to the Injunctions Directive (27/98/EC). The DTI, therefore, intends to amend the Stop Now Orders (EC Directive) Regulations (which implement the Injunctions Directive) so that the powers to seek injunctions, available to the Directorate General of Foreign Trade (DGFT) and other consumer protection bodies, will apply in relation to infringements of the E-Commerce Directive.
The responsibility for enforcing the regulations falls to the Director General of Fair Trading - a post currently held by John Vickers - and trading standards departments, which have a duty to consider any complaint about a possible breach of the regulations and the power to apply for an injunction to enforce compliance. It is likely that small-scale miscreants will be overlooked. Ironically, more major non-compliant but otherwise 'reputable' companies have become the possible targets of a test case prosecution. Urgent review of trading activity and policy is advisable. n
Rafi Azim-Khan is a partner and head of the e-business and marketing groups at McDermott Will & Emery