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European Commission proposes new Directive on the Protection of Consumer Rights

November 2008

On 8 October this year EU Consumer Commissioner Meglena Kuneva unveiled details of a proposed Directive to strengthen consumer protection across the EU and guarantee equal protection for consumers wherever and whenever they shop in the internal market[1].

The proposals aim to revise the Unfair Contract Terms Directive[2], the Sales and Guarantees Directive[3], the Distance Selling Directive [4] and the Doorstop Selling Directive [5] and merge them into a single piece of legislation[6]. These four key Directives which apply to consumer protection across the EU contain minimum harmonisation provisions which have led to some Member States imposing more onerous consumer protection rules on businesses than others. Consequently, the existing consumer protection regulatory regime is fragmented and different levels of protection are afforded to consumers in each Member State. For example, Member States offer differing cooling off periods, as well as differing obligations in relation to refunds and repairs[7].

In order to simplify the current regime, the Commission has adopted a maximum harmonisation approach in the proposed Directive so that Member States are prevented from maintaining or introducing more (or less) stringent consumer protection rules than those contained within the proposed Directive: the same rules will apply in each Member State across Europe.

Reasons for Introducing the New Directive

Ms Kuneva has stated that “The aim [of the Proposal] is to boost consumer confidence and at the same time to cut red tape which is holding back business within the national borders – denying consumers more choice and competitive offers”[8]. Aside from simplifying the current regime, the proposed Directive aims to facilitate the EU business-to-consumer market by enhancing consumer confidence and reducing business reluctance to trade cross border to consumers. The proposed Directive also adapts current consumer protection legislation to take into account new technology and sales methods, for instance, mobile commerce and online auctions.

Low Levels of Consumer Confidence

The level of consumer confidence in cross border shopping is low. Only one in five people who shop online ventures beyond national borders and current trends indicate that the number of consumers using the internet for domestic purchases increased from 23% to 30% between 2005 and 2008 whilst cross border online purchases only rose from 6% to 7% in the same period[9].

Two thirds of Europeans think that there are more potential problems in making cross border purchases than in making domestic purchases. Sixty-eight per cent of EU citizens consider there to be a greater risk of falling victim to scams and fraud when purchasing from suppliers located in another EU country than from providers in their home country. There is also a concern that suppliers from other EU countries are less likely to respect consumer protection laws than suppliers from their home country[10].

Business Reluctance to Trade Cross Border

According to the Eurobarometer 224 survey[11], retailers have yet to fully exploit the internal retail market and only 21% of EU retailers sells cross border via distance sales methods to at least one other EU country. As a result, retailers could potentially be foregoing millions of pounds worth of revenue. The most significant hindrance to cross border trade cited by retailers was the perceived cost of fraud or non-payment. Other significant obstacles to trading cross border include:

The perceived cost of complying with different fiscal regulations and national laws regulating consumer transactions. Notably, of the 75% of retailers that do not currently sell cross border, 34% said that they would consider selling cross border if regulations were harmonised;
The perceived cost of the difficulty in resolving cross border complaints and conflicts;
Extra costs arising from cross border deliveries; and
The cost of ensuring an efficient after sales service[12].

Key Improvements to the Consumer Protection Regime

The proposed Directive, which applies to contracts for the sale of goods and services from businesses to consumers and covers purchases made in a shop, at a distance and away from business premises, strengthens protection for consumers in a number of key areas:

Full pre-contractual information must be provided – Prior to the conclusion of any sales or service contract, including online auctions, the trader must provide the consumer with certain information in order to allow a consumer to make an informed choice, for example, the main characteristics of the product, geographical address and the identity of the trader, arrangements for payment, delivery, the existence of the right of withdrawal and so on.
14 day “cooling off” period and right of withdrawal for consumers – The current cooling off period of 7 days has been extended by the proposed Directive to 14 days. Within this 14 day period, the consumer has the right to withdraw from a distance or an off premises contract, without giving any reason. Exceptions to the cooling off period requirement are set out in Article 19 of the proposed Directive, for example, where sealed computer software supplied by a trader is unsealed by a consumer the right of withdrawal will not apply.
New rules on delivery –The largest number of complaints received by EU consumer organisations relate to problems associated with delivery of goods[13]. Under the proposed Directive, goods must be delivered to the consumer within 30 days from the day the contract is concluded unless the parties have agreed otherwise. The trader bears the risk of loss and cost of deterioration and loss of the goods until the moment the consumer receives the goods. For non-delivery (and arguably late delivery), the consumer will be entitled to a refund within seven days from the date of delivery.
No hidden charges – The proposed Directive stipulates that where the consumer was not informed upfront, prior to any sales or service contract being concluded, about extra costs and hidden charges the consumer will not be obliged to pay the charge.
Remedies - With regard to repairs and refunds, the current rights that a consumer has in relation to a faulty product (repair or replacement, followed by the reduction of the price or the reimbursement of money) remain unchanged and, in addition, there is an obligation on the consumer to inform the seller of the defect within two months of discovery.
Tougher protection against pressure selling – In an attempt to crackdown on pressure selling, the proposed Directive extends the scope of consumer protection to cover all “off premises selling”. All sales and services contracts which are concluded face to face away from a business premises will be covered, including “solicited” visits from sales representatives which have historically given rise to a high number of complaints[14].
Protection extended to new technology and sales methods (including mobile-commerce and tele-commerce) – EU consumer rights are extended to cover new technology and sales methods such as mobile-commerce and tele-commerce. The proposed rules make it possible for retailers who sell products through a medium which allows limited space or time to display information (for example, via mobile phones) to provide only the key characteristics of product and the price, provided that full information is made available to consumers through an appropriate means, for instance, a website or free telephone number prior to the conclusion of the contract.
New EU black list and grey list of unfair and abusive contract terms – The proposed Directive includes a black and grey list of unfair terms. The black list set out in Annex II of the proposed Directive contains contract terms which are unfair and, therefore, prohibited in all circumstances, for example, a term which gives the trader the right to determine whether the goods or services supplied are in conformity with the contract. The list of grey unfair terms set out in Annex III of the proposed Directive are deemed to be unfair if the trader does not prove to the contrary, for instance a term which permits a trader to unilaterally alter the terms of the contract without a valid reason and a term allowing a trader to terminate the contract at will where the same right is not granted to the consumer.

Key Benefits for Businesses

According to the Europa Press Release[15], the proposed Directive will bring about a number of key improvements for businesses. Traders will be able to use the same contract terms in all 27 EU Member States and, as a result, the cost to businesses of complying with legal requirements in different Member States will be significantly reduced. In addition, harmonisation of laws across Member States will provide legal certainty for businesses wishing to sell cross border, resulting in businesses being more willing to enter the relatively unexploited cross border market.

Timescales

As the new Directive is still only a proposal, it will need to be submitted to the European Parliament and the Council of the European Union for scrutiny and debate before it can become law and, at this stage, it is not clear when this process will be completed. If the proposed Directive does become law, Member States will be required to implement the Directive two years after its entry into force. In addition, Member States must “take appropriate measures” to inform consumers of their new rights.

Rebecca Anderson

Useful URLs

Consumer Rights Directive

Europa Press Release

[1]Proposal for an EU Directive on Consumer Rights (COM (2008) 614)

[2]Directive 93/13/EEC on Unfair Terms in Consumer Contracts

[3]Directive 1999/44/EC on Consumer Sales and Guarantees

[4]Directive 97/7/EC on Distance Selling

[5]Directive 85/577/EEC on Doorstop Selling

[6]These four Directives will be repealed (Article 47 of the proposed Directive)

[7]Europa Press Release entitled “Consumers: Commission proposes EU-wide rights for shoppers

[8]Ibid

[9]Europa Press Release entitled “Frequently asked questions on the proposed consumer rights directive”, dated 8 October 2008

[10]Ibid

[11]Eurobarometer 224 – Business attitudes towards cross-border sales and consumer protection

[12]Ibid

[13]The European Online Marketplace: Consumer Complaints 2005

[14]Europa Press Release entitled “Frequently asked questions on the proposed consumer rights directive”, dated 8 October 2008

[15]Ibid