Consumer Rights Directive - New consumer rights for EU's online shoppers

Updated April 2011

Members of the European Parliament have recently voted on amendments to a new Directive on EU wide consumer protection law which may have far reaching consequences for anyone doing business online.

The Consumer Rights Directive (CRD) aims to clarify and strengthen consumer rights with a view to harmonising protection across the EU and encouraging cross-border shopping. The EU has recognised the growing importance of the internet with over 150 million EU citizens currently shopping online and hopes to update the current legislation to reflect this.

Current rules

As it stands, EU consumer protection for online shopping and off-premises contracts is based on EU Directives on distance selling and doorstep selling. These Directives only contain minimum requirements. As a result, member states have added further rules meaning every state has different and incoherent levels of protection. This has led to legal uncertainty and has held back cross-border selling. The CRD aims to create common rules for consumers providing the same level of protection across the EU.

Scope of the Directive

The Directive will only concern contracts for the sale of goods and services from business-to-consumer and most of the key changes will apply to distance sales and include:

• Information: the need for retailers to give consumers clear key information prior to the conclusion of a sale, including the main characteristics of the product, the geographical address and identity of the trader, the price inclusive of taxes and all additional delivery or postal charges. This will include the prohibition of 'ticked-box' charges for goods and services meaning all contract terms must be clearly displayed to the consumer prior to the conclusion of the contract;
• Delivery: goods or services ordered at a distance must be delivered within 30 days and the trader will be responsible for the cost of deterioration or loss of the goods until received by the consumer. Where goods are delivered late or not at all, consumers will have a right to a refund within 7 days of the date of delivery;
• Cooling off period: consumers will now have a 14 day cooling off period to change their mind regarding the purchase of goods (excluding digital downloads). For distance contracts the 14 days only starts from receipt of the goods. If a trader fails to inform the consumer of their withdrawal rights, the period for withdrawal could be extended to up to a year under current EP proposals;
• Returns: where consumers wish to withdraw within the 14 days, they have to pay for returning the goods except where the goods are worth over €40: then, the seller pays.
• Refunds: where a consumer decides to withdraw within the 14 days, the seller must make a full refund within 14 days of that withdrawal even if the goods have not been returned;
• Defective goods: where goods are defective, the consumer has a right to repair or replacement up to two years of purchase. Where this is not possible, a refund must be given. However, EU member states may adopt or maintain provisions for a longer liability period in order to ensure a higher level of consumer protection;
• Cross-border selling: retailers will now be obliged to make their goods available to all EU member states.

Impact for retailers

The EU has stated that retailers will benefit from the new Directive as well as consumers, by virtue of the creation of a level playing field allowing cross-border trading and clear definitions of off-premises and distance contracts. However, the draft Directive has been received less favourably by the UK retail industry. Industry commentators have predicted that the Directive will damage the growth of the industry and cost retailers almost £9 billion per year. The rules making retailers bear the burden of the cost of returns over €40 and forcing retailers to trade in unknown markets that may not suit their business model have been particularly criticised. It is estimated that, depending on industry sector, between 1% and 10% of goods are returned unwanted by consumers. Online clothes retailers are likely to be the worst hit by increased costs but consumers will inevitably end up bearing the cost by the increased price of goods.

The Directive is currently in the stages of being negotiated between the European Parliament, the Council and the Commission. If an agreement is reached, the legislation could be approved by the EP in June or July of this year with the Directive coming into force as early as 2012. Whether the Directive will remain in its current form including the controversial changes highlighted above remains to be seen.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2011. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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