Recent changes to consumer law will affect business operations, so management needs to be aware of the rights that consumers will seek to enforce.
According to the Office for National Statistics, retailing accounts for 5.7% of the UK’s gross domestic product. So anything that affects retailing and the risks involved in selling – consumer rights, for example – should attract widespread interest in many businesses.
Many organisations have found that consumer law relating to the supply of goods and services has become increasingly outdated in recent years, especially with the arrival of digital content, such as downloads and software.
A radical change to consumer legislation has just been implemented and there is another one in the pipeline. It is imperative that retailers understand these revised requirements and act accordingly to ensure they are fully compliant.
The Consumer Contracts Regulations
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCR) came into force on 13 June 2014. The new rules replaced the existing legislation and apply to any retail business selling to a consumer on or after this date.
There are a number of changes that retailers need to be aware of.
It is imperative that retailers understand these revised requirements and act accordingly to ensure they are fully compliant
The first change relates to the provision of information. After the introduction of CCR, more information must now be provided to consumers before a purchase and the level of detail required depends on the method of purchase.
For in-store purchases, consumers must have access to the complaints handling policy and any aftercare or guarantee information. If consumers have the right to cancel, they must be provided with a cancellation form.
Alternatively, if the goods and services are being sold online, the retailer must identify whether it is acting on behalf of another trader and, if so, provide their contact details as well as their own.
The retailer must also make it clear to the consumer that the order implies an obligation to pay and the purchase process must ask the consumer to acknowledge this explicitly.
For the first time, the regulations deal specifically with digital content. For example, the retailer must now provide information about the functionality of digital content and the software/hardware requirements.
It is also important to know that digital content cannot be provided to the consumer during the cooling-off period, unless they explicitly acknowledge and consent to waive their cancellation right.
In relation to cancellation rights, the cooling-off period for consumers has been extended from seven days to 14 calendar days. The cooling-off period for goods starts when the consumer receives the goods, and if it relates to digital content and services, it starts from the day on which the contract was entered into.
Retailers must also be aware that if the consumer expressly asks for the service provision to start before the end of the cooling-off period, then the consumer will waive their cancellation rights.
It is also important for retailers to realise that, under the regulations, if a consumer exercises their statutory right to a refund, then it is the responsibility of the business to refund the price paid and the cost of the standard delivery charges. Refunds must be made within 14 days of receipt of the returned goods, or receipt of evidence that the goods have been sent back. In the case of provision of services or digital content, refunds must be made within 14 days of notice that the consumer wants to cancel.
Inertia selling is also covered by the legislation. In other words, consumers are protected from unsolicited sales or additional charges that have not been agreed in advance. In essence, the consumer is not required to pay for products and service charges they have not agreed to.
The new regulations also make provisions in relation to helpline charges. If a retail business offers its customers a helpline service, it should be charged at a basic rate.
The Consumer Rights Bill
The Consumer Contracts Regulations have far-reaching implications for retailers, but this is not the only change affecting the sector. Retailers must also start familiarising themselves with the Consumer Rights Bill.
This bill is not yet law, but when passed it will introduce new provisions that aim to ensure consumers are better informed and protected when they buy goods, services or digital content.
It will replace current legislation, including the Sale of Goods Act 1979 and the Unfair Contract Terms Act 1977, with the aim of simplifying and removing inconsistencies from the current regime.
The new legislation will also seek to clarify the standards a consumer can expect when making a purchase and the actions available to them if the standards are not met. It will also provide clarity on whether terms are fair or unfair.
The bill is currently going through the parliamentary process and is expected to become law in the second quarter of 2015. This may seem some way off at the moment, but retailers of all sizes must start to consider their sales processes in the light of the proposed changes.
Once again, many changes are being proposed, but the main ones that the bill is seeking to introduce are worth noting. The first relates to descriptions. Goods, digital content and services must meet the descriptions given by the trader before they are sold. Goods and digital content must be fit for purpose and of satisfactory quality, while services must be provided with reasonable care and skill.
Under the Consumer Rights Bill, digital content will have to be of satisfactory quality, fit for purpose and meet the description given
The bill clarifies a period of 30 days for consumers to reject faulty or sub-standard goods and to receive a full refund. This removes the ambiguity in the current legislation which, rather than providing an actual number of days, merely refers to a “reasonable period of time”.
Another important change relates to whether a consumer agrees to accept a repair or replacement. Under the new law, the business will have only one attempt to get it right, whereas current legislation allows an unspecified number of attempts.
Like the Consumer Contracts Regulations, the Consumer Rights Bill deals with digital content for the first time. Significantly, it contains a provision that the content must not harm the consumer’s device or any existing digital content being stored. If it does, the trader would be legally obliged to repair the device and provide compensation.
There has been much debate over whether digital content can actually be classed as goods. The new legislation will clarify this and will apply to all paid-for digital content, as well as content provided free with paid-for content, and content paid for with vouchers or virtual currency which were originally paid for with money.
In the future, there is also scope for the regulations to apply where, for example, personal data or something other than money has been exchanged by a consumer for the digital content.
Under the bill, digital content will have to be of satisfactory quality, fit for purpose (when this has been known to the retailer) and meet the description given.
In relation to satisfactory quality, the content must meet the standard that a reasonable person would consider satisfactory when the description, price and other relevant factors, including a statement about the characteristics of the content, are taken into account.
If the digital content is expensive and complex, then expectations will be higher. As regards meeting the description, the content must meet any description provided by the retailer to the consumer and not just any trial or sample version.
If the content does not meet these requirements, the consumer will be entitled to repair or replacement of the content. Where repair or replacement is not possible, or if it is not done within a reasonable time or without significant inconvenience to the consumer, then the customer will be entitled to keep the digital content but receive a price reduction. This refund can be up to the full amount paid for the content.
Right to sell
Another clarification in the draft bill is that it will be implied that the retailer has the right to sell the content. This is important because it is usual for a retailer to sell digital products under licence, so the new law will ensure the consumer knows that the retailer has the right to sell.
The bill also contains much-needed guidance on unfair terms. It aims to clarify which contract terms can be challenged in court so it can be decide whether or not they are fair. A useful list is provided in the draft bill (part 2, section 64), which will help to give clarity in this area.
Finally, the Consumer Rights Bill includes a notice of inspections. From next year, traders will receive notice of routine inspections from enforcers such as Trading Standards to allow them to make arrangements.
The intention is to give enforcement authorities greater flexibility to seek appropriate redress for consumers who have been affected by breaches of consumer law.
What do retailers need to do?
The proposed changes are designed, in the main, to give consumers better rights and protection. It is therefore essential that any businesses offering goods, services or digital content understand the extent and impact of the amendments.
For a start, retailers must review their current standard terms and processes against the new requirements and ensure compliance with the Consumer Contracts Regulations. And even though the Consumer Rights Bill is yet to become law, businesses should start considering the coming changes and planning for necessary amendments to their processes and procedures. This is especially important in the world of digital content, which has not previously been dealt with specifically.
If businesses’ processes or procedures will need to be changed, they should start to plan for this now. Their online experience and terms and conditions will also need to be updated to ensure consumers have the right information at the right time and that the business is not exposed to claims or a longer cooling-off period because information is not given at the correct time.
Training should also be arranged to ensure employees are familiar with the changes.
Sarah Riding is a partner and commercial law specialist at national law firm Irwin Mitchell.