The draft guidance helps to clarify some ambiguities that were
created when the Regulations came into force on 31st October 2000,
including practical advice on when refunds can and – more often –
cannot be lawfully refused. But there are still some areas of
confusion.
Background to the Regulations
Under the Regulations, consumers shopping for goods and services
by telephone, mail order, fax, interactive TV, the internet and
other types of distance communication are given rights to receive
certain information, a cancellation period of seven working days,
and protection against fraudulent use of a credit card.
Reasons for the new guidance
The rules were tweaked in April this year to address a practical
problem that some suppliers faced in getting written
information to customers. The OFT and DTI previously offered
separate guidance on the Regulations. After the April change, the
DTI withdrew its guidance and the OFT amended its
guidance. The two departments have now combined forces for the
next publication.
The draft of A guide for businesses on home
shopping is more comprehensive than its predecessors –
running to 66 pages. It contains answers to many more of the
questions businesses frequently ask.
According to the OFT and DTI, it is intended to be a handy
reference tool for businesses of all sizes, but the departments
need feedback from businesses, particularly small businesses, to
ensure that the guidance is as effective as possible.
The consultation period will run until 11th
November.
Key points in the new guidance
For eBay traders: the Regulations provide
certain exemptions for auction sales; but the draft guidance
clarifies that "buy it now" slots on internet auction sites are not
exempt because the sale is not concluded by a process of
auction.
For online supermarkets: While the great
majority of the Regulations, including the right to cancel, do not
apply to contracts for the supply of food, drinks or other goods
for everyday consumption delivered to the consumer's home or
workplace by regular roundsmen they
do apply to home deliveries by supermarkets for products purchased
online (or by other distance means). However, so far as the right
to cancel alone is concerned, while the guidance does not make this
point explicitly, supermarkets can often rely on a different
exception (which is addressed elsewhere in the guidance), that
applies to orders for goods that are liable to deteriorate or
expire rapidly. This may include perishable goods like fresh foods
or fresh flowers, or orders for newspapers or magazines.
For online bookings: The right to cancel does
not apply to contracts for the provision of accommodation,
transport, catering or leisure services (including hotel
accommodation, plane, train or concert tickets, car hire or
sporting events) where you agree to provide the service on a
specific date or within a specific period.
For computer sellers: it is already known that
consumers cannot cancel if the order is for goods made to the
customer's own specification. The guidance gives the example of
custom-made curtains. But the guidance also says that the exception
does not apply to "opting for add-on memory or choosing a
combination of standard off the shelf components when ordering a
PC". So a consumer can customise his PC to some extent and still
return it for a refund for no reason.
For CD, DVD and software sellers: the guidance
suggests that where the customer has unsealed such products, they
cannot be returned. OUT-LAW has invited the OFT to clarify this
point because it appears to conflict with other comments in the
guidance (on copyright issues and opening a package as they might
do in a shop) and it creates a problem for consumers who cannot see
software licence terms without breaking a seal and running a
disc.
For sellers of downloads: those selling ebooks,
music, screen savers or mobile ringtones online or by text
messaging will generally be providing a service, not selling goods.
The guidance confirms that "the exception to the right to cancel
would only apply if you have the customer's agreement to start the
service before the end of the cancellation period and you have
provided the customer with the required written information before
you start the service, including information that their
cancellation rights will end as soon as the service begins."
For sellers of intimate products: selling
lingerie online can be a big commercial risk. There is a general
exception to the right to cancel for those supplying goods "which
by reason of their nature cannot be returned". But the OFT and DTI
take the view that this exception only applies where "returning the
goods is a physical impossibility or where they cannot be restored
in the same physical state as they were supplied however they are
cared for."
The guidance continues: "Thus while this exception may apply to
items such as latex or nylon clothing which could become distorted
once worn, we do not see the exception being applied to lingerie in
general."
It acknowledges that hygiene concerns may prevent the reselling
of such goods; but that, it seems, is the seller's tough luck. The
Distance Selling Regulations "do not link cancellation rights with
a supplier's ability to resell items as new," according to the
guidance.
There is some comfort for e-tailers: a consumer has a duty to
take reasonable care of goods, and the guidance says it may be
reasonable for the supplier to guide the consumer on what is and is
not reasonable care – such as not removing hygiene seals, "as long
as these requirements are not so burdensome as to restrict a
consumer's reasonable opportunityto assess the product."
When providing services, when does a service
begin? The guidance says that preparatory work to
providing a service – such as setting up an account – cannot be
equated to the carrying out of a service. This will impact on the
right of some businesses to say that the provision of a service has
begun and therefore cannot be cancelled.
Time limits for cancelling orders: Guidance on
when the clock starts ticking for the provision of goods and
services has been expanded and is easier to follow. A frustration
for many businesses has been how to determine when a consumer's
cancellation period begins.
Refunds for damaged or unreturned goods: If a
consumer cancels an order by email but fails to return the goods,
the merchant cannot delay making a refund. It must be made as soon
as possible after the customer cancels, and within 30 days at the
latest, albeit the merchant has a right of action against the
customer. Simlarly, if a consumer returns damaged goods, the
guidance points out that the consumer does not lose the right to
cancel. Again, the trader can only rely on the right of action
against the consumer for breaching the statutory duty to take
reasonable care of the goods.
How much to refund: The full price paid for the
goods including the cost of delivery must be refunded. The guidance
gives some relief to sites like Amazon.co.uk that also offer gift
wrapping or express delivery services. Essentially, e-commerce
processes should be structured so there is one contract for the
supply of goods where a refund is available and another for a
supply of services that is non-refundable. Traders can make
consumers pay the cost of returning items; but this has to be made
clear in the contract, otherwise the trader pays. Also, if the
goods are faulty or do not comply with the contract, the trader
pays for returns.
The E-commerce Regulations: Today's guidance
includes some information about the E-commerce Regulations which
overlaps to some extent with the provisions of the Distance Selling
Regulations. It is much more limited in scope, but does provide
some useful information about potential conflicts. For instance,
the E-commerce Regulations say that all online sellers, when
refering to prices, must state whether the prices include
associated taxes and delivery costs. The guidance adds: "it is
important to note the requirement to quote prices inclusive of all
taxes where you are engaging in activities that fall under the
[Distance Selling Regulations].
