Out-Law / Your Daily Need-To-Know

Out-Law News 5 min. read

Distance selling rules: draft guidance from the OFT


The UK’s Office of Fair Trading and Department of Trade and Industry have today launched a consultation on joint draft guidance that will update and inform e-tailers and other traders of their duties under the Distance Selling Regulations.

The draft guidance helps to clarify some ambiguities that were created when the Regulations came into force on 31st October 2000, including practical advice on when refunds can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For eBay traders: the Regulations provide certain exemptions for auction sales; but the draft guidance clarifies that "buy it now" slots on internet auction sites are not exempt because the sale is not concluded by a process of auction.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].

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.