The changing landscape of consumer legislation

12/11/2009

By Jennifer Edwards, Associate in Corporate & Commercial. Featured in Growth Business, Fresh Business Thinking and Kent Messenger series.

The European Parliament will debate the Consumer Rights Directive later this month, completing a review of consumer rights across the European Union which has already resulted in the Provision of Services Regulations 2009 and the Consumer Protection from Unfair Trading Regulations 2008.

The Directive aims to provide a uniform set of consumer rights across the EU by granting consumers a minimum level of contractual rights and remedies whilst retaining the general principles of contract law in each member state. Existing sector-specific legislation will prevail over the generic standards.  The ultimate aim is to encourage consumers to buy goods across the EU.

Changes which favour UK consumers include: the right not to pay any additional charges not notified to them at the outset; a longer cooling-off period of 14 days; the right to a refund within 7 days (currently 30 days) for late or non-delivery and the right to require a price reduction or refund in certain circumstances.

Changes which favour UK businesses include: the right, when a customer cancels the contract, to withhold reimbursement until the goods have been returned (currently, a refund within 30 days is required); the right to refuse a refund for minor defects and a reduction in the statutory liability period for defective goods from 6 years to 2 years (1 year for second-hand goods).

Service providers looking to expand into the EEA (other than in sectors such as financial services, transport and healthcare) will benefit from a streamlined process when the Provision of Services Regulations 2009 come into force at the end of next month.  A single point of contact will be established in each country (for example, Business Link in the UK) to deal with enquiries and applications to trade in that country. Consumers will benefit from a single online advice service in each country. The Regulations encourage co-operation between regulatory bodies across the EEA, particularly in relation to businesses which pose a danger to the environment, public health and/or safety and introduce new sanctions.  However, the Regulations also add to, rather than consolidate, the existing lists of information which businesses must provide to customers. 

The Consumer Protection from Unfair Trading Regulations 2008 create an EU-wide list of commercial practices which are unfair if they affect a consumer's decision and a blacklist of 31 banned practices.  The Regulations apply to all consumer contracts but may also affect contracts between businesses which have a close connection with consumers - for example, a distribution agreement where the end-user is a consumer. The Regulations encourage the free-flow of information across the EU, particularly in relation to enforcement action. The OFT now has the right to request that its equivalent body in, say, France takes enforcement action against a French company which has breached the Regulations in relation to a consumer located in the UK. The OFT also has additional investigative powers and can, for example, inspect goods without a warrant. 

Surprisingly, or perhaps as a result of the scale and nature of the changes, the OFT has stated that it wishes to encourage self-regulation where it is more appropriate than enforcement or intervention. To this end, the OFT has set up the Consumer Codes Approval Scheme and the Local Authority Assured Trader Scheme Network.  In addition, the OFT will support industry-based schemes which require a higher standard of compliance than the legal minimum but will not give formal approval or guarantee a "safe harbour". 

As with all new regulation, the hope is that the benefits will outweigh the additional administrative and legal burden, but it remains to be seen whether cross-border buying increases significantly as a result.