Today, it is possible to buy almost anything online. Indeed, many businesses do not have physical premises at all, instead operating entirely from online stores, allowing consumers to purchase anything they want instantly at the click of a button.
Selling goods and services online has significant advantages over running an expensive physical store because it helps the trader to keep their operating costs down while allowing them to offer more competitive prices to customers. However, there are some significant consumer law watch outs for online sellers which do not all apply to their bricks and mortar competition. UK consumer laws are, understandably, very protective of consumers – so how can a trader protect themselves?
This article is intended to help businesses understand and comply with the rules governing distance selling to consumers, as set out primarily in the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the "Regulations"). This is important because if certain information is not presented to consumers at the correct time, a trader can find themselves subject to extended cancellation periods and other sanctions.
Pre-contract information requirements
Whether you're selling goods, services or digital content online, in most cases, the Regulations require you to provide certain specific pieces of information to consumers before they enter into the online contract – i.e., before they finally submit their order.
In many cases, the required information will be displayed on screen in the course of the online purchase journey, for example on the order summary page, where the products, price and other variables will usually be displayed to allow the consumer to check everything is correct before submitting their order. Other information will more naturally sit in the terms and conditions of sale and be accessible via a link on the order summary page.
However, the Regulations are prescriptive about when and where in the process different pieces of information must be given or made available. For example:
- Delivery restrictions and accepted payment methods must be provided no later than the beginning of the order process.
- Certain key information must be provided directly before the consumer places their order if there is an obligation to pay, including the main characteristics of the product, the total price (including taxes), any additional delivery charges or other costs, as well as certain other information that is more relevant to ongoing contracts such as subscriptions: the minimum duration of the contract, how the contract can be terminated and the cost per billing period. This is usually best set out in full on the order summary page.
- Other required information includes, among other things, details about the trader, any cooling off rights and how to exercise them, the trader's complaint-handling policy, any after-sale customer assistance, and in the case of a sales contract, a reminder that the trader is under a legal duty to supply goods that are in conformity with the contract. This information is generally included in the terms and conditions and linked to from the order summary page.
The full list of required pre-contract information can be found inSchedule 2of the Regulations. All of this information must be given or made available to the consumer before they submit their order, but it must also be confirmed in a durable medium (e.g. email) after the contract is formed, if it hasn't already been given in a durable medium at the pre-contract stage. In addition, where the consumer has cooling off rights (see below), a model cancellation form must be given or made available to them, although they are not obliged to use this.
It is therefore important that the correct information is presented in the correct form at the correct time, and this requires careful planning when designing the purchase journey. Failure to get this right could give rise to a breach of contract claim, but, depending on the circumstances, it might also mean that the consumer's statutory right to cancel the contract is extended or that they are not bound by the contract at all, as discussed further below.
Pay now buttons
Traders must ensure that the consumer explicitly acknowledges that their order implies an obligation to pay. If paying requires the consumer to click a button to submit the order, the button must be labelled with the words "order with obligation to pay" or something similar. This would make for a quite wordy label and EU guidance suggests that simpler phrases such as "buy now", "pay now" or "confirm purchase" would be sufficient.
If the trader fails to comply with these requirements, the consequences are potentially severe – the consumer is not bound by the contract. So it is important to ensure that compliance with these requirements is built into the order flow.
Cooling off rights
Subject to certain exceptions, consumers generally have 14 days to change their mind and cancel the contract without giving a reason. These are known as the consumer's cooling off rights. When the cooling off period starts and ends depends on whether you are selling goods, services or digital content (or a mixture), but the key is that information about a consumer's cooling off rights is mandatory pre-contract information that must be given or made available to the consumer before they enter into the contract.
The consequences of not providing the right information at the right time are again quite severe. The 14-day cooling off period will not begin until the correct information has actually been provided and it can be extended in this way for up to a maximum of 12 months after the date it would have ended had the information been provided at the right time.
In the case of goods, if you want to make the consumer responsible for the cost of returning the goods, this must be made clear to them up front in your terms and conditions. If you don't do this, you will be responsible for return costs, which can considerably increase the cost of dealing with returns.
There are some exceptions to the cooling-off rights. For example, cooling off rights cease to apply to products sealed for health and hygiene reasons, such as beauty products or underwear/swimwear, where those products are unsealed after delivery. Cooling off rights do not apply at all to products that are likely to deteriorate rapidly, such as certain short-dated foods and things like flowers. In terms of services, there is an exception for contracts for the supply of accommodation, transport of goods, vehicle rental services, catering or services related to leisure activities, if the contract provides for a specific date or period of performance.
However, these exceptions are interpreted very narrowly and, even in the case of an exception applying, you must still tell the consumer that they do not have cancellation rights or that they will lose them in certain circumstances.
Providing services and digital content during the cooling off period
The point of cooling off rights are to allow the consumer a brief window of opportunity to change their mind without incurring any liability to the trader. However, what happens if a consumer signs up to a service, starts using the service straight away and then cancels in the cooling off period?
The basic rule is that traders must not start providing services during the cooling off period unless, before the services begin, they have obtained an express request from the consumer to do so and an acknowledgement that, by making the request, the consumer loses the right to cancel if the services are fully performed during the cooling off period.
Complying with this requirement allows the trader to charge for services provided during the cooling off period. The consumer can still cancel, as long as the services have not been completed, but if they do so, they must pay a reasonable and proportionate amount to reflect the services actually received prior to cancellation. This is particularly important if you are operating a subscription service which starts immediately after sign up.
The express request cannot be obtained by including wording to this effect in the terms and conditions, because that would not fulfil the requirement for the request to be expressly made. Instead, the consumer should be required to take an active step to indicate their request and therefore an appropriate mechanism (such as a tick box) should be built into the purchase journey (or at least as some point in time before the services begin).
A similar requirement applies to the supply of digital content. The consumer must expressly consent to the supply of the digital content during the cooling off period and must acknowledge that, by doing so, they will lose their right to cancel once the supply of the digital content begins. Unlike with services, the consumer completely loses the right to cancel once they start downloading or streaming the relevant digital content.
Again, the consequences of non-compliance are quite severe. If the consumer cancels during the cooling off period but the supply of the services or digital content started without the consumer giving their express request or express consent, they will not have to pay anything for the services received or the digital content consumed during the cooling off period.
Finally...
It's important to remember that some services fall outside the scope of the Regulations altogether (e.g. contracts for banking, insurance and investment services, gambling services and residential rentals, to name but a few), whereas some goods and services are only partially in scope. However, these are the exceptions rather than the norm and understanding the rules that apply to your business, and the individual products, services and digital content you are selling, is essential to succeeding as an e-commerce business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.