Changes in Consumer Law for Distance Contracts in the EU

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Differing levels of consumer protection in the laws of the EU member states create barriers to cross-border trade, especially to Internet based distribution systems. These barriers affect likewise businesses and consumers. Businesses that intend distributing their services and goods in Europe face differently strict consumer protection regimes in each of the 28 EU member states despite the European Union's mission to facilitate cross-border trade. Consumers are unsure of their rights and how to enforce them and, therefore, stay with local retailers and service providers, thereby missing the opportunity of greater choice and lower prices offered by foreign retailers and service providers via the Internet.

The EU Consumer Rights Directive of October 25, 2011 ("CRD")1 aims to lower such barriers and to increase legal certainty for consumers and traders by providing a single regulatory framework based on clearly defined legal concepts (Recital 7 of the CRD). On the one hand, the CRD focuses on ensuring that consumers have the information and time they need to make informed decisions fully aware of all costs and legal implications when entering into a contract. On the other hand, it aims to strengthen businesses that treat consumers fairly and provide them with all needs to know in a clear and straightforward manner and favors them in comparison to those which use less transparent practices and lure consumers to less competitive offers.

All EU member states must transcribe the CRD into national law by December 13, 2013 and apply the CRD from June 13, 2014 on at the latest. Despite its title, the CRD is not a general code of consumer rights. Instead, it particularly applies to so called "distance contracts". A distance contract is a contract concluded under an organized distance sale or provision of service scheme by exclusively using one or more means of distance communication up to and including the moment of the conclusion of the contract (or, how Art. 2 Sec. 7 of the CRD defines it rather murky: "'distance contract' means any contract concluded between the trader and the consumer under an organised distance sales or service-provision scheme without the simultaneous physical presence of the trader and the consumer, with the exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded"). Of course, contracts concluded via the Internet are the main scope of application. Although it is less ambitious than originally proposed, the CRD has the widest harmonization approach possible and, therefore, can be considered to be a milestone. Contrary to legacy EU directives that are replaced by the CRD, the EU member states are not allowed to deviate from the provisions of the CRD in favor or to the detriment of traders and consumers, such creating a EU-wide identical legal framework for internet sales.

Articles 6 and 8 of the CRD provide extensively detailed rules with respect to pre-contractual information obligations for distance contracts inter alia relating to the content of the information, the time at which the information has to be given, the burden of proof and certain formal requirements. The information must form an integral part of the contract and cannot be altered unless the parties expressly agree otherwise (Article 6 Sec. 5 of the CRD). Mandatory information covers the main characteristics of the goods or services (Article 6 Sec. 1 lit. a of the CRD), the identity of the trader (Article 6 Sec. 1 lit. b of the CRD), the trader's contact information (Article 6 Sec. 1 lit. c of the CRD) and the price and other related costs (Article 6 Sec. 1 lit. e of the CRD). In case of contracts that are concluded via the Internet the information must be provided immediately before the consumer places the order. If the trader charges a fee the information must include a clear notice about the fees and costs (Article 8 Sec. 1 and 2 of the CRD). In addition, consumers must be informed clearly and legibly whether any delivery restrictions apply and which means of payment are accepted (Article 8 Sec. 3 of the CRD). Further to the obligation to provide pre-contractual information, the CRD obliges traders to provide post-contractual information, i.e. confirmation of the conclusion of the contract on a durable medium within a reasonable period of time, however at the latest when delivery of the goods or performance of the services is made (Article 8 Sec. 7). The burden of proof of compliance with the aforementioned obligations is on the trader.

The full harmonization of the rules on the consumer's right of withdrawal is a further important step for overcoming barriers in cross-border trade. The consumer's right to withdraw from a distant contract without reason shall even out the structural shortcomings of distance contracts following from the lack of consumers' opportunity to check the goods before concluding the contract (see Recital 37 of the CRD). The right of withdrawal is already applicable law of the EU members, but the conditions for the exercise of the right of withdrawal are fairly different under the national laws causing severe difficulties for cross-border trade, especially with regard to a lack of certainty in respect to the date until when the consumer can exercise its right to withdraw. The CRD implements a uniform withdrawal period of fourteen days upon receipt of the goods (Article 9). Further, the CRD states a uniform period for expiration of the right of withdrawal of twelve months if the trader missed to provide the consumer with exact and complete information about its right of withdrawal (Article 10 Sec. 1 of the CRD). The rules for exercising the right of withdrawal (Article 11) and the effects of a withdrawal (Article 12 to 15) will become standardized as well.

Considering the extended harmonization of legal requirements for Internet trade in the EU by the CRD, the CRD does definitely lower barriers and increase legal certainty for consumers and traders which should lead to a noticeable benefit for both sides. However, it must be borne in mind that even the CRD itself provides only a minimum harmonization under certain aspects (e.g. regarding the termination of ancillary contracts such as finance agreements related to the goods or services, Article 15 Sec. 2 CRD) and other EU directives regulating certain other aspects of Internet trade with a lesser harmonization standard may apply as well (e.g. EU Directive 2006/123/EC on Services in the Internal Market and EU Directive 2000/31/EC on Electronic Commerce).

Internet dealers and traders should be aware of the new requirements and prepare for respective measures in order to avoid claims from consumers and consumer associations. It must be noted that dealers from outside the EU must comply with these rules as well if they market their goods or services online to consumers located in the EU.


1 - See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:304:0064:0088:EN:PDF