Consumer Rights Bill - Bringing consumer rights into the digital age

by Reed Smith
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Introduction

The draft Consumer Rights Bill was published on 12 June 2013 and will represent a major overhaul of consumer protection law in the UK. The Bill seeks to consolidate important parts of consumer law, make it more user friendly and robust and bring it up to date to account for the digital age. The new law will have an impact on all business to consumer (“B2C”) businesses, including businesses that provide goods, services, digital content or any combination and whether provided online or through bricks & mortar stores. It is important that
businesses are aware of the proposed changes and start to think about reviewing their standard terms and consumer policies.

Brief highlights of the Consumers Rights Bill

The Bill is split into three main sections, covering (1) consumer contracts for goods, services and digital; (2) control of unfair contract terms in consumer contracts; and (3) clarification and strengthening of enforcement powers.

1. Consumer contracts for goods, services and digital

  • Digital content – Arguably the most significant change brought about by the Bill is that it introduces, for the first time, specific consumer rights in respect of “digital content”. This is defined broadly to include any data that is produced and supplied in digital form and would cover digital content supplied online (e.g. software, content downloads, apps and in-app purchases), as well as digital content on a physical medium (e.g. software on a computer or disk or a film on a DVD).
  • Rights and remedies for digital content – The Bill provides that digital content must satisfy a certain standard similar to physical goods – it must be of r e e d s m i t h . c o m Client Alert 13-204 July 2013 satisfactory quality, fit for its purpose and as described. The provider is also deemed to warrant that it has the necessary rights to provide the content. A consumer will have the right to repair, replacement, price reduction or refund and will also have a right to compensation where content causes damage to a device or other content of the consumer (e.g. by introducing a virus).
  • Supply of Goods – The new law will consolidate most of the B2C provisions in the Sale of Goods Act 1979 (as amended). The Bill therefore restates a lot of the current law on implied terms as to quality. In terms of new rights, it gives mandatory contractual force to any pre-contractual information about the characteristics of the goods. It also introduces a new tiered remedy for consumers, which includes an early right to reject goods (within 30 days) as well as a final right to reject. The final right to reject will apply if the supplier fails to repair or replace the goods after just one opportunity to do so. As an alternative to this right to reject, the consumer may elect for a price reduction in certain circumstances.
  • Supply of Services – The new law will consolidate most of the B2C provisions in the Supply of Goods and Services Act 1982 (as amended). The Bill therefore restates a lot of the current law on implied terms as to standards of performance. In terms of new rights, as with the supply of goods, contractual force is given to any pre-contractual information about the service which the consumer takes into account in deciding to enter the contract. The consumer’s remedies include the right to ask for repeat performance or if that is not possible or is not done properly or on time, then a right to a reduction in price of an appropriate amount.

2. Unfair Contract Terms

The Bill considerably strengthens consumer rights in relation to unfair terms. The B2C provisions in the current Unfair Terms in Consumer Contracts Regulations 1999 and Unfair Contract Terms Act 1977 will be consolidated in the new
legislation.

The test for an “unfair” term will stay the same, being one which “causes a significant imbalance in the parties’ rights and obligations under the contract, to the detriment of the consumer”. In addition to non-core terms (terms other than price or subject matter), the test is extended to apply to consumer notices (whether or not in writing). Core terms on price or subject matter will only be exempt from the fairness test if they are presented in a transparent and prominent manner. The current provisions on terms having to be in plain and intelligible language are further boosted by an obligation on the supplier to bring particularly onerous terms to the consumer’s attention. The grey list of clauses that are
deemed to be unfair has also been revised and expanded.

3. Enforcement powers

The Bill introduces a number of changes to consolidate and improve powers of enforcement, which are to rest with bodies including the Competition and Markets Authority (“CMA”) (launching on 1 October 2013) and the Trading Standards. Current investigatory powers will be strengthened together with improved rights for applying for injunctions and court orders.

Enforcers will be able to attach a range of “enhanced consumer measures” to enforcement orders or undertakings. These include compensation, termination rights, compliance measures, and measures such as requiring a supplier to sign up to an established customer review site.

The provisions also improve some of the safeguards to protect businesses, such as a requirement for enforcers to give at least two business days’ written notice to enter premises. Timetable for implementation The Bill is currently at consultation stage and businesses have until 19 August 2013 to submit evidence to Parliament and until 13 September 2013 for comments to the Government. Beyond this date, there is no firm timetable for the Bill’s process through Parliament or the ultimate date on which the new provisions will become effective. However, the Bill does implement a limited number of provisions of the EU’s Consumer Rights Directive (2011/83/
EU) (the “CRD”), which has an implementation deadline of 14 June 2014. The CRD also requires a number of important changes to the law on distance selling and these changes are not included in the Bill, but are being separately implemented – a separate client bulletin is available on the CRD.

We are closely monitoring the Bill and will provide updates of its passage through Parliament, including any material changes to its provisions.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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