In early 2007, the European Commission (the ‘Commission’) published a green paper requesting views on 28 aspects of European consumer law. The Commission’s ultimate aim is to harmonise consumer laws across Europe. Its main focus is the rules on distance selling and unfair contract terms and the Commission is particularly interested in encouraging more European businesses to sell to consumers in other countries (especially online). The consultation complements the Commission’s long-term project to revise European contract law in order to remove barriers to the European internal market. It has already conducted one round of consultation which led to the publication of an action plan in early 2003. In that action plan, various inconsistencies between different EC directives and the non-uniform implementation of EC directives between different countries were highlighted as significant issues. This was also a major focus of its consultation in relation to the Distance Selling Directive last year.
Aims of the Consultation
The hope behind the green paper is that, once the harmonisation of the eight consumer-related directives is complete, it will make no difference to a consumer as to where they are located within the EU or from which country the goods or services are bought. The essential rights of all consumers across the EU will be the same. In addition, the Commission is hoping to bring EC law up to date. The law is not keeping face with advances in technology and the particular issues which are raised in the consultation relate to the sale of intangible digital products such as music downloads and software.
Problems for Consumers
The Commission is particularly interested in the following areas:
• late, partial or missing deliveries
• the availability of guarantees in relation to downloaded content (such as music)
• the right to return goods and the costs of doing so and who bears such costs
• returning unwanted products
• the availability of remedies such as a reduction in a price or the termination of the sales contract
• the length of the cooling off period within which goods may be returned if a consumer changes his or her mind about keeping them.
The directives covered by the review are the Unfair Contract Terms Directive 93/13/EEC, the Directive on Sale of Consumer Goods and Guarantees 99/44/EC, the Distance Selling Directive 97/7/EC, the Door Step Selling Directive 85/577/EEC, the Package Travel Directive 90/314/EEC, the Timeshare Directive 94/47/EC, the Directive on Injunctions 98/27/EC and the Price Indications Directive 98/6/EC. The Commission has stated in its press release that only 6% of consumers in 2006 bought purchases cross-border. Consumers are suffering the following problems which reduce their confidence in buying online from foreign countries: problems with delivery, for example partial delivery or late delivery, defects with the goods or the products were not what was expected when first ordered, problems with price and payment, problems with cancellation of orders and cooling-off periods. The Commission is conscious that the online shopping sector is set to boom, particularly in relation to products such as travel, clothes, groceries, and consumer electronics, and is concerned that the EU should not get left behind. Respondents to the consultation are requested to return their replies and observations to the Commission by 15 May 2007.
The review will not affect EC rules on the conflict of laws. In this area, the Commission has presented two proposals for regulations, one for non-contractual obligations, and one for contractual obligations. The latter proposes a conflict rule on consumer contracts: only the law of the place which is the consumer’s habitual residence would be applied under certain conditions. The financial sector is also excluded from the review.
Problems with the Current Law
The Commission is particularly concerned that the consumer directives no longer meet fully the requirements of today’s rapidly evolving markets. Technological developments are creating new channels for transactions between businesses and consumers which are not covered by consumer legislation. Online auctions are a good example of this. In addition, the existing consumer protection rules are fragmented. The current directives allow Member States to adopt more stringent rules in their national laws than the directives provisions and many member states have made use of this possibility to ensure a higher level of consumer protection. Secondly, many issues are regulated inconsistently between directives or have been left open. This creates extra compliance costs for businesses, including the cost of acquiring relevant legal advice, changing information and marketing materials or contracts and possible litigation costs. Some professionals refuse to sell to customers in other Member States. The Commission has identified two main strategies for revising consumer law – either revising each individual directive or adopting a framework instrument to regulate common consumer law areas with particular sectoral rules where they are needed. There are a number of issues which are common to all directives – definitions of consumer and professional, the length of cooling-off periods and the methods of exercising a right to cancel are examples.
Mutual Recognition
Another issue which the EU is reviewing is whether the consumer protection directives should be harmonised with a mutual recognition clause. This would mean that Member States would be able to introduce stricter consumer protection rules in their national rules, but they would not be entitled to impose their own stricter requirements on businesses established in other member states. Another option would be minimum harmonisation with the country of origin approach. However, these options would not simplify and rationalise the regulatory environment. Consequently, the Commission is keen to achieve full harmonisation.
Definitions
The various issues that the Commission wishes to address include the definition of a consumer and the varying definitions which are currently included in the various directives. For instance, the Directive on Door Step Selling defines consumer as a natural person who is acting for purposes ‘which can be regarded as outside his trade or profession’. The Directive on Price Indications refers to any natural person ‘who buys a product for purposes that do not fall within the sphere of his commercial or professional activity’ and the Unfair Contract Terms Directive refers to ‘the purposes of which are outside his trade, business or profession’. Similarly, the professional is referred to variously as trader, seller, supplier, etc depending on the directive. The definitions vary too: the Distance Selling Directive, for example, defines the ‘supplier’ as ‘any natural or legal person who… is acting in his commercial or professional capacity’, whereas the Unfair Contract Terms Directive refers to ‘seller or supplier’ as a natural or legal person who ‘is acting for purposes relating to his trade, business or profession whether publicly or privately owned’. To overcome the current inconsistencies, the notion of ‘professional’ could replace a variety of terms in the existing directives and apply to all persons who are not deemed to be consumers. The Commission also wishes to consider the position of consumers acting through an intermediary, as well as the concepts of good faith and fair dealing. In addition, the Commission wishes to solicit views on the extension of the scope of the EU rules on unfair terms to individually negotiated terms. The Commission asks whether the unfairness test should be extended to cover the definition of the main subject matter of the contract and the adequacy of the price. Another issue that the Commission wishes to consider is what contractual effects there should be where suppliers do not comply with information requirements and cooling-off periods. The Commission is of the view that all cancellation periods should be uniformly counted in calendar days rather than working days to increase legal certainty. The concept of working days is interpreted by each Member State differently and varying national holidays may cause uncertainties for consumers and businesses.
Right to Cancel
The methods of exercising a right to cancel are also regulated differently across the directives and across the Member States. In some countries, the consumer may choose how to notify the seller that he or she wishes to cancel the contract, whereas in others the consumer will be obliged to use a certain procedure such as registered mail. The Commission wishes to clarify these rules. In addition, the effect on the contract when the consumer exercises any right to cancel is regulated differently for different types of contract.
Contractual Remedies
The Commission wishes to receive views on whether general contractual remedies should be provided. The relationship between domestic rules on damages and the remedies provided for by the specific directives is unclear. Different solutions are possible. The new framework regulation or directive could merely introduce a general right to damages for consumers or it could specify that these damages should cover only purely economic damages or both economic and moral losses as in the Package Travel Directive.
Digital Content
The lack of coverage of contracts for the supply of software and data is a particularly important problem. An extension of the coverage of consumer protection rules to situations where consumers download music, software and digital content would allow consumers to make use of remedies for non-conformity and obtain damages. However, this would require specific rules since digital content is usually licensed rather than sold outright to consumers.
Second-hand Goods
The Commission wishes to consider the position of second-hand goods sold at public auctions, as well as the rules on the conformity of goods. Currently the seller is liable for any lack of conformity which existed at the time of delivery and becomes apparent within two years from that moment. The Commission is considering extensions to those rights. In addition, the Commission wishes to receive views on whether specific rules should exist for second-hand goods. The burden of proof is currently on consumers after the first six months and the Commission wonders whether this regime should be changed. The Commission wishes to receive comments on the general obligations of a seller in relation to delivery and conformity of goods, as well as the passing of risk in consumer sales and direct producers’ liability for non-conformity. The Commission also wishes to receive comments about guarantees given by manufacturers on top of the legal requirements.
Conclusion
The Commission wishes to conduct a full-scale review of EC consumer legislation. It is important for all businesses which may be affected by such changes to ensure that their voices are heard. It also remains to be seen whether such a framework directive would be effective in harmonising the laws across the EU if Member States are given discretion as to the directives’ implementation. Consequently, it may be more sensible for the Commission to issue a consumer regulation which has direct effect in each Member State without having to be implemented.
Helen Hart is a solicitor in the Corporate and Commercial department at Stevens & Bolton LLP in Guildford. Previously she spent time as sole counsel for Europe at Palm Europe Limited, as well as working in-house at the AA and British Gas. She can be contacted on helen.hart@stevens-bolton.co.uk or 01483 734238.
