Presently, EU rules on consumer protection come from four EU Directives – Unfair contract terms, Sales and Guarantees, Distance Selling, and Doorstep Selling. According to the Commission these Directives provide only minimum standards for the protection of consumers. But they give Member States discretion to establish more strict standards if they so desire. Hence, some Member States have set their own higher standards.
Last October, the Commission proposed a draft directive on consumer rights which revises and merges the four Directives abovementioned into a single instrument. The draft directive concerns contracts for sales of goods and services from business-to-consumer and applies to both domestic and cross-border contracts. The Commission wants to harmonise consumer rights as regards information about the goods, rights in the event of late delivery or non-delivery, cooling-off periods, returns, refunds, repair terms and guarantees.
The Commission has moved away from the minimum harmonisation approach to a full harmonisation approach under which Member States would be prohibited from keeping or introducing provisions in their national law which differ from the proposed Directive, whether those provisions provide for more or less stringent consumer protection requirements. Consequently, if the directive is adopted the UK would have to repeal any existing legislation which exceeds or provides less protection than the level of consumer protection provided by the Directive. In fact, the UK is concerned that some of its existing consumer protection measures go beyond the proposed directive terms therefore the UK would have to reduce consumer’s protection.
The Minister for Trade and Consumer Affairs at the Department for Business, Enterprise and Regulatory Reform, Mr. Gareth Thomas, told to the European Scrutiny Committee that the Government is concerned about “full harmonization, the restricted scope of the provisions on sales contracts, the proposed loss of the consumer’s “right to reject” faulty goods and distance and off-premises contracts.”
The Commission wants to harmonise the rules on information to be provided before conclusion of the contract. Traders would be required to provide the consumer with a clear set of information requirements, such as the main characteristics of the product, the arrangements for payment, delivery and duration of the contract, so the consumer can make an informed choice.
The European Commission wants to boost cross-border shopping online therefore the contract terms will apply to both high street purchases and those made online.
The Draft directive also includes provisions on distance and off-premises contracts. It provides for specific information requirements that the trader must give the consumer both before the conclusion of a distance contract and in the contract itself. The Commission proposal also regulates the right of withdrawal for distance and off-premises contract, including via the web. The Commission proposal sets an EU wide cooling off period of 14 days, rather than the present seven, when consumers can change their mind. It also introduces a standard withdrawal form.
Under the Commission proposal the rules on off-premises sales would apply to all contracts, despite of their value. However, there is, presently, under UK law, a threshold of £35 below which the rules do not apply. Gareth Thomas has said that it’s the Government view that “(…) imposing information requirements on traders and introducing a right of withdrawal for off-premises contacts worth less than £35 would place a disproportionate burden on traders.” Moreover, he said “(…) there was little evidence of consumer detriment relating to these low value contracts and therefore no justification for removing the threshold.”
The Commission proposal also provides for consumer rights specific to contracts of sale. It provides for provisions on passing of risk, lack of conformity, general contractual remedies and general right to damages and duty to notify defects. The Commission has kept the principle that the trader is liable to the consumer for a period of two years if the goods are not in conformity with the contract.
Under the draft directive the trader is required to deliver the good to the consumer on maximum of 30 days from signing the contract. The trader would bear the risk and cost of deterioration, loss of the good until the moment the consumer receives the good. The consumer will have a right to a refund no later than 7 days from the date of delivery in case of late or non delivery. The Commission has introduced a new rule whereby the risk of loss or damage of the goods is transferred to the consumer only when he or a third person designated by him other than the carrier acquires the material possession of the goods.
The proposal also provides for the same standard set of remedies available to all consumers who have bought a faulty product. Under the draft directive where goods do not conform, repair and replacement is the first option and the consumer would only be entitled to a refund in restricted circumstances. Hence, the trader may provide a remedy by repairing or replacing the product. Under certain circumstances such as if the trader refuses to remedy the lack of conformity or fails to do so in a reasonable time, the consumer would be entitled to have a reduction of the price or rescind the contract and claim damages. However, retaining the right to reject is essential for consumer confidence.
The UK would be required to repeal consumers’ existing right, in national law, to reject faulty goods. Consequently, consumers in the UK would no longer have a legal right to reject goods of unsatisfactory quality and being reimbursed. Furthermore, under the draft Directive the trader, not the consumer, would be entitled to decide whether non conforming goods should be repaired or replaced. The Minister has said that: “Our initial view is that this change will amount to a reduction in consumer protection for UK consumers which is unlikely to be acceptable.”
The draft proposal also contains provisions on unfair contract terms which have not been individually negotiated. They are terms drafted in advance by the trader and to which the consumer has agreed without the option of influencing them. The draft directive provides for a black and grey list of unfair terms. The 'black list' contains contract terms which in all circumstances are considered unfair whereas the “grey list” contains terms which are deemed unfair unless the trader proves otherwise to the satisfaction of the competent national authority. Such lists apply in all Member States and may only be amended by the Commission through the comitology procedure.
According to EurActiv, Nuria Rodriguez, a legal officer at European consumers' organisation BEUC, said that the "BEUC supported the principle of minimum harmonisation, but the directive harmonises everything to the maximum level while providing a low level of protection for the consumer.”
The Consumer Rights Directive must be approved by the European Parliament and EU Member States before coming into law. The Commission is expecting that the European Parliament as well as the Council will approve the draft Directive by March 2009. It remains to be seen what will come out from the negotiations but QMV is required at the Council therefore the UK would not be able to veto the proposal. The Government might not be able to build a blocking minority in order to prevent a reduction in consumer protection for UK consumers.
Member States would be required to transpose the Directive into domestic law within eighteen months of the measure coming into effect.
