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Effective Consumer Protection In Electronic Commerce

Info: 5356 words (21 pages) Essay
Published: 2nd Jul 2019

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Jurisdiction / Tag(s): EU Law

Consumers who participate in electronic commerce should be afforded transparent and effective consumer protection that is not less than the level of protection afforded in other forms of commerce

Online shopping has become very popular for consumers. It’s attractions include the opportunity to search for goods and services, compare their prices, read reviews made by customers who have purchased the same goods or service, order and pay for them and have them delivered, all from the comfort of one’s home. Other attractions include the “cooling-off” period which applies to most online purchases, discounts, promotions and the freedom from being pressurised by a salesperson into buying expensive (sometimes unwanted) extended warranties.

However, there is always the potential for abuse and arguably the anonymity afforded by the internet has done much to damage the level of trust consumers are willing to place in it. Prior to the events of September 11, internet business was already declining at a significant rate, and is still showing few signs of sustained recovery [2]

Consequently, various National and International Rules and Regulations aimed at protecting consumers have been put in place. The view is that the Consumer needs to be protected as they have no face to face interactions with the suppliers and have no way of inspecting the goods or service before entering into the contract. These laws stress the importance of transparency and information disclosure by the service provider.

In the Instant case, Mr John has ordered goods online, but has not received some of the goods he ordered. He has tried to contact the service provider by sending emails to them, but has not received any feedback. What rights and protection does John have in this case? What are the rights of a consumer where there is a breach of a distance contract and goods were not delivered after payment has been made? Consequently, various International policies, legislations, regulations and laws aimed at protecting consumers have been put in place. The view is that the Consumer needs to be protected as they have no face to face interactions with the suppliers and has no way of inspecting the goods or service. These laws stress the importance of transparency and information disclosure.

This essay will try to answer the questions posed above. It will analyze the provisions of the law on distance contracts especially as it relates to the provision of address and electronic mail address of the supplier where consumer complaints will be addressed. It will also examine the provisions for consumer protection in distance contracts, It will examine the proposals for change to the existing Rules.especially as it relates to Mr John’s rights as a consumer.

2. CONSUMER PROTECTION IN DISTANCE CONTRACTS

Distance contracts are “any contract concerning goods or services concluded between a supplier and a consumer under an organized distance sales or service-provision scheme run by the supplier, who, for the purpose of the contract, makes exclusive use of one or more means of distance communication up to and including the moment at which the contract is concluded.” [3]

“information society services” has been summarised in recital 17 of the Directive [4] as covering “any service normally provided for remuneration, at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data, and at the individual request of a recipient of a service” [5]

The difference between distance contracts and the traditional forms of contract is that there are no face to face interactions between the contracting parties and the goods are not inspected physically by the consumer. Consequently, certain obligations have been imposed on the service provider which he must satisfy for there to be a binding Contract.

PRIOR INFORMATION

Regulation 7 of the Consumer Protection (Distance Selling) Regulations 2000, Regulation 6 of The Electronic Commerce (EC Directive) Regulations 2002, and Article 4 of The Distance Selling Directive provide for information which must be provided to the consumer prior to the conclusion of any distance contract. These include amongst others, the name, identity, geographical address, and the electronic mail address of the service provider to make it possible to contact him rapidly and communicate with him in a direct and effective manner. [6] These information must also be provided in a form and manner which is easily, directly and permanently accessible. [7] Where a service provider fails to provide these information, he may be liable in damages for breach of statutory duty at the suit of the recipient of a service. [8]

In the instant case, John has sent emails to which no response has been given and he has no telephone number with which he can contact the supplier of the goods. It seems that the supplier has provided the information required of him by the law which is the email address, however the provision also requires that the information provided makes it possible for rapid, direct and effective communication. Telephones satisfy the requirement of rapid, direct and effective communication and can be interpreted by the courts to fall within the required information. It is suggested that specifically providing for telephone numbers will be a welcome development.

2.1 FORMATION OF ELECTRONIC CONTRACTS

The rights and obligations of parties come into existence when the contract is formed. In distance contracts however, it is sometimes difficult to determine “where and when” the contract is concluded. A view is that:

“A contract is concluded when the consumer becomes bound to buy

something and the business becomes bound to supply it. The

conclusion of a contract is determined by the facts in each case.

It is in your interest to make clear to your consumers exactly when a

binding agreement will be reached. For example, you need to explain

if the contract becomes binding when the customer places the order

or only when you confirm that you have accepted their offer to buy.

If you are selling in a way that comes within the definition of an

information society service in the ECRs, you are also required to

explain the technical steps that the consumer has to follow to

conclude the contract.” [9]

Regulation 9(1)(a) of the Electronic Commerce Regulations 2002, and Article 10(1)(a) of the Electronic Commerce Directive 2000 [10] provide that where a contract is to be concluded by electronic means, the service provider shall prior to placing the order, notify the service recipient of the various technical steps to follow to conclude the contract. The court in Holwell Securities v Hughes [11] stated that any steps taken by the supplier/service provider to clarify “when” an offer is accepted and the contract formed as long as they are reasonable and the ordering process clearly conveys this intent to the consumer. According to Lord Wilberforce in Brinkibon Ltd v Stahag Stahl and Stahlwarenhandel GMBH [12]

“No universal rule can cover all such cases, they must be resolved by reference to the intention of the parties, by sound business practice and in some cases by a judgement where the risks should lie”.

In practice, many service providers provide in their websites, that the contract is not formed until the goods are shipped and payment has been received. A carefully designed website will thus contain indications, often by incorporating terms and conditions, which specify the moment of contract formation. [13] If a supplier wishes to avoid a contract being formed before the goods are sent out and payment has been taken, it should make it clear to the customer that the acknowledgement (whether by email or by an acknowledgement of order” web page) is merely an acknowledgement of order and that the offer will only be accepted by that later event. [14] In the instant case, some of Mr John’s goods were actually delivered. Based on that, it is right to infer that a binding contract was concluded between the parties.

As to where a contract is concluded, It has been suggested that the website address should not be relied on in determining “where” a contract is concluded. According to Proffessor Ian Lloyd [15] ,

“The Global Top level Domain name .com gives no indication where a business is located and even where the name uses a country code such as .de or .uk, there is no guarantee that the undertaking is established in that country. It is relatively common practice, based in part upon security concerns to keep web servers geographically separate from the physical undertaking. A website might, for example have an address in German(.de) (or in Hong Kong(.hk) as in the instant case). Its owner however might be a United Kingdom-registered company.” [16]

Article 6(5) of the United Nations Convention on the Use of Electronic Communications in International Contracts states that “the sole fact that a party makes use of a domain name or electronic mail address connected to a specific country does not create a presumption that its place of business is located in that country”. [17]

stated that any steps taken by the supplier/service provider to clarify when an offer is accepted and the contract formed as long as they are reasonable and the ordering process clearly conveys this intent to the consumer. According to Lord Wilberforce in Brinkibon Ltd v Stahag Stahl and Stahlwarenhandel GMBH [18] “No universal rule can cover all such cases, they must be resolved by reference to the intention of the parties, by sound business practice and in some cases by a judgement where the risks should lie”.

2.2 PRIOR INFORMATION

Regulation 7 of the Consumer Protection (Distance Selling) Regulations 2000, Regulation 6 of The Electronic Commerce (EC Directive) Regulations 2002, and Article 4 of The Distance Selling Directive [19] provide for information which must be provided to the consumer prior to the conclusion of any distance contract. Article 5(1)(c) of the Electronic Commerce Directive 2000 provide that the consumer shall be provided with “the details of the Service provider including his electronic mail address which allow him to be contacted rapidly and communicated with in a direct and effective manner”. These information must also be provided in a form and manner which is easily, directly and permanently accessible. [20] Where a service provider fails to provide these information, he may be liable in damages for breach of statutory duty at the suit of the recipient of a service. [21]

Article 7 of the Electronic Communications Convention reminds the parties of the need to comply with possible disclosure obligations that might exist under domestic law.

UNCITRAL considered at length various proposals that contemplated a duty for the parties to disclose their places of business, among other information. It was sensitive to possible gains in legal certainty, transparency and confidence in electronic commerce that might result from promoting good business standards, such as basic disclosure requirements. It expressed the opinion that obligations to disclose certain information would be more appropriately placed in international industry standards or guidelines, rather than in an international convention dealing with electronic contracting or domestic regulatory regimes governing the provision of online services, especially under consumer protection regulations. The inclusion of disclosure requirements in the Convention was regarded as particularly problematic since the Convention could not provide for the consequences that might flow from failure by a party to comply with them. On the one hand, rendering commercial contracts invalid or unenforceable for failure to comply with the Convention was said to be an undesirable and unreasonably intrusive solution. On the other hand, providing for other types of sanctions, such as tort liability or administrative sanctions, would have been clearly outside the scope of the Convention. [22] The consensus that eventually emerged was that it would be preferable to address the matter from a different angle, namely by a provision that recognized the possible existence of disclosure requirements under the substantive law governing the contract and reminded the parties of their obligations to comply with such requirements [23]

However, under most circumstances, the parties would have a business interest in disclosing their names and places of business, without needing to be required to do so by law. [24]

In the instant case, John has sent emails to which no response has been given and he has no telephone number with which he can contact the supplier of the goods. It seems that the supplier has provided the information required of him by the law including which is the email address, however the provision also requires that the information provided should makes it possible for rapid, direct and effective communication with the service provider. What happens in a situation where the email does not address the consumer complaint rapidly, directly and effectively like in the instant case. What amounts to “Rapid” “direct “ and “effective” is left for the courts to interpret. Some are of the opinion that Communication is to be regarded as effective if it permitted adequate information to be obtained within a period compatible with the needs or legitimate expectations of the recipient. [25] In Bundesverband der Verbraucherzetralen und Verbraucheverbande – Ver-braucherzetrale Bundesverband eV vs Deutsche internet versicherung AG (C-298/07), the question before the ECJ was essentially whether article 5(1)c must be interpreted as meaning that the service provider must provide recipients of the service before conclusion of the contract with them, in addition to its electronic mail address, other information giving access to an additional means of communication and if such an obligation exists, whether that information must necessarily include a telephone number or whether an online inquiry template is sufficient. The court held that information does not necessarily have to be a telephone number. It could be in the form of an electronic inquiry template through which the recipients of the service can contact the service provider via the internet, to whom the service provider replies by email except in situations where a recipient of the service, who after contacting the service provider electronically, finds himself without access to the electronic network, requests the latter to provide access to another non-electronic means of communication.

The rationale [26] for the ECJ’s decision is that while ensuring that information giving access to an electronic communications was to be supplied by the service provider to customers, it did not mean that it intended to dispense with other types of non-electronic communications which might be used in addition to it. Development of e-commerce does not seek to isolate e-commerce from the rest of the internal market. Secondly, is to guarantee the protection of consumer interest at all stages of the contract between the service provider and customers. [27] It is noteworthy that in the case before the ECJ, there was actually personal contact between the parties sometime during the contract, which may or may not have influenced the decision of the ECJ.

Applying the decision of the ECJ to the instant case, Mr John’s emails has not been answered, and if that may be interpreted to mean “ where the recipient of service finds himself without access to the electronic network,” he can then request the service provider to provide access to another non-electronic means of communication. Mr John can only request for that information in this case through email.(it is not stated whether a geographical address was provided.) Since his old emails were not answered, what is the probability that this one requesting for a telephone number will be answered? This brings Mr John back exactly where he started.

Telephones satisfy the requirement of rapid, direct and effective communication and can be interpreted by the courts to fall within the required information. Otherwise . It is suggested that specifically providing thatfor telephone numbers be included in the prior information will be a welcome development. In practice, some websites provide telephone numbers for their customers to address complaints. [28]

2.3 What happens in a situation where the payment has been made and received, as is mostly the case with online transactions and the goods were not shipped or received, is the contract formed at this stage? PERFORMANCE OF THE CONTRACT

Unless the parties agree otherwise, the supplier must perform the contract within 30 days from the day after the consumer sent his orderr to the supplier. Where the supplier is unable to perform the contract within this period, or such other period as the parties agree, he must inform the consumer and repay any sum paid as soon as possible within 30 days beginning with the day after the day on which the period for performance expired. . However the supplier and the consumer may agree on a revised date for delivery. [29]

A contract which is not performed within the 30 day period shall be treated as if the consumer never entered into it, but the consumer will still have remedies for non-performance and breach of contract. If a longer period than 30 days is required then this must be clearly stated in the supplier’s terms and conditions and in the prior information which he must give to the consumer before the conclusion of the contract, in a durable and accessible medium. The supplier may perform the contract by substitute goods or services of equivalent quality and price if the contract provided for this possibility and the supplier gave the consumer the prior information to that effect in the requireda durable medium. [30]

Mr John did not receive some of the goods he purchased, the others were delivered a month before the Child’s birthday. That goes to show without doubts that 30 days has elapsed since the order was made. It is further provided that where performance is not possible, the consumer must be informed of the situation and should be refunded the payment he made within 30 days. In this case the supplier neither informed the consumer of his inability to perform the contract nor returned the sums paid. He also did not provide the consumer with goods of equivalent quality and price (dependent on whether their contract provided for that in the prescribed way). It follows therefore that the supplier in this contract , is in violation of Article 7 of the Distance Selling Directive, and Regulation 19 of the Distance Selling Regulation.

Mr John is entitled to the refund of any money he has paid on the goods, and he can also maintain an action against the supplier for breach of contract and or non performance.

2.4 RIGHTS OF WITHDRAWAL AND CANCELLATION.

3 PROPOSALS AND CHANGES

3.1 GREEN PAPER ON THE REVIEW OF THE CONSUMER ACQUIS. [31]

The Commission of the European Communities launched the Review of the Consumer Acquis in 2004 with the objective to achieve its Better Regulation goals by simplifying and completing the existing regulatory framework. [32] The Review covers eight directives aimed at protecting consumers. [33] The main issues for the Review were identified as New market developments and Fragmentation of Rules. Most of the Directives that were part of the review are prescriptive rather than principle-based and no longer met fully, the requirements of today’s rapidly evolving markets. The cause of the fragmentation of Rules were minimum harmonisation, issues regulated inconsistently between the Directives, and the lack of confidence in cross-border purchases. Consumers were not sure that the same level of protection they enjoyed at home will apply when they buy cross-border. For example, the different cooling-off periods between member states. Consequently, the European Commission with the Green paper, called on all interested persons to express their views on the issues identified in the context of the Review of Consumer Acquis.

3.2 STAFF WORKING PAPER. [34]

This is a summary of the ideas, opinions and suggestions of Stakeholders: Member states, public authorities, European parliament, the European Economic and social committee as well as European and National Business or Consumer associations, academics, legal practitioners and others on the review of the Consumer acquis.

It is stated that “the overarching aim of the Review is to achieve a real consumer internal market striking the right balance between a high level of consumer protection and the competitiveness of enterprises, while ensuring the strict respect of the principle of subsidiarity”.

The highest contribution was by the business sector, followed by the Consumer organisations.

Amongs the issues raised, 62% of Respondents favoured full harmonisation targetted to the issues raising substantial barriers to trade for business and/ or deterring consumers from buying cross-border. [35]

80% of business associations, support full, targeted harmonisation of some key issues like, withdrawal rights or the definition of consumer/professional. They however stress that changes to the acquis should not lead to the creation of additional burdens on businesses and therefore the review should aim at simplification and be accompanied by a thorough impact assessment. [36] Majority of consumer associations support minimum harmonisation combined with the application of the law of the country of destination as laid down in Article 5 of the proposed Rome I Regulation on the law applicable to contractual obligations. Though some supported full harmonisation.

On failure to provide information, Majority were for one cooling off period as a uniform remedy for applicable contracts, while the others were for different remedies for breaching different groups of information requirement. However there were different opinions with regards to the appropriate length of the cooling-off period. Business stakeholders opted for a shorter period while consumer groups wanted a longer period.

Some of the other issues not treated within the review but which was mentioned by the stakeholders include, enforcement of consumer rights, ADR mechanisms and easy access of consumers to ADRs and Courts, Pre-contractual information requirements, Consumer education and After sales services.

3.3 COM (2008) 614 FINAL [37]

“…wherever you are in the EU or wherever you buy from it makes no difference: your essential rights are the same”. [38]

This proposal aims at revising the Council Directive 85/577/EEC to protect the consumer in respect of contracts negotiated away from business premises, Council Directive 93/13/EEC of on unfair terms in consumer contracts, Directive 97/7/EC of the European Parliament and of the Council on the protection of consumers in respect of distance contracts, and Directive 1999/44/EC of the European Parliament and of the Council on certain aspects of the sale of consumer goods and associated guarantees. These Directives lay down a number of contractual rights for consumers.

The Directives under review contain minimum harmonisation clauses meaning that Member States may maintain or adopt stricter consumer protection rules. Member States have made extensive use of this possibility and it has resulted into a fragmented regulatory framework across the Community. This proposal moves away from the minimum harmonisation approach followed in the four existing Directives to embrace a full harmonisation approach (i.e. Member States cannot maintain or adopt provisions diverging from those laid down in the Directive).

The objective of the proposal is to contribute to the better functioning of the B2C internal market by enhancing consumer confidence in the internal market and reducing business reluctance to trade cross-border. This overall objective should be attained by decreasing the fragmentation, tightening up the regulatory framework and providing consumers with a high common level of consumer protection and adequate information about their rights and how to exercise them.

The existing Directives have been reviewed so as to simplify and update the applicable rules, remove inconsistencies and close unwanted gaps in the rules. The review has shown that it is appropriate to replace the four Directives by a single Directive. The new Directive should lay down the standard rules for the common aspects, and move away from the minimum harmonisation approach.

The Directive provide for a high level of consumer protection and also states that traders may offer consumers contractual arrangements which go beyond the protection afforded by the Directive. Member States are to lay down penalties for infringements of the provisions of the Directive and must ensure that these are enforced. The penalties should be effective, proportionate and dissuasive.

Chapter 1 of the Directive deals with subject matter, definition and scope. Chapter 2 deals with Consumer Information. Chapter 3 deals with Consumer Information and Withdrawal Rights for distance and off-premises contracts. Chapter 4 deals with Other consumer rights specific to sales contracts, and Chapter 5 deals with Consumer Rights concerning contract terms and Chapter 6 deals with General provisions relating to Committee, Enforcement, Penalties etc.

Articles 5,7,9 and 11 provide for all the detailed information that must be provided by the supplier to the consumer prior to or before the conclusion of the contract and these, form an intergral part of the contract. Article 6 provide that the consequences of any breach of Article 5, shall be determined in accordance with the applicable national law and Member States shall provide in their national laws for effective contract law remedies for any breach of Article 5. The information requirements should take into account the technical constraints of certain media, such as the restrictions of the number of characters on certain mobile telephone screens or the time constraint on television sales spots. In this case the trader should comply with a minimum set of information requirements and refer the consumer to another source of information, for instance by providing a toll free telephone number or a hypertext link to a webpage of the trader where the relevant information is directly available and easily accessible. According to Mathias Nordmann, [39]

“EU legislations were framed and implemented with a PC-oriented mind set, while in principle, this legislation equally applies to the mobile environment made up of portable and thus small-scale end user devices, certain concepts do not appear to suit the particulars of these devices. In particular, the extensive and detailed information requirements designed for consumer protection in the field of e-commerce prove to be cumbersome, if not impossible to comply with in a mobile environment”.

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