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10 Online Retail Implications of New EU Consumer Rights Directive
The new EU Directive on Consumer Rights (2011/83/EU), effective since 13th June 2014, has important implications for every business that sells online, writes John Whelan, Export Sector Specialist at AIB.
Directive 2011/83/EU includes changes aimed at increasing price transparency, a ban on pre-ticked boxes on websites, improved refund rights for consumers and clearer information on who pays for returning goods. It is intended that these common rules for businesses will make it easier for them to trade all over Europe.
Europe’s online shopping market grew by 16% to €363.1 billion in 2013 and is expected to grow to €425.5 billion this year, as reported by the trade association Ecommerce Europe in June 2014. The figures include Russia and other non-European Union nations. However, cross-border sales make up only 12% of the total, something the EU believe will be advanced rapidly by the new EU legislation to bolster consumer protection when buying online. The European Commission wants to increase cross-border sales to 20% by 2020 as part of its Digital Agenda targets.
It is widely recognised that small and medium sized businesses that adopt internet trading grow twice as fast, and export twice as much, when compared to non-adapting businesses.
Online retailing in Europe grew by a weighted average of 21% in 2013, with mobile technology driving some of the momentum. To take advantage of this growing trend in the Action Plan 2014 for Jobs, the Government is seeking to support an additional 2,000 micro and small enterprises to develop their businesses by trading online.
While the new EU Consumer Rights strengthen consumers' rights wherever and whenever they shop in Europe – online or on the high street – it does bring a range of new requirements that businesses selling online need to be aware of. In most instances this will mean that businesses will have to upgrade their websites to comply with the Directive.
1) Elimination of hidden charges and costs on the Internet
Buyers must be protected against "cost traps" on the Internet. This happens when fraudsters try to trick people into paying for “free” services, such as horoscopes or recipes. From now on, consumers must explicitly confirm that they understand they have to pay a price.
2) Increased price transparency
Businesses selling online, as well as in-store, have to disclose the total cost of the product or service, as well as any extra fees. Online shoppers will not have to pay charges or other costs if they were not properly informed before they place an order.
3) Banning pre-ticked boxes on websites
When shopping online – e.g. buying a plane ticket – you may be offered additional options during the purchase process, such as travel insurance or car rental. These additional services may be offered through so-called “pre-ticked” boxes. Consumers are currently often forced to un-tick those boxes if they do not want these extra services. With the new Directive, pre-ticked boxes will be banned across the European Union.
4) 14 Days to change your mind on a purchase
The period under which consumers can withdraw from a sales contract is extended to 14 calendar days (compared to the seven days legally prescribed by EU law prior to the new Directive). This means that consumers can return the goods for whatever reason if they change their minds.
- When a seller hasn’t clearly informed the customer about the withdrawal right, the return period will be extended to a year.
- Consumers will also be protected and enjoy a right of withdrawal for solicited visits, such as when a trader called beforehand and pressed the consumer to agree to a visit. In addition, a distinction no longer needs to be made between solicited and unsolicited visits; circumvention of the rules will thus be prevented.
- The right of withdrawal is extended to online auctions, such as eBay – though goods bought in auctions can only be returned when bought from a professional seller.
- The withdrawal period will start from the moment the consumer receives the goods, rather than at the time of conclusion of the contract, which is currently the case. The rules will apply to internet, phone and mail order sales, as well as to sales outside shops, e.g on the consumer's doorstep, in the street, at a Tupperware party or during an excursion organised by the trader.
5) Better refund rights
Businesses must refund consumers for the product within 14 days of the withdrawal. This includes the costs of delivery. In general, the trader will bear the risk for any damage to goods during transportation, until the consumer takes possession of the goods.
6) Introduction of an EU-wide model withdrawal form
Consumers must be provided with a model withdrawal form, which they can (but are not obliged to) use if they change their mind and wish to withdraw from a contract concluded at a distance or at the doorstep. This will make it easier and faster to withdraw, wherever you have concluded a contract in the EU.
7) Eliminating surcharges for the use of credit cards and hotlines
Businesses will not be able to charge consumers more for paying by credit card (or other means of payment) than what it actually costs the trader to offer such means of payment. Traders who operate telephone hotlines allowing the consumer to contact them in relation to the contract will not be able to charge more than the basic telephone rate for the telephone calls.
8) Clearer information on who pays for returning goods
If a business wants the consumer to bear the cost of returning goods after they change their mind, it has to clearly inform consumers about that beforehand. Otherwise the business has to pay for the return. Traders must clearly give at least an estimate of the maximum costs of returning bulky goods bought by internet or mail order – such as a sofa – before the purchase, so consumers can make an informed choice before deciding from whom to buy.
9) Better consumer protection in relation to digital products
Information on digital content will also have to be clearer, including details on its compatibility with hardware and software and the application of any technical protection measures, e.g. limiting the right for the consumers to make copies of the content.
Consumers will have a right to withdraw from purchases of digital content, such as music or video downloads, but only up until the moment the actual downloading process begins.
10) Common rules for businesses will make it easier for them to trade all over Europe.
The Directive also means simpler, more predictable rules for businesses, which will now have more incentives to expand their business across borders, with the benefit of:
- A single set of core rules for distance contracts (sales by phone, post or internet) and off-premises contracts (sales away from a company’s premises, such as in the street or the doorstep) in the European Union, creating a level playing field and reducing transaction costs for cross-border traders, especially for sales by internet.
- Standard forms will make life easier for businesses e.g. a form to comply with the information requirements on the right of withdrawal.
If you require finance to expand into new markets, talk to AIB today.
AIB’s Outlook: Exports report – in association with Bord Bia and the Irish Exporters Association (IEA) – provides detailed research, analysis and commentary, on a multi-sectoral basis, of the SMEs that are currently exporting goods or services from Ireland. An important part of this report is the specially commissioned detailed research on exporting SMEs, which has been carried out independently by Ipsos MRBI on behalf of AIB.
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