The Impact of the New Consumer Contracts Regulations

Background

If you sell goods, services or digital content to consumers, the recently published Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134) (the “Regulations”) are likely to affect the way you carry out your business.

The Regulations will apply to consumer contracts concluded on or after 13 June 2014, revoking the current ‘distance selling’ and ‘doorstep selling’ regulations.

Various categories of goods and services, including contracts dealing with gambling and package holidays, are excluded from the scope of the Regulations. Other categories, such as prescription items and passenger transport are partially exempt.  Otherwise, the Regulations will apply to and distinguish between “On-premises contracts” (concluded at the seller’s business premises e.g. in a shop), “Off-premises contracts” (concluded away from the seller’s business premises where both parties are present e.g. when visiting homes), and “Distance contracts” (concluded where the parties are not physically together e.g. online) as outlined below.

Information

Sellers will be required to bring certain “pre-contract information”, such as delivery charges and the seller’s complaints policy, to a consumer’s attention before a contract is entered into. This obligation will be more onerous for off-premises and distance contracts, where the consumer must also be given a copy of the contract or confirmation in a “durable medium” allowing them to store and reproduce the information, such as paper or email, within a reasonable time and not later than the delivery of goods or commencement of services.

Order Process

In relation to distance contracts, it must be made clear to the consumer that an order confirmation will result in an obligation to pay.  For online sales, this will mean that any button the consumer clicks to show that they wish to enter into a contract must be labelled unambiguously to the effect of “order with an obligation to pay” or “pay now”; “continue” or “confirm” is unlikely to be sufficient.

Additional Payments

Consumers cannot be required to make payments in addition to the price agreed without “express consent”.  Pre-ticked boxes which bolt-on costs during the online order process, such as for an extended warranty, will be prohibited.  A pre-ticked box will still be allowed for free products and services, such as a newsletter.

Cancellation

For consumers entering into off-premises and distance contracts, their right to no-fault cancellation  (the “cooling-off period”) will be extended from seven to 14 calendar days from the date they received the goods or, for contracts for services or digital content, from the date the contract is concluded.  Cancelling the main contract will automatically terminate any supplemental agreements, such as insurance.

Under the Regulations, a seller can only start to provide services or digital content during the cooling-off period if a consumer makes an express request, and acknowledges that they will lose their right to cancel if the contract is fully performed, or once the supply of digital content has begun.

The Regulations include a model cancellation form which must be provided to consumers, and they also set out model instructions for cancellation, the insertion of which would ensure a contract complies with the cancellation provisions.

Failure to inform a consumer of their cancellation rights could result in the cooling-off period being extended by up to 12 months, during which time the consumer would not be obliged to pay for any services provided.

Refunds

Where a consumer elects to withdraw from the contract during the cooling-off period, they are entitled to be reimbursed for all payments including the costs of delivery.  The seller must also pay the costs of returning the goods unless otherwise specified in the contract.  Once goods have been returned, or proof of return provided, the seller will have 14 days (rather than 30) to reimburse the consumer.  Sellers are entitled to make a reduction for use beyond what is needed to check that goods are as the consumer expected.

Delivery

Where a contract is silent as to the time for delivery, the Regulations imply that delivery must occur without undue delay, and in any event within 30 days.  This is more stringent than the current requirement of delivery within a “reasonable time”.

Telephone Lines

Telephone helplines operated for use by consumers with contract queries must not be charged at more than basic rate.

Conclusion

All sellers dealing with consumers are likely to need to update their terms and conditions and ordering processes in order to implement the Regulations, and failure to do so by the 13 June 2014 deadline could result exposure to significant costs.

New rules for Online Behavioural Advertising

Bulletin on new OBA rules - click to read PDFSince spring last year, websites and advertisers have been getting to grips with the new law on obtaining consent for cookies.

One common use of cookies is for online behavioural advertising (OBA), and from 4 February 2013 websites and advertisers using OBA will have additional rules to comply with.

The Advertising Standards Authority (ASA) is taking over responsibility for ensuring that consumers are made aware of, and can exercise choice over, the collection and use of information for OBA. The ASA’s first step is the introduction of new rules on OBA which will come into force from early February.

I have prepared an article summarising the key elements of the OBA Rules which websites and advertisers should be aware of. To read this article in full please click here (PDF).

Apple v Google (v the rest): how important are “ecosystems”?

Apple iCloud

Image credit: Apple.

Interesting post on FT Alphaville about disagreements among analysts over Apple’s prospects for the final quarter of 2012 and first half of 2013. According to Citi, signs of increased pressure on Apple include:

  • Apple’s hardware suppliers reporting cuts in orders.
  • Cannibalisation of iPad 4 sales by the iPad Mini, with iPad Mini sales expected to outnumber those for the (more profitable) iPad 4 by at least two to one by Q2 2013.
  • Increased competition (and price-sensitivity) in the tablet market generally.
  • Growing customer preferences for the larger screen sizes offered by competitors such as Samsung.

Against that, Morgan Stanley predicts that iPhone 5 sales in the December quarter could exceed 50 million units, and argues that Samsung’s phone sales are mostly coming at the expense of other Android phone manufacturers.

But what I found particularly interesting from FT Alphaville’s post was Citi’s discussion on Apple’s “ecosystem”: the idea that Apple can lock in its customers by providing an integrated, Apple-only web of services and products that make it hard from people to switch to another manufacturer without losing content or functionality that they have come to value. Citi’s conclusion is that this isn’t currently valued by customers as much as Apple might hope:

In general consumers are indifferent with regard to having a common operating system across devices with 54% indicating that it is “Not Important.” Moreover, only 14% of respondents indicated that a common ecosystem was “Very Important.” Across iPad owners, the ecosystem is more important but only marginally so, with respondents that valued a common ecosystem up to 53% and 21% believing it is“Very Important.”

I suspect, though, that ecosystems are valued by those who are already integrated into one. If you own an Android phone and an iPad, the Apple/iTunes ecosystem probably doesn’t matter to you a great deal. But if you own an iPhone, iPad and Apple TV, and have bought dozens of movies or TV series on iTunes, then it probably matters a lot more to you that your next gadget fits into that world.

Conversely, I’m currently awaiting delivery of my first Android phone, to replace my iPhone – partly for the larger screen (to pick up on one of Citi’s other points), but mostly because I’ve found the iPhone to be playing less nicely than it used to with the Google ecosystem, which I’m more locked into than Apple/iTunes. That may not be a universal experience, but it’s far from unique.

Google Maps for iOS iconOn a wider scale, the Apple Maps debacle demonstrates the risks to a brand’s reputation when something goes wrong, not with the product itself, but with a valued part of the product’s ecosystem. Ten million iOS users downloaded the new Google Maps app in the first two days after its release last week – how many more have had their relationship with Apple’s ecosystem weakened, maybe even enough to tempt them to look elsewhere next time?

As I wrote last year, the battle between the “big four” consumer digital brands – Google, Apple, Facebook and Amazon – isn’t over mere hardware or individual services. It’s a battle between competing business models, built around competing ecosystems. While only a minority of customers may have noticed yet that this is happening, I expect that those four giants will continue to build their future plans around this trend.