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E-tailers beware: OFT web sweep is imminent
Opinion: a legal eye over Distance Selling Regulations

By Paula Barrett

Published: Friday 14 December 2007

Do your ecommerce operations comply with the law? The Office of Fair Trading (OFT) and the Local Authority Trading Standards Services are planning a sweep of the UK's top 600 retail websites to ensure they meet key legislation. Paula Barrett warns particular attention will be paid to distance selling rules.

The Distance Selling Regulations deal with business-to-consumer sales which are not made face to face - therefore they apply to internet sales. They set out a number of consumer rights, including seven-day post-purchase cancellation rights, a right to a refund and a raft of information that must be provided pre- and post-sale.

Despite estimates that £14bn will be spent by consumers online this Christmas, recent research by the OFT indicates that very few online shoppers are aware of additional legal protection provided by the regulations and that many websites may be failing to respect consumers' rights.

Year on year, the number of people choosing to do their Christmas shopping online is increasing, so the timing of this review is clearly no coincidence. The regulations have been with us since 2000 but interpretation and application of the rules have not been consistent.

Many e-tailers have picked up on the right to cancel in their terms. But there are still many who impose other conditions that are not compliant - in particular in relation to the return of goods, which is a significant operational pressure around Christmas.

Apart from attracting unwanted OFT or trading standards attention, it is important e-tailers get this right if they want to enforce their terms and conditions. Any term in a distance selling contract that is inconsistent with the protection of the consumer as set out in the regulations is automatically void and therefore can't be relied on.

Some key mistakes include:

• Unless the parties agree otherwise, the supplier must perform the contract within 30 days from the day after the consumer sent an order to the supplier. 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. It is very important therefore to be clear about delivery and performance commitments in the contract. On the cancellation of a contract, any sum paid by the consumer must be repaid as soon as possible and, in any case, within 30 days of cancellation. The full price paid for the goods and the cost of delivery must be refunded.

• A supplier can't oblige the consumer to pay for the cost of return if the goods are faulty. However, a supplier may (except where goods are returned because they are faulty) impose a reasonable charge to cover postage costs incurred. But this charge must be clear in the contract and the consumer has to be notified of this in advance as part of the written confirmation relating to the right to cancel.

• If the goods arrive before the contract has been cancelled, the consumer has a duty to restore them to the supplier and, in the meanwhile, to retain possession of the goods and take reasonable care of them. Many e-tailers however seek to impose higher duties on return and care of the goods.

• The supplier cannot delay making a refund even if the consumer has failed to return the goods. Similarly, if a consumer returns damaged goods he or she does not necessarily lose the right to cancel. The supplier can only rely on the right of action against the consumer for breaching the statutory duty to take reasonable care of the goods.

And it's not just these regulations which apply. The OFT also mentions the E-Commerce Regulations 2002, under which e-tailers must provide shoppers with certain information, including the identity, location and contact details, geographical addresses and clear pricing statements. It will also be interesting to see whether the OFT also looks at compliance with other consumer-protection regulations at the same time - particularly limits on liability.

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For some in the retail sector the OFT's swoop may well be unwelcome scrutiny at a very busy time of year. Although the OFT says the aim of the exercise is to "publish an [anonymous]…assessment of the web sweep results after the New Year", any bad PR associated with an adverse finding would be particularly untimely if released pre-Christmas.

In reality this may well be a wake-up call for the sector as a whole, particularly if some of the larger e-tailers are found to be deficient. Many of the smaller e-tailers rely on larger brands to lead the way and assume they have got it right, even copying terms and conditions from the bigger sites. That can all too often be a false assumption.

Guidance has been issued but there has been little visible enforcement of the Distance Selling Regulations and this has led to complacency by some e-tailers about the legal compliance issues of e-tailing. Looks like the OFT is minded to do something about that.

Paula Barrett is head of the data protection group at international law firm Eversheds.