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E-commercial breakdown

Written by Josh Russell on Wednesday, 07 November 2012. Posted in Commercial law, Legal

Thanks to many revisions and amendments, the consumer legislation relating to e-commerce is rather complex and fragmented. Fortunately, legal expert Nicola Broadhurst is on hand to help us piece it all together

E-commercial breakdown

In legal terms, e-commerce and distance selling laws are in their infancy and this means that they are developing all the time. It’s not always easy to be absolutely sure which regulations apply to you and which ones don’t, particularly as many businesses probably aren’t even aware that they are subject to e-commerce regulations. Nicola Broadhurst, partner at Stevens & Bolton puts it simply: “Most businesses do offer some form of e-commerce – they will sell their products or services online.” And the first step you need to take is to make sure you know who your customer is.

“Consumers and business customers are treated differently, so it’s important you get it right as to who you are dealing with,” Broadhurst says. “With business-to-business customers, you can get away with a lot more. A consumer you can’t.” Given the many revisions and remedies that have been applied to consumer-focused e-commerce regulations, all of the legislation has become increasingly fragmented. “A consumer is a natural person who is buying not for the purpose of a business,” Broadhurst explains. “They’re acting outside of a trade or a business.”

But where’s the problem? Surely most of us have enough experience of e-commerce either from our own consumer experiences or through our enterprise that we’re pretty familiar with the laws governing selling online? Perhaps not. There are many common mistakes that, because they are so often repeated, have almost become standard practice. The largest mistakes often involve failing to comply with the Consumer Protection (Distance Selling) Regulations 2000.

One major flaw that often comes up involves businesses terms and conditions. “Most terms and conditions will say at the end of it ‘we exclude all of our liability’, so ‘all of our indirect and inconsequential loss will exclude that to the extent permitted by law’,” Broadhurst states. Got that? Us neither. And this is the problem. “That is now commonly held as probably going to be unenforceable,” she says. “The consumer doesn’t know what that means – they don’t know what an indirect and inconsequential loss is.” A significant requirement that many businesses fail to take into account is that they are legally required to state exclusions like this in as plain terms as possible. “If you don’t,” continues Broadhurst, “it’s likely that if you ever tried to enforce it, it would be unenforceable for being an unfair contract term.”

Another requirement of these regulations that is slightly easier to understand is that if you’re selling long distance – either over the phone or online – the consumer must be given a cooling off period of at least seven working days in which to cancel their order, something to which the majority of businesses comply. However, it’s not all plain sailing, as Broadhurst explains: “The Office of Fair Trading (OFT) has picked up people for contravening the legislation because they’re saying things like, ‘We’ll only refund you if you return the goods in their original packaging, unopened’.” This clearly contravenes the customer’s rights to inspect their purchase.

Which is all very well. However, these days often the products involved in e-commerce transactions have no packaging – opened or otherwise – and no product to inspect. If you’re selling an ebook or an mp3, where is the line drawn? Surely with something so easily copied, you aren’t obligated to accept returns?

This is a contentious area, and one that is currently being looked at as part of wider legislative reforms. “The government is going through a consultation process to harmonise the fragmented legislation into one updated bill,” explains Broadhurst. “The purchase of digital content is treated slightly differently as it does not usually have a physical medium so it is hard to classify as a product.” As things currently stand, however, there is little consumer protection around digital purchases. She continues: “A consumer will be deemed to have accepted the product once it is downloaded – without any proof of a defect they will not be able to simply cancel the transaction and demand a refund.”

Understandably, many of these issues deal with rather knotty legal issues and therefore businesses may be forgiven for not entirely understanding their responsibilities. There are, however, far more fundamental mistakes being made. Something many enterprises may not appreciate is the basic information they are obligated to provide consumers with when selling services and products.

“You have to give your registered number and an address,” says Broadhurst. This is a standard requirement and yet it is something that can often trip businesses up. An even more widespread error is how enterprises present their contact details. “You are meant to give a contact number,” Broadhurst says. “It is considered an offence if you do not give a contact number and someone is unable to contact you directly.” Some people provide email addresses and, while this is considered better than nothing, many businesses fail to even get this right. It needs to be listed on the site as text or in a ‘mail to:’ hyperlink – a contact form isn’t a legally valid alternative.

It’s tempting to view these errors as rather trivial oversights but they can have huge ramifications. Just this month the OFT engaged in a campaign to highlight transgressions in the legislations – out of 156 of the nation’s biggest online retailers, the organisation notified 62 that their websites featured major failures to meet with distance selling regulations. While the campaign was simply aimed at encouraging retailers to tighten up their compliance in the run-up to Christmas, the businesses involved could have found themselves being slapped with strict punishments. “You need to be absolutely sure that you are complying with the legislation,” stresses Broadhurst. “If you don’t, you can be liable certainly to a fine. And in some cases you could also be liable to a criminal offence – particularly if you’re misleading a consumer about their rights.”

About the Author

Josh Russell

Josh Russell

As editor, Russell is the man in charge of properly apostrophising our publication and ensuring Oxford commas are mercilessly excised. Our digital doyen, he’s also a Photoshop Pro, a dab hand with InDesign and the man to go to if you need a four-hour soliloquy about the UK's best silicon startups.

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