Online shopping

Online shopping continues to grow. According to the Christmas message of the Interactive Media in Retail Group (IMRG), the UK has 25 million internet shoppers who this year will spend online an average of £4 million every hour, day and night, during the 10-week run-up to Christmas 2006. That is, £7bn in total: 40 per cent more than the £5bn spent online during the same period in 2005; and more than double the £3.3bn recorded in 2004.

The appeal of avoiding the traffic, congestion charges (for Londoners) and crowded stores means that more and more people will be doing their Christmas shopping online.

The Consumer Protection (Distance Selling) Regulations (DSRs) have been in force since October 2000 and give legal rights to consumers who buy by means of 'distance communication' (by phone, mail order, via the internet or digital TV). In some respects, these legal rights place online consumers in a much stronger legal position vis-à-vis the trader than they would be buying the same goods in store.

In September 2006, the Office of Fair Trading (OFT) issued guidance with the Department of Trade and Industry (DTI) on the DSRs for businesses.

Consumer rights

The right of cancellation

The downside to buying online is that you cannot actually see and feel the goods until you have paid for them and they have been delivered. This is why the main right consumers have under the DSRs is to cancel the contract for any reason and return the goods.

Timing issues

To cancel, the consumer must inform the trader within seven working days after the day on which they receive the goods (reg 11). However, if the trader fails to provide the consumer with all the written confirmatory information in a timely fashion as required by reg 8 of the DSRs, the cancellation period can be extended up to a maximum of three months and seven working days. It is, therefore, in the trader's interests to make sure that their online systems are designed to provide the required information in the way required by the DSRs.

Refunds

If the consumer cancels, the trader is under an obligation to refund the consumer as soon as possible after cancellation and in any case within 30 days at the latest (reg 14(3)).

Under the DSRs, the obligation to refund is not dependant on the goods being returned. The trader should state in its terms and conditions that consumers must return the goods if they cancel the contract. The trader can also state that, if the consumer fails to return the goods, the trader may charge the consumer the direct costs of recovering them (reg 14(5)).

The full price of the goods paid, including the cost of delivery, must be refunded. Where the trader provides additional services such as gift wrapping, the trader is not obliged to refund the gift wrapping charges so long as they are provided under a separate contract for supply of services that makes it clear that the cancellation right ends as soon as the goods are wrapped and despatched to the consumer.

Consumers' obligations

Duty to take reasonable care

Traders have to accept the returned goods and refund the consumer, even though the trader may not be able to re-sell the goods. The trader cannot insist on the consumer returning the goods as new or in their original packaging. He cannot refuse a refund even if the consumer breaches his duty to take reasonable care of the goods (reg 17(2) and (3)). The trader's only redress is a right of action against the consumer for breach of statutory duty (reg 17(10)). This is not particularly helpful as it is unlikely that a trader would refund the price and then pursue a claim against a consumer.

What is considered to be 'reasonable care' will depend on the facts of each case. For certain kinds of goods, it may be advisable for the trader to specify in its terms and conditions what it considers to be 'reasonable care'. As long as these requirements are not so burdensome as to restrict a consumer's reasonable opportunity to assess the goods, this should not conflict with the DSRs.

Traders are understandably concerned about reselling items that have been worn or which may raise issues about hygiene. With goods, such as underwear or swimwear, which may have hygiene seals, the trader could for example state in its terms and conditions that the consumer will lose the right to return the goods if they remove the seal.

Exceptions to right of cancellation

While the DSRs do not link cancellation rights with the trader's ability to resell items as new, there are some exceptions to the right to cancel.

One exception relates to goods made to the consumer's specifications or which are clearly personalised (reg 13(1)(c)). Many websites give the consumer the opportunity to configure goods to their requirements. With garments, for example, this may involve selecting style, colour and size. While this exception to the right of cancellation will apply to a genuinely bespoke tailored suit, it will not apply simply where there has been a selection based on standard options, such as colour or size.

Another exception to the right of cancellation is for 'goods'¦ which by reason of their nature cannot be returned'¦' (reg 13(1)(c)). While the DSRs do not define such goods, the OFT's view is that this exception only applies where returning the goods is a physical impossibility or where they cannot be restored in the same physical state as they were supplied, no matter how they are cared for. The OFT says that this exception may apply, for example, to items such as latex or nylon clothing which could become distorted once worn.

Christmas message

The DSRs are designed to protect the consumer and can be very burdensome for traders. To have a profitable Christmas online, traders need to make sure their terms and conditions redress the balance so far as possible.