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See small print for details – upcoming changes to the small print requirements

We are all familiar with the radio adverts at the end of which, a breathless actor speed-reads or sings the mandatory 'legal bits'. No matter how much effort is put into making it sound interesting or even catchy, it never fails to dampen the impact of the ad.

April 2014

Striking an appropriate balance between informing the consumer, complying with regulatory requirements and not detracting from the product or scaring the consumer off, is an ongoing battle, made all the more difficult by continually changing legal requirements.  So why do these requirements keep changing?  It's because the consumer environment has changed so dramatically in recent years.  We are now far more likely to transact across borders, buy online and do so from a space-limited smart phone screen.  This is so far removed from traditional ways of contracting that it's not surprising the legal framework is constantly playing catch-up.

EU flagsThe European Union has recognised the vital economic importance of easy online and cross-border transactions and is churning away to harmonise laws across Member States and for anyone transacting with EU citizens.  At the same time, the UK is trying to reform consumer law, currently spread across a multitude of statutes, into a single, fit-for-purpose instrument.  How successful these attempts will be and whether they will genuinely make things easier for the consumer or for businesses, remains to be seen.

Some of the recent and ongoing legal developments which are likely to affect the small print include:

The Consumer Rights Directive

The Consumer Rights Directive has to be implemented across the EU by 13 June 2014.  New rules will apply to most businesses selling to consumers in the EU, including to those selling from outside EU countries.  In the UK, the Directive is being implemented by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (Regulations) which will replace the Distance Selling Regulations.  The Regulations deal principally with pre-contractual information which businesses (unless they come within limited exceptions) need to supply to consumers and with cancellation rights.  Many of the elements are already familiar requirements under current law but others will mean changes and, in some cases, additions to the small print.

Among other changes: for online and other distance sales, the cooling off period will be 14 days (currently 7 in the UK); and refunds will have to be given within 14 days (rather than 30).  In terms of the small print, if not business practices, these changes are pretty straightforward but there are a few other requirements which are not so user friendly.  For example, standard online cancellation forms will have to be "made available" to consumers with cancellation rights before the contract is entered into.  The standard form is rather old fashioned and consumers are not required to use it in order to cancel contracts but it still has to be made available.  Depending on the way the contract is being concluded, this takes on varying degrees of complexity.  It seems likely that in website terms and conditions, it will be sufficient to include a link to the form.  That's not a huge burden.  However, where space is more constrained, it might be trickier to have to add that line in (see our article 'Small print and small screens' for more).  For a contract concluded by phone, it requires at least an additional paragraph in the pre-contractual conversation which does little to clarify or enhance the consumer experience.

laptop and bank cardAnother potentially onerous requirement is that online customers be clearly informed when they are about to enter into a payment obligation.  The legislation's somewhat unhelpful suggestion is that where the placing of the order involves clicking on a button or similar, the button must be labelled “in an easily legible manner only with the words ‘order with an obligation to pay’ or a corresponding unambiguous formulation indicating that placing the order entails an obligation to pay the trader”.  Failure to comply with these obligations will mean the customer is not bound.  You can practically hear the cries of horror from the web designers and marketing executives.  Fortunately, guidance from the Department for Business, Industry and Skills takes a more pragmatic approach and indicates that a more simple "pay now" button will do the job.

There has been a great deal of debate around the provisions which deal with cancellation rights in relation to the supply of digital content.  Supply during the cancellation period can only begin where the consumer has expressly consented to the supply and acknowledged that the right to cancel will be lost.  The question of how to obtain the consumer's consent and acknowledgment is a vexing one.  It would seem that in order to be valid, the consent and acknowledgment must be expressly collected and this involves, at the least, adding a few lines to the small print, potentially with a tick box.  The question of how to obtain the consent and acknowledgment becomes extremely problematic, however, where digital content, say an app, is supplied to the consumer's device before the consumer engages with any terms or conditions.  There is no easy way to supply all the small print without interfering with the user experience.  Market practice is not currently set up to comply with these requirements and it remains to be seen how adaptive it will prove.

Perhaps the most pointless addition is the new requirement for a trader selling goods to remind the consumer that they are under a legal duty to supply goods that are in conformity with the contract, to which the only appropriate response, even from the most clueless of consumers, is surely "duh!".

Consumer Rights Bill

The law governing consumer contracts in the UK is highly fragmented, spreading across more than twenty pieces of legislation. This makes it difficult for businesses to comply with their obligations and confusing for consumers to understand and enforce their rights. In many cases, different pieces of legislation overlap or conflict with each other and have failed to keep up with the market, particularly where there has been significant technological development.
The government has laid the draft Consumer Rights Bill (CRB) before Parliament to consolidate the law on consumer contracts for goods and services and introduce digital content as a new gavelcategory of contract with its own statutory rights and remedies. Part II of the CRB reforms the law in relation to unfair contract terms in consumer contracts and Part III covers enforcement of consumer protection and the introduction of private actions for breach of competition law. The CRB should vastly simplify and clarify the consumer protection legal framework. It is extremely relevant to all consumer facing organisations (subject to a few exceptions) and, of course, to all consumers. It should, however, be noted that the CRB is not necessarily in final form. There are a number of opportunities for amendments to be made both by the Commons and the Lords. It is also difficult to say with any degree of certainty how long it will take for the CRB to become law. Once it does though, anyone trading with consumers who is caught by the CRB will have to review their terms and conditions and business practices. This means it is well worth keeping a close eye on the CRB's progression to enactment.

European Common Sales Law

In October 2011, the European Commission presented a proposal for a Regulation establishing a Common European Sales Law (CESL) also known as the 28th Regime. The proposals arose from the Commission’s belief that the competing 27 contract regimes of EU member states were a barrier to cross-border trade, particularly to consumers. The plan is to produce an optional 28th (29th if you include Scottish law) contract regime for certain cross border b2c contracts and for certain b2b contracts where one of the parties is an SME.

The UK government has been very negative about the CESL, concluding that it contains a number of areas which do not provide clarity or legal certainty. It found the proposed Regulation:

  • too complex;
  • incomplete in parts;
  • unworkable for certain types of contract;
  • uncertain as to whether a contract is valid and as to its terms; and
  • unclear on its applicability, in particular how its provisions interact with other EU law.

The initial plan was to enact the Regulation by January 2013, however, the proposals have met with sustained opposition from a number of Member States, not just from the UK.  Ironically, after a prolonged period of silence on the subject, the European Parliament recently voted in favour of introducing the law.  The irony lies in the fact that the vote came a couple of weeks after the European Commission announced a review of the risks posed by conflicting laws in the online environment, particularly looking at the issues of trading with jurisdictions with less developed legal environments, and commented that it did not think a single mechanism would be a suitable way of addressing the challenges.  Of course, even if it does make it onto the statute books, the CESL will not be mandatory but it will be yet another set of small print which consumers and businesses may have to get used to dealing with.

Data protection reform

disc and padlockThe draft EU data protection Regulation was first published in January 2012.  Two years later, a revised draft has been approved by the European Parliament but negotiations between members of the Council are ongoing.   Data protection and privacy policies are an essential ingredient in small print.  Similarly to the consumer law framework, European data protection law is considered to be outdated and no longer fully fit for purpose given the explosion in collection and use of personal data in recent years.  One of the key changes likely to affect the small print is the requirement for consent to collection of personal data to be explicit.  Again, this is an area which needs to be closely monitored by those writing and using small print.

If you have any questions on this article please contact us.

Signing contract
Debbie Heywood

Debbie considers some of the legal changes likely to affect the content of small print in consumer contracts.

"Striking an appropriate balance between informing the consumer, complying with regulatory requirements and not detracting from the product or scaring the consumer off, is an ongoing battle made all the more difficult by continually changing legal requirements."