Current Consumer Issues
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EU Commission takes action over implementation of Sale of
Goods law
New Sale and Supply of Goods Regulations 2002
DTI applies for winding up order on Holidays Direct
New OFT approach to consumer codes of practice
Earlier
this month, on 14 July 2003 the Commission announced that
it was to take Belgium, France, Luxembourg and Spain to
the European Court of Justice (ECJ) over their failure to
fully implement the Guarantees Directive (1999/44/EC).
This
Directive, adopted in May 1999 (see the story below), sets
out certain minimum legal rights for consumers buying goods
in the EU. These include a right to return defective goods,
or have them repaired or replaced, up to two years after
delivery. Member States were obliged to implement the Directive
by 1 January 2002.
In
January 2003 the Commission sent "Reasoned Opinions" to
eight Member States that had still not notified it of the
measures taken under their national law to implement the
Directive. Four of these eight Member States have now fully
implemented the Directive, while Spain has notified the
Commission of measures that partly implement it. Belgium,
France and Luxembourg have taken no measures to implement
the Directive. A ECJ judgement against the Member States
will oblige them to take action or risk financial penalties.
Health
and Consumer Protection Commissioner David Byrne said: "The
rights set out in the Guarantees Directive are of fundamental
importance to shoppers and the Internal Market. If consumers
cannot be confident their rights will be protected they
are not going to shop across borders. The Directive was,
quite rightly, hailed as a major achievement when the Council
and Parliament adopted it in 1999. We are now more than
18 months past the deadline Member States signed up to for
implementation and the Commission still has no assurances
that the consumer rights guaranteed in the Directive are,
in fact, protected in these countries. The Commission is
determined to proceed with these infringement actions to
ensure none of the EU's consumers are short-changed."
As
discussed more fully below, the Directive lays down a common
set of consumer rights valid no matter where in the European
Union the goods are purchased. Central amongst these is
that if goods are defective, or do not conform with the
contract agreed at the time of purchase, consumers have
a right of redress against the seller for two years after
taking delivery of the goods. The consumer can request the
goods be repaired, delivery of new goods, a price reduction
on another purchase or a complete refund of their money.
For six months after the delivery the burden of proof is
on the seller not the consumer to prove that the goods sold
conformed with the contract of sale and were not defective.
The final seller who is responsible vis-à-vis the consumer,
can under circumstances determined by the Member States
hold the producer liable. Member States are allowed to have
rules under their national law obliging consumers who wish
to use their right of redress to inform the seller of any
defect or lack of conformity in the goods within two months
of them discovering it.
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These new Regulations, which transpose the Sale of Consumer Goods and
Associated Guarantees Directive (1999/44/EC) into UK legislation, will
come into force on 31 March 2003.
On the face of it they will be a valuable addition to UK consumer rights
giving new rights to replacement, repair, a reversed burden of proof,
and enforceable guarantees.
In essence the Directive provides a baseline of protection for consumers
across the EU - although in some states, such as the UK, existing consumer
protection legislation already largely exceeds that baseline
SALE OF GOODS ACT
Currently consumers are entitled to goods of satisfactory quality,
taking account of any description, the price and other relevant
circumstances. If an item has a fault that was present at the time of
sale, the consumer can seek redress once it is discovered.
However consumers cannot expect a legal remedy in respect of:
- fair wear and tear;
- misuse or accidental damage; or
- if they decide they no longer want the item.
Similarly, consumers cannot expect a legal remedy where goods have
faults that they knew about before the sale or that should have been
evident on reasonable inspection.
SSG REGULATIONS
The Directive however provides a hierarchy of remedies where goods are
sold with an inherent defect - repair or replacement, or partial or
full refund.
Consumers should also be entitled to reasonable redress wherever they
buy goods in the European Union.
In brief - Regulation 5 introduces a new Part 5A into the 1979 Sale of
Goods Act in order to give effect to the new rights for consumers which
are set out in Article 3 of the Directive.
Where goods fail to conform to the contract of sale at the time of
delivery, then under Part 5A the buyer firstly has the right to require
the seller to repair or replace the goods within a reasonable time and
without causing significant inconvenience to the buyer.
If repair or replacement is impossible or disproportionate, or if the
seller fails to repair or replace the goods within a reasonable time
and without significant inconvenience to the buyer, then the buyer may
require the seller to reduce the purchase price of the goods by an
appropriate amount, or rescind the contract.
In addition, Regulation 15 provides that where goods are sold or
otherwise supplied to a consumer with a consumer guarantee, the consumer
guarantee takes effect as a contractual obligation.
The Regulation sets out the requirements for the form and content of
consumer guarantees and gives powers to enforcement authorities to
apply for an injunction or (in Scotland) an interdict against the
guarantor or offeror in the event of non-compliance
Of course this does not mean that suppliers MUST offer a guarantee!
Remedies
If a product that was faulty at the time of sale is returned to the
retailer, the consumer is legally entitled to:
-
a full refund, if this is within a reasonable time of the sale
('reasonable time' is not defined in law but is often quite short)
- a reasonable amount of compensation for up to six years from the
date of sale (five years in Scotland).
nb - This does not mean all goods have to last six years!
It is the limit for making a civil claim and is not equivalent to a
guarantee.
These are long-established rights and they remain available to the
consumer after the Regulations come into force on 31 March 2003.
What is new is that under the Regulations, consumers can choose to
request instead:
-
a repair or replacement.
The retailer can decline either of these if he can show that they are
disproportionately costly in comparison with the alternative.
However, any remedy must also be completed without significant
inconvenience to the consumer. If neither repair nor replacement is
realistically possible, consumers can request instead:
- a partial or full refund, depending on what is reasonable in the
circumstances.
It may be the case that a full refund is not the reasonable option
because the consumer will have enjoyed some benefit from the goods
before the problem appeared.
This needs to be taken into account before a reasonable partial refund
can be assessed.
Consumers will be able to switch between certain remedies if they find
they are getting nowhere, however they would have to give a retailer a
reasonable time to honour a request before they tried to switch, and
they couldn't pursue two remedies at the same time.
Proving the fault
As now, the consumer needs to demonstrate the goods were faulty at
the time of sale.
If the consumer chooses to request an immediate refund or damages.
There is one exception - this is when a consumer returns goods in the
first six months from the date of the sale, and requests a repair
or replacement or, thereafter, a partial or full refund.
In that case, the consumer does not have to prove the goods were faulty
at the time of the sale. It is assumed that they were. If the retailer
does not agree, it is for him to prove that the goods were satisfactory
at the time of sale - this is called a reversed burden of proof.
For definition purposes "consumer" means any natural person who, in
the contracts covered by these Regulations, is acting for purposes
which are outside his trade, business or profession
TSnet comment:
Great! - at last these regulations are to be implemented after a long
delay. But are they much improvement?
Well we don't think so - sure consumers will be able to ask for a repair
or replacement - or even a full or partial refund...but wait a minute,
that's what happens now.
Even the reversed burden of proof will not be so straight forward - if
the retailer offers some basic proof that goods were not faulty at the
time of sale, then consumers will be back to square one.
In fairness though - these regulations are more about a level playing
field across europe. It would be much better if the government did
more in terms of redress mechanisms - especially in Scotland where
the small claims limit is still a paltry £750
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The
Secretary of State for Trade and Industry has presented
petitions
in the High Court to wind up in the public interest Incentive
Marketing Limited and Holidays Direct Travel Limited (both
trading as
"Holidays Direct Promotions and/or "Holidays Direct")
following
investigations by Companies Investigations Branch of the
DTI under
section 447 of the Companies Act 1985 (as amended).
On
the application of the Secretary of State the Court appointed
the
Official Receiver as provisional liquidator of both companies
pending
the hearing of the petitions on 24th October 2001 10.30am.
NOTES
1.
The registered office of Incentive Marketing Limited is
Rock
House, Market Square, Longnor, Buxton, Derbyshire SK17 0PG.
The
registered office of Holidays Direct Travel Limited is 200
Old
Christchurch Road, Bournemouth, Dorset BH1 IPD. The companies
trade
from Millbrook House, Millbrook Business Centre, Floats
Road,
Manchester M23 9YJ and 59 Wilmslow Road, Handforth, Wilmslow,
Cheshire, SK9 2EN.
2.
The petitions were presented under Section 124A of the Insolvency
Act 1986.
3.
All public enquiries concerning the company should be made
to:
THE
OFFICIAL RECEIVER
Public Interest Unit
21 Bloomsbury Street
London WC1B 3SS
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The
Director General of Fair Trading has a specific duty, under
Section 124(3) of the Fair Trading Act 1973, to encourage
trade and
professional associations to prepare, and disseminate to
their
members, codes of practice for guidance in safeguarding
and promoting
the interests of consumers in the United Kingdom.
Industry
Codes of Practice however have been notoriously ineffective
in safeguarding consumer interests, especially in certain
trade
sectors.
This consultation paper therefore announces a new approach
by the
Office of Fair Trading to voluntary codes of practice governing
business dealings with consumers. It explains in brief the
existing
position and the reasons for change, sets out the new approach,
and
seeks views on the criteria to be used and a preliminary
list of
priority sectors for the new approval regime.
The
OFT are to adopt a far more rigorous approach to approving
codes
of practice. Effective compliance and dispute resolution
being
important elements.
There will be two stages to the changes - Firstly, as at
current,
the OFT will continue to encourage code of practice development
using
its existing powers.
Secondly, when new legislation comes into force, a new 'Better
trader'
logo will be added as a 'stamp of approval'.
To
keep the codes under surveillance, industry sectors will
be checked
using compliance audits, evidence of effective dispute resolution,
complaint handling procedures, and mystery shopping exercises.
Priority
areas for the scheme include used cars, car repairs/
servicing, travel, estate agents, credit, direct marketing,
and funerals.
Trade
associations which currently sponsor schemes will not be
able to claim OFT support after december 2001 unless they
can show
that their code meets the new criteria.
Hopefully
these new proposals will actually make a difference to the
Consumer at the end of the day. Codes need to be backed
up with some
sort of powerful deterrent in order to work across a whole
industry
sector, and with rogue traders simply opting out of Codes
of Practice
it remains to be seen how effective these new proposals
will be in
'practice'
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