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Current Consumer Issues
This page contains details of interesting local and national Consumer Protection issues. Please email the Editor if you have any comments or questions, or would like any particular issues featured.

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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

EU Commission takes countries to court over Sale of Goods legislation

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--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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New Sale and Supply of Goods Regulations 2002

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:

  1. 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)
  2. 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:

  1. 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:
  2. 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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DTI applies for winding up order on Holidays Direct

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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New OFT approach to consumer codes of practice

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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