EU Fully Harmonizes the Requirements for Information, Formalities, and Right of Withdrawal Within the Online Trade with Consumers
With the EU Directive 2011/83/EU of the European Parliament and of the Council of October 25, 2011, on consumer rights (Consumer Rights Directive [“CRD”]), the EU makes a further step towards EU-wide legal consumer protection standards for online traders. The EU fully harmonizes the legal requirements for information, formalities, and the right of withdrawal for the online trade with consumers (CRD, Art. 4). Full harmonization means that all EU Member States must implement these requirements to its full extent. Beforehand, the requirements were harmonized to a minimum standard only.1 The EU Member States were free to decide whether to implement further requirements or not. This led to an incoherency throughout the EU. Difficulties for online traders were caused because they had to deal with the legal standards of different EU Member States—depending on the EU Member States the traders were doing business in.
The CRD defangs these difficulties in stating EU-wide standards for information, formalities, and the right of withdrawal. The EU Member States are obliged to transpose the CRD into national law by December 13, 2013, at the latest. If a EU Member State fails to do so by June 13, 2014, the regulations of the CRD will be deemed national law of this EU Member State and have direct effect. In some EU Member States the transposition has already started. For example, in Germany, the transposition regarding the new requirements for information and formalities is completed, and the new law will be in force beginning August 1, 2012.
The new requirements apply to any contract concluded via the Internet between a trader and a consumer. However, certain types of contracts are excluded, such as contracts for gambling, financial services, immovable properties, travel, or supply of goods intended for current consumption (CRD, Art. 3).
The new pre-contractual information obligations refer to a catalogue of information that the trader must provide the consumer with before the contract is concluded. The information can be categorized in mandatory and other information (CRD, Art. 6). Mandatory information is obligatory and therefore must be provided in any event. Such information covers, for example, the main characteristics of the traded goods and services, the identity of the trader and his contact information, the total price and other costs, information on delivery and payment arrangements, and a reminder of the existence of a legal guarantee. The obligation to provide other, non-mandatory information depends upon its relevance to the particular contract. Such information is, for example, duration of contract or—in case of a trade with digital content—operating instructions for the use of the digital content.
Formal requirements refer to the manner of how the aforementioned information has to be provided. The information has to be clear and comprehensible (CRD, Art. 6(1)) and must be provided in a way appropriate to the means of Internet communication as well as in a plain and intelligible language (CRD, Art. 8(1)).
If the contract places the consumer under an obligation to pay, the trader is obliged to make the consumer aware in a clear and prominent manner and directly before the consumer places his order of the specific information, such as the main characteristics of the traded goods and services or the total price (CRD, Art. 8(2)). Furthermore, the trader must ensure that the consumer, when placing his order, explicitly acknowledges that the order implies an obligation to pay. If placing an order entails activating a button or a similar function, the button shall be labeled in an easily legible manner only with the words "order with obligation to pay" or a corresponding unambiguous formulation (so-called “button solution”, CRD, Art. 8(2)).
Further formal requirements refer to the information of delivery and payment restrictions (CRD, Art. 8(3)) as well as the provision of a confirmation regarding the conclusion of the contract (CRD, Art. 8(7)).
Requirements for the Right of Withdrawal
The right of withdrawal serves as a major consumer protection interest in allowing the consumer to test and inspect the goods that were ordered online. Although the right of withdrawal is not an invention of the CRD, the achievement of the CRD cannot be overrated. This is due to the fact that the CRD fully harmonizes requirements for the duration, beginning, and limitation of the withdrawal period as well as the exercise of the right for withdrawal (CRD, Art. 9-16). For example, the withdrawal period lasts 14 days and, in the case of service contracts, starts on the date of the conclusion, and in the case of sales contracts, on the date the consumer acquires physical possession of the goods (CRD, Art. 9(1)(2)(a)(b)). If the trader has not provided the consumer with the information on the right of withdrawal, the withdrawal period expires 12 months from the end of the initial withdrawal period (CRD, Art. 10).
In its Annex 1, the CRD provides an example of how proper information regarding the instructions of withdrawals and a proper withdrawal form might look like.
Relevance for U.S. Companies
The aforementioned new legal developments, as well as the already existing consumer protection requirements in the EU, affect US Internet traders under two crucial aspects.
Firstly, with respect to the law under which the contract is governed. In a consumer contract, the contract is governed by the law of the country where the consumer resides if the trader directs his activities to this country.2 Although the parties are free to choose the applicable law (EU Regulation 593/2008/EC [Rome I], Art. 6(2))—which might be helpful for other legal issues—such choice does not, however, have the result of depriving the consumer of the protection afforded to him by the consumer protection regulations such as the CRD (EU Regulation 593/2008/EC [Rome I], Art. 6(2)). Therefore, the CRD and the requirements set by each EU Member State in order to transpose its regulations into national law stay in effect in any event. Consequently, a US Internet trader has to comply with the requirements of each EU Member State to which its Web site is considered to be directed at.
Secondly, U.S. companies can be affected with regard to unfair competition law. For example, in Germany the breach of the aforementioned consumer protection requirements is considered an unfair competition act, which could lead to claims for cease and desist, disclosure, and reimbursement of damages by competitors or consumer protection organizations (Sections 3 and 4 No. 11 of The German Act Against Unfair Competition). If the Web site is considered to be directed at the German consumer, German courts have jurisdiction (see Judgment of the German Federal Court of Justice of March 30, 2006, No. I ZR 24/03). German unfair competition law is applicable if the collective interest of the German consumer is affected or the damage occurs in Germany.3
Therefore, the crucial question is whether the Web site of a U.S. Internet trader is directed at an EU Member State consumer or whether damages arising from a breach of the EU consumer protection requirements occur in an EU Member State. To answer these questions, all aspects of the case must be assessed. However, if a U.S. company only trades via one English Web site, there is risk that the EU requirements apply. This is because English is a common language in the EU, even in non-English speaking countries. The EU consumer is used to placing orders in English if ordering via the Internet. From the point of view of the EU consumer, the English Web site of a U.S. company that is trading worldwide or EU-wide could be understood to be directed at him if the U.S. Internet is not running specific Web sites for each (relevant) country.
1 Directive 97/7/EC, of the European Parliament and of the Council of 20 May 1997 on the Protection of Consumers in Respect of Distance Contracts, 1997 OJ (L 144) pp. 19-27.
2 Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the Law Applicable to Contractual Obligations, 2008 OJ (L 177) 6 (Rome I), Art. 6(1)(b).
3 Regulation (EC) No. 864/2007 of the European Parliament and of the Council of 11 July 2007 on the Law Applicable to Non-contractual Obligations, 2007 OJ (L 199) 40 (Rome II). Art. 6(1)(2).