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Commission Introduces Proposals for Modernised Contract Rules on Online Sales Across The EU

The European Commission has presented two proposals designed to protect consumers shopping online across the EU and to help businesses expand their online sales. As Hong Kong traders may be involved with different types of distance selling to EU consumers, these proposals, presented by the Commission on 9 December 2015 and which are now making their way through the EU’s legislative procedure, will prove to be of high relevance.

Although e-commerce is growing, it is believed to still be far from reaching its full potential, with 37% of EU retailers selling online in their own country, as opposed to only 12% of them offering online services to consumers in other Member States. The same applies to consumers’ purchasing behaviour, with 44% purchasing online from their own country, as opposed to a mere 15% of consumers purchasing online from another EU country.

The hurdles to online sales mainly relate to legal fragmentation in consumer contract law, high costs for businesses (especially for SMEs), and low consumer trust when buying online from abroad. Only 38% of EU consumers said they were confident about buying online from another EU country.

Consumers’ concerns usually relate to the non-delivery of a product or the delivery of a wrong or damaged product, as well as trouble incurred in repairing and replacing a faulty product.

The Commission has therefore adopted two proposals which aim to address the main obstacles to cross-border e-commerce in the EU by harmonising the rules governing two aspects of the digital economy, namely:

  • Online and other distance sales of goods (Proposal for a Directive on certain aspects concerning contracts for the online and other distance sale of goods); and
  • The supply of digital content (Proposal for a Directive on certain aspects concerning contracts for the supply of digital content).

The proposed Directives are the first legislative proposals to be presented as part of the Digital Market Strategy, adopted by the Commission on 6 May 2015, with 16 initiatives to be presented by the end of 2016. They follow the 2015 edition of the Commission’s annual Consumer Conditions Scoreboard published on 21 September 2015, which focused on the Digital Single Market and consumer experience in cross-border e-commerce.

According to the European Commission, the proposals will give consumers more rights, enabling them to enjoy products and services purchased online from Member States other than their own. It also highlighted the benefits accruing to businesses, which will be able to ‘grow across borders’ at lower costs, under a common set of EU laws instead of a ‘patchwork of national laws’.

The introduction of the new laws is expected to enable tens of thousands of businesses to start selling to consumers in various Member States, with the total number of consumers buying online from Member States other than their own expected to reach almost 70 million. This will, in turn, increase competition and thus contribute to economic growth and consumption due to lower consumer prices.

The two proposals introduce a number of significant legal improvements. The main features of the proposed Directive on the distance and other online sale of goods, which may be of particular interest to Hong Kong traders, are as follows:

Reversal of burden of proof for two years: Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees, which applies to all sales of consumer goods, currently provides for a two-year warranty period whereby, for the initial period of six months, a consumer asking for a remedy for a defective product does not have to prove that the defect existed at the time of delivery. The proposed Directive will extend the time period during which the seller has this burden of proof to two years for online and other distance sales of goods. Accordingly, for those agreements, the burden of proof will rest with the seller during the entire two-year warranty period.

No notification duty: Consumers will still retain their rights even if they do not inform the seller of a defect within a certain period of time, as is currently required in some EU Member States.

Minor defects: If the seller is unable or fails to repair or replace a defective product, consumers will have the right to terminate the contract and to be reimbursed. This will be possible even in the case of minor defects, which currently is not the case.

Second hand goods: For second hand goods, consumers will be able to exercise their rights within a two-year period, in the same way as for new goods, as opposed to the one-year period that currently applies in some EU Member States.

With the proposed Directives, consumers will benefit from clear and specific rules for digital content which will allow them to obtain a price reduction or terminate the contract and to be fully reimbursed for a faulty good or service.

Additionally, it is hoped that the future laws will heighten legal certainty leading to a business-friendly environment, by virtue of the fact that businesses will no longer need to adapt to local contract law rules in the Member States they sell to, replacing this legal fragmentation with one set of key contract law rules. According to the available data, businesses currently have to spend €9,000 to adapt to the national contract law of each Member State they wish to sell to. The new EU-wide rules will help businesses, including those hailing from Hong Kong, save up to €243,000 when selling to all 28 Member States.

Please click on the following link for: the Proposal for a Directive on certain aspects concerning contracts for the online and other distance sale of goods.

Please click on the following link for: the Proposal for a Directive on certain aspects concerning contracts for the supply of digital content.

Content provided by Picture: HKTDC Research
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