Trading with Consumers? Key developments in relation to Alternative Dispute Resolution
A few months ago we posted Insights about significant reforms to the UK consumer legislation; ‘Consumer Rights Act 2015: Part 1 – what are the key changes for business and Part 2 – digital content. It seems that the ink is barely dry on the Consumer Rights Act 2015 and here we are writing about further legislative developments which will be highly relevant to businesses contracting with consumers.
When it comes to dealing with businesses, the general position is that consumers are faced with a power imbalance when trying to rectify an issue with goods or services provided to them. The value of goods or services provided on a one-off basis may be relatively low which means that raising an action in court will not, in most cases, be a viable option. Such complaints are even more difficult to resolve when they involve a transaction between a consumer and a business in different EU countries.
Two recent legislative developments attempt to address these issues. The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 (“the Regulations”) came into force on 1 October 2015 and implement two different pieces of EU legislation, both of which deal with dispute resolution between a trader and a consumer. More recently, the Regulations were further amended by the Alternative Dispute Resolution for Consumer Disputes (Amendment) Regulations 2015 and the Alternative Dispute Resolution for Consumer Disputes (Amendment) (No. 2) Regulations 2015. These include further obligations on online marketplaces to provide consumers with information about a new initiative called Online Dispute Resolution.
Obligations from 1 October 2015
The Regulations impose more stringent information obligations on businesses that are obliged to use an alternative dispute resolution (ADR) procedure under existing legislation, under contract or under trade association rules (such as the Financial Ombudsman Service which is mandatory for the sale of financial services). Where the business has an existing obligation to use ADR, the trader must identify the relevant ADR body on its website and in the terms and conditions provided to the consumer.
In addition to this, all businesses are obliged to provide certain information where a dispute with a consumer has escalated and the business’s internal complaint mechanism has been exhausted without a satisfactory outcome. At that point, the following information should be provided to the consumer on a durable medium:
- A statement that the business cannot settle the complaint with the consumer.
- Name and website details of an ADR body that can deal with the complaint.
- Whether the business is obliged to or is willing to engage in an ADR process.
This does not make the use of ADR mandatory, rather the aim is to ensure that ADR is available for disputes between consumers and businesses. UK businesses selling goods, services or digital content to consumers will have to ensure that they comply with the new requirements and will have to provide information about the ADR process.
New obligations from 15 February 2016
The European Commission is presently establishing a platform for Online Dispute Resolution (ODR). This platform will not resolve disputes but will rather channel disputes to a relevant ADR scheme in the relevant country. If, however, a business which is not obliged to use a particular approved ADR provider is not prepared to use an approved ADR provider the ODR platform cannot process the complaint any further. The platform will go live on 15 February 2016 and from that date businesses trading online will have to provide information to consumers about online dispute resolution. All UK businesses that sell goods or services online will be required to:
- Display a link to the ODR platform on their website in a place that is easy for customers to find.
- Provide an e-mail address on their website that can be used for customer complaints.
Businesses that are under an existing obligation to use ADR will, again, have to go the extra mile. In addition to the requirement to give details of the relevant ADR body on its website, and the two above obligations that apply to all online businesses selling goods and services, they will also have to:
- Provide a link to the ODR scheme in direct marketing e-mails that offer goods or services.
- Include details about the ODR platform in the terms and conditions issued to customers.
The Guidance issued by the Department of Business, Innovation and Skills emphasises that the ADR and ODR schemes should be used in addition to, and not instead of, the existing consumer complaint mechanisms used by businesses. The best way to resolve complaints will still undoubtedly be nipping them in the bud without the need to use external processes. That being said, businesses should consider implementing these changes as soon as possible since lack of information about alternative dispute resolution could lead to unresolved complaints, unhappy customers and, in the worst case scenario, enforcement action by Trading Standards.
MacRoberts assists businesses to comply with consumer legislation and assists businesses with ADR. For further information, please contact David Gourlay or Julie Hamilton.