The law behind : Shopping

The law behind : Shopping

Shopping is more than just an enjoyable way of spending an afternoon – it is an activity governed by sale of goods legislation, advertising codes and stringent product liability requirements. Lawyer 2B asked magic circle law firm Clifford Chance to explain consumers’ rights and protections

STORECARDS

“Get another 10 per cent off if you open an account today.” Ever been tempted? Ever thought that you might take out a storecard to get an additional discount on that red dress you want to buy? It would not cost you anything, as you fully intend to pay off the balance at the end of the month. And then, of course, you forget to pay on time. If this sounds familiar to you, then you are one of the people that the UK’s Competition Commission wants to protect.

The Competition Commission is currently conducting an inquiry under the Enterprise Act 2002 in order to assess whether there are any ‘features’ in the market for storecard credit in the UK that restrict or distort competition. In its provisional findings, the Competition Commission said the interest rate on storecards (typically 29 per cent APR) was too high due to the fact that consumers were generally more interested in the ‘retail benefits’ of the card than the interest rate. Remember that red dress? Did you ever ask yourself what interest rate you would be paying on that storecard? Unlikely.

Consumer research also shows that shoppers are not always rational. A change of colour in the card from blue to gold can make people spend up to 10 per cent more. Irrational? Perhaps. However, we all like the benefits that a storecard brings with it. Most of us also have access to other forms of credit, such as current account overdrafts and credit cards. In other words, we have choice. However, in order to exercise that choice we need information, and if that information is not available then we might make the wrong choice.

The Competition Commission has therefore proposed a provisional remedy which will force storecard providers to give more prominent publicity to the interest rate and charges associated with a particular storecard. It has also proposed provisionally that insurance products should not be included with a storecard product. The aim again is to safeguard consumer choice. The findings of the Competition Commission are provisional. However, if they are confirmed in the final ruling, then it is likely that storecard providers will have to give more information to consumers at the point of sale. But how well that is going to go down in the long checkout queue remains to be seen. Lets face it – you really just want the additional 10 per cent off that red dress.

Oliver Bretz, partner Clifford Chance


ONLINE SHOPPING

It is hard to imagine that around 10 years ago online shopping was virtually unknown. In 2004, UK consumers spent nearly 15bn online, but many say they are nervous about doing so due to uncertainties about who they are dealing with and their legal rights if the transaction goes wrong. The Electronic Commerce (EC Directive) Regulations 2002 address some of these concerns. They apply to ‘information society services’, a definition that includes online retailers, and set out essential information for consumers. This includes the name and address of the retailer, contact details, the particulars of its relevant supervisory authority and its VAT number. This information must be “easily, directly and permanently accessible”, and prices on websites must be stated “clearly and unambiguously” and must indicate whether they are inclusive of tax and delivery costs.

Before you order from the site, the retailer must tell you the different technical steps to follow; whether the contract will be filed by the retailer; whether it will be accessible; the means for identifying and correcting input errors prior to placing the order (so you only end up with one copy of James Blunt and not the 100 you accidentally ordered because your keyboard was misbehaving); and the languages offered for the conclusion of the contract. These requirements do not, however, apply to contracts concluded solely by an exchange of emails.

Retailers are also required to make their terms and conditions available in a form that allows them to be stored, and they must acknowledge receipt of orders without delay. If a retailer fails to comply with its obligations, the contract will be unenforceable against you.

So next time you are concerned about who you are buying from, look around the site to see if these requirements are fulfilled. If they are, you should have some comfort that the retailer is taking its legal obligations seriously and will perhaps be a more responsible seller than one who provides little or no information.

Susan Poffley, lawyer, Clifford Chance

ADVERTISING

If you have changed your mobile phone provider lately, or bought a new anti-cellulite product, or even a new shampoo, you probably made your choice after seeing the product advertised. But if your text bundle has already run out, your thighs are still lumpy and your hair is flat, you might wonder whether you can believe everything you are told.

The advertising and sales promotion codes published by the Committee of Advertising Practice operate to ensure that advertisers do not make claims about their products or services that they cannot fulfil. They also give consumers the right to complain to the Advertising Standards Authority (ASA) if they think they have been misled or have been offended by print or broadcast advertising.

The basic requirements of the codes are that advertising must be “legal, decent, honest and truthful”, but there are a number of other, more specific requirements depending on the type of advertisement in question, and there are also rules governing sales promotions. Cosmetics advertising has been in the spotlight recently after a number of adjudications cracking down on spurious or exaggerated claims about the efficacy of products. Claims by supermarkets, airlines and telecoms providers to be the best, cheapest or leading supplier are also frequently considered, particularly when the ad in question fails to mention important qualifications to the claim, such as extra charges or availability within a limited area. And new rules on the advertising of alcohol, which prohibit a link with seduction, sexual activity or sexual success, saw one ad rejected recently because the people in it were too good-looking.

Advertising regulation also aims to protect vulnerable members of society such as children, who may be distressed or harmed by ads, even if the ads are not directly targeted at them. Also, ‘copycat’ behaviour is a concern with ads that show dangerous activities. These may be banned or moved to after the 9pm watershed, as is the case with Pot Noodle’s ‘Slag of All Snacks’ series, which contains adult content.

The ASA offers advice on how to complain and publishes a weekly bulletin of complaints considered and/or resolved.

Susan Poffley, lawyer, Clifford Chance

PRODUCT LIABILITY

A question that might typically cross your mind when just about to make a purchase is: “Will I be able to change it if I don’t like it or it doesn’t work?” However, the question you should be asking yourself when buying some goods – perhaps a new MP3 player – is: “What if the product causes damage or is unsafe?” After all, it is not unknown for electrical products to catch fire or cause electric shocks.

Product liability and product safety law protects consumers by holding businesses (and potentially also their directors) accountable for ‘defective’ and/or ‘unsafe’ products. This protection is driven at a European level, although it is implemented in national law. You are protected in this country against a defective and/or unsafe product under the Consumer Protection Act 1987. Under the act, you are entitled to be compensated (regardless of fault) by the producer or importer of the defective MP3 player if you suffer injury or your other property is damaged. The act does not impose this liability on distributors or retailers of the defective MP3 player unless they refuse to give you information about the next link in the supply chain.

Criminal provisions intended to ensure product safety are set out in new regulations, which took effect from 1 October 2005. A failure to comply with these regulations constitutes a criminal offence punishable by a fine, or even imprisonment in extreme cases.

Retailers and distributors, as well as producers and importers, are responsible for ensuring that only safe products are put into shops and purchased by you. The regulations allow Trading Standards to order the compulsory recall of products, including from you as the consumer, if an unsafe product has not been recalled voluntarily. Likewise, retailers and distributors (as well as producers and importers) are under an obligation to notify Trading Standards if they discover that they have placed an unsafe product on the market.

With these safeguards in place, there is, therefore, no need to worry the next time you plug in.

Julian Acratopulo, lawyer, Clifford Chance

TRADE DESCRIPTION

The Trade Descriptions Act 1968 aims to protect consumers from false descriptions of goods offered for sale, although it applies only to businesses and not to private transactions. Section 1 prohibits the application of a false trade description to goods and also covers the supply of goods to which a false description has already been applied. In this way, it applies to manufacturers and to retailers alike.

A trade description is any sort of indication of certain matters relating to goods, including the quantity of the goods in question, their method of manufacture, composition or performance, the results of tests carried out on them, their approval by any person, their place or date of manufacture, the person by whom they are manufactured and other history, including previous ownership or use. So the description “100 per cent pure new wool” applied to a garment that is in fact partly comprised of man-made fibres would be a breach of the act, as would a statement that a product was recommended by a professional body or other organisation when it was not, or that it was “made in the UK” when in fact it was made somewhere else.

A false trade description can be applied by means of markings on the goods themselves, markings on packaging, markings on anything in which the goods are placed, such as a display cabinet, and also by means of an oral statement.

The description must be false to a material degree, but the offences are strict liability offences, so it does not matter whether the manufacturer or seller intended to be dishonest.

Section 14 of the act applies to the making of statements about services, although a breach of that section is not a strict liability offence. Instead, the person making the statement must know it to be false, or must make it recklessly.

The act does not give you additional rights against a manufacturer, trader or service provider if you are dissatisfied with their goods or services, but the sanctions for breach of the act are fines or imprisonment, which are in themselves a significant deterrent to those who might be tempted to fib about what they are providing.

Susan Poffley, lawyer, Clifford Chance

‘I DON’T WANT IT ANY MORE’

Your rights in this situation depend on what, if anything, is wrong with the goods. The Sale of Goods Act 1979 implies certain terms into contracts as to fitness for purpose and satisfactory quality. If, therefore, you ask for a product that can perform a particular task and are sold something that will not do it, the seller could be in breach of the fitness for purpose term. If you buy a pair of shoes that fall apart on the first wearing, they are arguably not of satisfactory quality, which is defined in the act as the “standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances”.

The term as to quality does not extend to any matter that is specifically drawn to your attention before you buy them, nor is it part of the contract where you examine the goods before purchase and the defect ought to have been revealed in that examination. It does, however, extend to sale goods (once again to the extent that defects are not pointed out to you, for example by the inclusion of the product in a ‘seconds’ display). In these circumstances, and depending on what is wrong with the goods and how long you have had them, your money may be refunded, or the goods may be repaired or replaced. If they are covered by a guarantee, you may have additional rights.

If, on the other hand, you simply change your mind about the colour or fit of a garment, or discover that the sofa you have purchased is too big for your living room, you will not have these rights. Many retailers do, however, offer to exchange or refund saleable items returned within a particular time, and you should check their terms and conditions for details. Sale goods may be excluded from the seller’s usual exchange or refund practice, so it is worth checking this before you decide not to bother to try something on in the January sales.

Susan Poffley, lawyer, Clifford Chance

BRAND PROTECTION

In a supermarket environment, consumers are faced with thousands of different products. To navigate their way through this quickly and come out with their basket of purchases without feeling mentally exhausted by the choices that face them, they look for clues and cues. Brands are a powerful way to help consumers make choices. They recall past good experience of that product, and/or interest stimulated by advertising messages. They draw the consumer past a host of other products towards the shelf where they will find the well-known name or pack.

Manufacturers of fast-moving consumer goods invest in developing strong brands and support them with advertising. To reinforce this with legal protection, they register as trademarks or designs many aspects of their products and packs, including names, unusual shapes, logos and even colours. The purpose of this is to ensure that their branding elements remain distinctive to their products and that they can prevent copying by producers of ‘me too’ products. Prominent examples of elements of branded goods that have been registered as trademarks include the Kellogg’s name and logo, the shape of the classic Coca-Cola bottle, the shade of purple used on Cadbury’s chocolate and of the turquoise used on Heinz baked beans.

Supermarkets’ own-label goods have achieved a significant share of the shelf space in many supermarkets. Some own-label ranges operate as brands in their own right and are designed carefully to give messages such as ‘high quality’ or ‘good for you’. Others are essentially positioned as (often lower cost) alternatives to branded equivalent products. Test this yourself. Next time you shop in a supermarket, look out for the supermarket’s own-label products which use elements of the brand leaders’ designs. What message do you think they are trying to convey to the busy consumer, who is bombarded by choice, when they do that? Do you think someone might pick up the own-label product by mistake? If so, the branded goods manufacturer may already be considering whether it has a basis for suing for trademark infringement or ‘passing off’, as United Biscuits, the makers of the Penguin brand of biscuits, did over Asda’s Puffin biscuits.

Vanessa Marsland, partner, Clifford Chance