Communication COM(2006) 514 final on the implementation of the Distance Selling Directive 1997/7/EC

EMOTA’s reply to the questions for public consultation

I.  ABOUT THE DISTANCE SELLING SECTOR

In the last decades, the distance selling sector has evolved from a purely mail driven business (i.e., mail order) to a multi-channel sector encompassing traditional as well as new on-line and interactive media in their communications with consumers (catalogues, mailings and other printed media, telephone, Internet, interactive television, SMS…). The products and services offered by distance selling companies range from textiles, clothing, furniture, books, CDs and electrical appliances to wines, music downloads, financial services or travel bookings, events tickets etc.
The integration of new on-line communication techniques by distance selling companies during the last years has helped the sector to grow and stimulated the emergence of new sectors such as distance selling of food items, airline and railway tickets. In recent years, sales over the Internet have increased rapidly, multiplying by five in some countries since 2000. 
In 2005, online sales accounted for more than 45% of the €76.6 billion of total distance sales. Small companies are also discovering the possibilities of the new-online media and of platforms such as eBay, which offer them the possibility to expand their business. The so-called mobile commerce (m-commerce) is also slowly but steadily emerging.
The penetration of distance selling varies from country to country. In Western European countries this is due to a combination of factors such as the level of performance of postal services, the availability of retail outlets, as well as varying levels of consumer interest or the legal environment. In most Central and Eastern European countries the distance selling sector is less developed. Nevertheless, because of the developing availability of access to Internet, the relatively good performance of postal services and the anticipated increase in income levels, we expect sales to rapidly pick up in the next few years. Many distance selling companies are already active in the ten new Member States and are expanding to other countries such as Croatia, Romania, Turkey or Russia.

II.   EMOTA’s REPLY TO THE QUESTIONS FOR PUBLIC CONSULTATION

Article 2 – Definitions

1. Are the current definitions of “consumer” and “supplier” adequate for the purposes of the field regulated by Directive 97/7/EC? (this issue will also be considered in the broader consumer acquis review work)

EMOTA believes that the current definition for consumer is adequate for today’s distance selling activities. It must be clear that self-employed small and medium sized companies are excluded from its scope. Nevertheless, we also feel that it is important to have an EU-wide definition of the average consumer, which does not allow for varying interpretations. The wording provided for in recital 18 of the Unfair Commercial Practices Directive, 2005/29/EC may serve as a basis (“...who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors”).
As for the definition of “supplier”, we suggest, in the interest of clarity, to replace “natural or legal person” by “professional”. Indeed, we support the view of some Member States which do not differentiate big from small and medium sized companies, as when signing a contract, they both act within the same professional environment, the market place.

2. Is the current definition of a “distance contract” clear enough? In particular, is the term “organised distance sales or service provision scheme” clear or should consumer protection be extended to all distance contracts regardless of whether the supplier usually trades at a distance?

We are of the opinion that the current definition is still adequate for the distance selling sector as it covers new technologies and market types.

3. Is the current definition of “means of distance communication” clear enough?

Yes, we think that this definition is clear enough.

4. Is there any added value to “operator of means of distance communication” being defined?

The name is self-explanatory. There is no added value in further defining “operator of means of distance communication”.

5. Are definitions unclear in relation to any other concept, or are there other concepts relating to distance selling in need of definition?

There is a need to provide definitions for “durable medium” as well as for “online auctions”, Please refer to the replies provided to Q6, Q9 and Q12. 


Article 3 – Exemptions

6. Do the current exemptions need to be revised, expanded or repealed in the light of new market developments (e.g. downloading of music or other services) and/or technologies (e.g. emergence of m-commerce) or interpretation problems (e.g. European Court of Justice ruling on the Easycar case in which it was decided that car hire amounts to a “transport service” and is as a consequence excluded from the scope of the Directive; use of broad terminology such as “leisure services”)?

Contrary to the current text, we believe that auctions conducted through means at a distance should be included in the scope of the Directive, provided that they take place in the B2C field (see reply to Q9).

7. Has the insertion of a definition of financial services by Article 18 of Directive 2002/65 in the Directive) solved any transposition problems Member States may have originally encountered when transposing the Directive? (this issue will be considered in more detail in the course of the review of Directive 2002/65)

According to EMOTA’s study on the implementation of the Directive, most Member States have implemented correctly the exemption of financial services. Although Article 3 (1) and Annex II are clear and explicit enough, Article 18 of Directive 2002/65 has the advantage to exclude totally financial services from the scope of this Directive.

8. Does the exemption covering the construction and sale of immovable property or rights related to immovable property cause any interpretation problem e.g. interaction of this Directive with the Timeshare Directive?

EMOTA has no specific view on this case.

9. Should auctions or specific types of auctions be covered by the Directive?

As indicated above, EMOTA considers that auctions should be covered by the Directive. More and more companies are using auction platforms to sell their products. Currently, fixed price sale transactions (rather than an auction transaction) conducted between a business and a consumer over an auction platform (ex: eBay) are excluded from the application of the provisions of the Directive, just for the mere fact that the distance selling company is using an auction platform. This would constitute unfair competition vis-à-vis other distance selling companies not using these platforms.

In the case of goods where the price is fixed by bidding, the price is dependent of the fluctuations of the offer and demand in the market at one specific moment. This cannot be controlled by the supplier. There is no guarantee that the supplier would obtain the same price if the goods were put for bidding a second time. Therefore, when the price is fixed by bidding, companies should only be exempted from the right of withdrawal (see Article 6.3 which establishes an exemption from the right of withdrawal for those goods or services where the price is “dependent on fluctuations in the financial market which cannot be controlled by the supplier”), however not from other obligations such as providing prior information.  This would lead to unfair competition as well.

Article 4 – Prior information

10. Can Article 4 be improved (e.g. clearer provisions concerning timing and/or format of the prior information; introduction of additional requirements or repeal of certain requirements)?

It is clear that information should be available to consumers so that they can make informed choices. However, an overload of information may have the converse effect. Therefore, the right balance must be found between informing consumers and avoiding any such information overload.
Companies, in addition to the information related to the product, have to comply with a series of information requirements contained in the Distance Selling Directive (more than 15 different items) and in other pieces of legislation such as data protection legislation (the identity of the controller, purposes for the collection of the data, processing, the categories of recipients, the right of the consumer to object), consumer credit, environmental law (energy labelling, batteries) or sales promotions (more than 30 different pieces of information).
This represents a big burden for companies and is translated into increased prices of products.
Further, we should draw attention to the difficulty arising from the fact that the same information has to be provided irrespective of the means of communication used: While it may be feasible to provide all the pre-contractual information in the services and information pages at the end of a big catalogue, this may not be practicable in the case of a small newspaper, TV or radio advertisement. A radio spot complying with the pre-contractual information requirements of the Directive would have a length of four or more minutes compared to 30 seconds. In the case of a small newspaper advertisement, too much information would hardly leave any space for information really relevant to the consumer regarding the price and the product.
The same applies to TV shopping, a booming sector in Europe,  and m-commerce; it is hardly feasible to provide information on the TV screen for all products presented or on the screen of a mobile phone.
More flexibility is needed in view of future developments of the sector and new media. There should be a possibility for companies to discharge their information obligations, for instance, by providing the address of a website or a phone number where all the information can be obtained, with no further costs than the normal rate of the communication. As we mentioned earlier, distance selling is now characterised by a multi-channel approach. Most companies have websites where consumers can access detailed information on products, sales conditions and other relevant information; and consumers are now used to go to the Internet to get information and compare offers from different companies.
An alternative to referring consumers to a website or a precise phone number could also be to provide all the information on a durable medium, to be sent together with the good(s) ordered via TV shopping or following a radio advertisement.

11. Are all groups of consumers (e.g. minors) sufficiently protected by the Directive? If not, how can their protection be improved?

EMOTA considers that all groups of consumers are sufficiently protected. However, this question is not directly related to distance selling but to civil law, and should be dealt with as such. Nonetheless, to avoid different criteria within the different Member states concerning the notion of the consumer who needs to be protected, we would welcome and favour adding the notion of “average consumer” into the definition (see reply to Q1).


Article 5 – Written confirmation

12. Can Article 5 be improved (e.g. introduction of a definition of “durable medium” as defined in Directive 2002/65/EC; introduction of further information to be confirmed in writing or deletion of some information)

- As stated above, EMOTA would favour the introduction in Article 2 of a definition of “durable medium”. It should read: 'durable medium’ means any instrument which enables the consumer to store information available to him in a way which makes it accessible for future reference for a period of time adequate for the purposes of the information and which allows the reproduction of the information stored”.
- Article 5 (1) of the Directive states that the information to be given to consumers must include the geographical address of the business place to which any complaints by the consumer may be addressed. In the light of new technological developments, EMOTA would welcome a more flexible approach on this point. A company may prefer, for reasons of internal organisation and processes, to receive consumer complaints via e-mail, since it enables a prompter possibility of replying to complaints and questions, especially regarding cross-border transactions. The important thing here is that the consumer can contact the company regarding any complaint it may have. It may also be more convenient for the consumer to contact the company using the new means of electronic communication at his/her disposal.
- Among the information that has to be confirmed to consumers in writing is, further, information on after-sales services and guarantees. For reasons of legal certainty it may be useful to clarify that this only refers to those after-sales services and guarantees which are foreseen by the distance selling contract.

13. Would the merger of the information requirements at Article 4(1) and 5(1) simplify these rules for both consumers and suppliers?

EMOTA agrees that a merger of the information duties on pre and post sale would simplify rules, provided the requirement for information in writing is abandoned. The provision should not impose a unique way to provide the information. A more flexible and technically feasible approach concerning the means to be used would be better suited (see also reply to Q 10).
Furthermore, we consider Article 4 (1) (f) as incomplete insofar as the non–existence of a right of withdrawal based on Article 6 (3) should also be indicated to consumers.


Article 6 – Right of withdrawal

14. Do you think the length of the distance selling cooling off period should be harmonised across the Mrember States and if, so how long should this period be? (the issue of whether the length of the cooling off periods in the different consumer directives should be harmonised across the acquis will be considered in the broader consumer acquis review work. However, you may wish to comment here)?

EMOTA believes that the cooling off period (or better the period to exercise the right of withdrawal) should be harmonised due to the significant divergence between the Member States. A period of 7 calendar days would be enough to guarantee the right of the consumer to check the goods bought at a distance. If a business, with the aim of getting a commercial marketing advantage, wishes to offer a period longer than 7 calendar days (as some distance selling companies already do), it should be up to them to make such a decision and this should not be imposed by legislation.
Refer to calendar days rather than working days would lead to greater clarity and harmonisation, since the notion of working days differs greatly throughout the different countries of the EU.

15. Do the rules concerning the exercise of the right of withdrawal and its consequences need to be clarified?

The Distance Selling Directive does not specify the way in which the right of withdrawal may be exercised. EMOTA is proposing that in the case of goods, the right of withdrawal should be exercised by sending the goods back to the supplier before the expiry of the withdrawal period. In this way situations in which the consumer has expressed his/her will to exercise the right of withdrawal but failed to send back the goods can be avoided. This would provide for more legal certainty for companies.

16. Do the current exemptions to the right of withdrawal need to be revised, expanded or repealed in the light of new market developments and/or technologies?

EMOTA misses an exemption for goods that cannot be resold as new. On one hand, this is to avoid any possible abuse of the right of withdrawal, e.g.:
- Shoes being worn outside and then returned with the soles scuffed;
- Consumers ordering a large-screen TV for the FIFA World Cup and returning it after the games;
- Consumers ordering a digital camera for their holiday and then returning it after they have taken their holiday pictures;
- Consumers ordering air conditioning systems and returning them after a heat wave;
- Cars being driven for six days before being returned.

High street retailers do not have to offer a right to return the goods because the consumer can inspect the goods in their premises. In the case of distance selling, consumers should have the right to check that the goods that have been delivered fit correctly, as they do in a high street retail shop, or correspond to the characteristics (colour, size, model…) of what they have ordered. Nevertheless, in the same way  that a high street retailer would not let people “spoil” the goods by, for example, wearing them out in the street before buying, distance sellers should also be able to reject the return of goods that have clearly been used, beyond what is reasonable, by the consumer.
Further, in the same way that a customer in a shop is not allowed to remove the packaging when examining goods, consumers buying at a distance should return the goods with the ancillary items and the original packaging in which they have been supplied.
Finally, EMOTA is concerned that health and safety considerations are not reflected in the right to return products that have been tried (underwear, earrings, personal care products... ). Not only can these not be resold as new, but also there are health risks in doing so.

17. Should the provisions concerning the cost of return be harmonised in the field of distance selling and if so, who should pay the cost of return? (this issue will also be considered in the broader consumer acquis review work)

Article 6 of the Directive establishes that the only costs that may be charged to the consumer because of the exercise of the right of withdrawal is the direct cost of returning the goods. In the last years there has been an increase in the returns in distance selling specially in those countries, such as Germany, where the legislator when transposing the Directive establishes that the company would have to pay for the costs of returning the goods. In Germany, the quota of returns reached record levels of 35% in quantity respectively, 33,1% in value in 2004. In some textile companies the return rate is up to 70%. Consequently, the costs of returns are increasing for companies as they employ a lot of economic and human resources to handle returns. Returned garments have to be checked, cleaned and sorted. In 2004 costs raised to 9,1% of turnover net. This leads to an increase of 4,5% yearly since 1998. This should be taken into account in any future review of the Distance Selling Directive.
This also creates competitive distortions with non-distance selling retailers who are not obliged to refund the travel-to-store costs (petrol, parking, bus charges…) for a consumer returning items. Moreover, shops have the possibility to offer vouchers instead of a refund.
Furthermore, it is not clear whether the company when refunding the consumer after the return of the good should also refund the initial handling and delivery costs of sending the goods to the consumer. Indeed the legal situation varies in the different EU Member States. EMOTA is of the opinion that delivery is in all circumstances an extra service offered to the consumer, the consumer did not have to go to look for the product to a high street shop or any other place, but the product was delivered to his home. Therefore, since delivery is a service offered to the consumer, if commenced with the consumer’s consent, it cannot be subject to cancellation and therefore refund.


Article 7 - Performance

18. Do the provisions of Article 7 ensure proper performance of distance contracts e.g. are the rules concerning timing and form clear?

Article 7 could provide for more legal certainty by indicating when the refund period of 30 days should start. In our view, the refund period should begin when a customer instructs the company where to make the payment to (bank account  ...). The provision should also clearly indicate that the consumer can exercise his right of withdrawal only when he returns the good(s).

19. Should the optional provision concerning substitute goods at Article 7(3) be made compulsory to raise the level of consumer protection evenly across the Internal Market?

Substituting goods is merely an extra service offered to customers buying from a distance, when products ordered by consumers are out-of-stock. Generally, buyers are highly satisfied with this customer-friendly service; this is the more so when they receive a product which is superior in quality than the one they ordered. We do therefore not see a need to amend this provision.


Article 10

20. Should Article 10 be expressly repealed to clarify the relationship between Article 10 and the Directive 2002/58/EC on privacy and electronic communications?

There is no meaning any longer for this article to be included in the Directive, thus it can be deleted.


General questions

21. How has the use of the minimal clause i.e. the possibility for Member States to retain or introduce provisions offering a higher standard of consumer protection affected cross border trade and competition e.g. has it constituted a hindrance to cross-border trade or raised obstacles to the exercise of the right of establishment? If so, please give examples.

Yes, our sector did encounter significant problems because of the minimum clause.
In December 2002, EMOTA published a study on the implementation of the Distance Selling Directive in the, then, fifteen EU member states. One of the main findings of the study was that the consequence of the minimum harmonisation approach had been the existence of different rules applicable to distance selling due to Member States using the possibility to introduce specific provisions when implementing the Directive into their national legal systems. By way of example should be mentioned:
- the differences in the right of withdrawal  (7, 8,10,11,14 or 15 natural or working days, depending of the Member States [1]);
- the obligation of the supplier to bear the costs of return in Finland and Germany;
- the differences in information requirements and the way this information has to be given to consumers.

Other examples to illustrate the difficulties are:
- the Belgian provisions according to which distance sellers are not allowed to oblige any payment before the expiration of the seven day withdrawal period foreseen in the distance selling legislation;
- a law introduced in Hunagry obliging distance sellers to possess a physical shop in order to carry out their activities; later on, this obligation was changed into the obligation to set up a call centre;
- Belgian provisions imposing on companies to indicate essential information in bold on the first page of the document accompanying the goods, and considering the goods to be sent without prior request, if the sentence is omitted or not properly formatted.  Belgian law also forbids explicitly demanding full or partial prepayment of articles sent before the expiry of the withdrawal period. This is not foreseen in the Directive, and also makes it virtually impossible to offer small priced products on the Market, as the Belgian provision implies that the payment risk has to be entirely worn by the companies. These pre-requisites are unknown to non-Belgian companies, hence, they represent important legal obstacles in cross-border distance selling.
The consequence of the minimum harmonisation approach has been a re-fragmentation of the national markets. Therefore, EMOTA believes that any revision of the Distance Selling Directive should be done on the basis of a full harmonisation approach. Member States should not be allowed to adopt or maintain provisions more restrictive than those adopted by European legislation and in this way create barriers and obstacles for the development of the Internal Market.
Should full harmonisation not be feasible, EMOTA would recommend that the country of origin principle is introduced for certain aspects, notably for the right of withdrawal and information requirements.

22. Have you encountered any other problem with the regulation of distance selling as it currently stands?

The problems are illustrated in the above replies.

23. Do you feel that there are other aspects of distance selling that require regulation?

EMOTA does not see any other aspect of distance selling which needs regulation.


III.      CONCLUSION

The replies and examples provided show that EMOTA sees a need for several adaptations of the Directive, taking into account the developments of the distance selling sector and the new media, and removing the difficulties resulting from differences in the laws regulating the distance selling sector in the various Member States. EMOTA believes that any revision of the current provisions should be done following a full harmonisation approach, at a level which balances the interests of both consumers and companies, recognises that modern selling channels have shifted the balance of power towards the consumer, and leaves enough commercial room for companies to differentiate their offer in the market.

[1][1]The multitude of transposition ways becomes apparent from Annex IV of the EC Communication as well.