E-trade: A Guide to the Jungle
While a press release concerning the results of the sweep was out in English in April, the survey as such has so far only been available in Danish. A fuller summary of specifically problematic counts follow below in English.
Pre-order Information Availability of Contracts
The Danish E-commerce Act stipulates that the customer should be informed whether the contract is kept and whether it is available for the customer. 11 out of 15 websites contained no such information. Businesses are not required to distribute contracts to customers; yet the law requires them to inform potential customers whether they do or not so that the customers know to keep their own copies.
Cancellation rights
9 out of 15 businesses used incomplete or wrong information concerning terms and conditions. Cancellation rights proved to be the most problematic issue of all. Some of the unlawful terms of contract stated were:
- Exemption of specific goods from the cancellation right because they – incorrectly – were assumed to be covered by the possibility of exempting specifically customised goods and services
- Consent has not been sufficiently secured to make limitations applicable
- The goods or service must be returned unused
- The customer bears the full risk for the handling of the goods while it is being returned to the business
- The goods must be returned in the original package
- In the event that the goods or service has not been claimed, a fee which exceeds the return expenses will be imposed.
- The customer must keep an extra copy of the delivery note, note with order number
- Shipping expenses may be rebated
- Goods cannot be returned unless the business has been contacted
Technical procedures
The overall conclusion is that the sites in general provide the customers with sufficient information about the process and when and how to complete the order. Many of the sites contain a schematic presentation of the steps completed and how the order is placed. Only one site did not provide the users with the possibility to change or delete information submitted prior to completing the order.
The order
A third of the sites did not provide the technical facilities necessary to print the order confirmation directly – i.e. the right side of the page was missing from the actual print. One site stated that it would be possible to get the order in full if the print set-up was changed
The Danish Consumer Ombudsman is of the opinion that it lies with the e-trader or business to ensure that the order along with other important documents such as terms and conditions are readily printable. A print-friendly version of relevant documents is a likely option.
Problems after the order
Disclaimers and limitations of liability
Test purchases were not made; however, all businesses have been informed about the law and their information duty.
Comments were made on 11 out of the 15 sites regarding their use of disclaimers and limitations of liability.
Disclaimers must be sufficiently clearly stated. Simply referring to them in the ordinary terms of contract without further ado will not do. Where the business wishes to diverge from the normal legal doctrine, the terms in question must be clearly emphasised in the contract if they are to be considered valid.
Limitations of liability, including force majeure, were invoked by several of the sites. Where the limitations diverge from the standard doctrine they are most likely in conflict with the principles of good marketing practises.
The Sales of Goods Act: customers’ statutory claims right
6 of the sites provided the customers with information that conflicted with mandatory provisions of the Sales of Goods Act.
Some terms stated that in order to assert claims in pursuance of one’s statutory rights, this had to be done within a specific period of time. This is clearly in conflict with the Act whose wording is ‘within a reasonable period of time’.
Other requirements were put forward which in one way or the other sought to restrict or prevent the customers from making claims or putting them forward.
Specific issues
Pricing policies
Incorrect, misleading or incomplete pricing information which may influence the demand of goods and services is at all times in conflict with good marketing practises.
One website contained photos and descriptions of particular products along with price information and potential discounts. A list of distributors showed where the product could be purchased and at what price. The website stated that the prices on display were RRPs and frequently updated; however, the business behind the site did not accept responsibility for changes between updates or products out of stock.
The DCO is of the opinion that price comparisons should be based upon verifiable data. The DCO informed the business in question that it should not state prices which may not be obtainable. This will be considered misleading and in conflict with section 3 of the Marketing Practises Act. Moreover, he believes that a product may be incomplete/defect if purchased on the basis of incorrect price information. This is also the case with services where the sales person has stated incorrect or misleading information which may have influenced the final purchase.
Total price
5 of the websites did not conform to the rules on price marketing as they did not state the total price inclusive of all fees. Delivery charges proved the biggest problem; the postal service charges a COD (cash on delivery) fee which some of the websites failed to include.
Newsletters and spam
6 of the examined websites did not comply with the rules on electronic advertising set out in the Marketing Practises Act. Only active and informed consent is legal; some of the sites simply pre-ticked the box concerning newsletters for their customers. Other sites breached the rule that commercial messages do not belong in tell-a-friend services. Finally some of the sites did meet the rules concerning distribution of electronic newsletters but left out the required possibility to decline.
Guarantees
A check-up conducted in 2000 showed that e-businesses found it difficult to distinguish between the statutory two-year claims period and voluntary guarantee schemes. Whereas a third of all e-businesses got it wrong six years ago, only one did not understand the connection between the two concepts this time around.
Conclusion and follow-up
The rules governing the e-business area are, admittedly, complicated, and although the consumers should be careful when shopping online, most e-businesses follow the basic rules However, the check-up somewhat surprisingly revealed that even Danish e-businesses with the e-mark, a mark accredited by the Danish Ecommerce Foundation for safe and ethically responsible conduct that exceed standards required by law, did not fully live up to the law. The DCO contacted the Ecommerce Foundation and confronted them with the results of the check-up. Further, the DCO inquired whether the Foundation had any initiatives in the melting pot to raise its members’ standard. The foundation replied that a consumer survey conducted later this year would clarify which initiatives were needed to inspire more confidence in ecommerce.
See the April press release on the check-up
See the DCO check-up list for e-businesses
Internet Auctions
Online auctions are very popular trading venues and hence of great interest to many consumers. The combination of these two factors made great copy and an article in a major Danish newspaper reported how disappointed the DCO was with the outcome of his investigation. Unfair limitations of liability, too restrictive limitations on the access to complain and unsolicited dissemination of e-letters were some of the problems encountered; however, the cooling-off rights accorded the bidders represented the most seriously compromised aspect.
The fact that the right of cancellation and the statutory claims period also may apply to agreements concluded between private persons and not only professional businesses astounded the owner of the biggest online auction in Denmark where this was the case. He claimed that his online bidding forum was no different from buying a lawn mower by your neighbour since the forum only established the contact.
What are the problems?
- The problems most commonly encountered were:
- Insufficient business contact information
- The procedure regarding registration and acceptance of terms and conditions
- The bidding procedure, including compliance with the information duty in pursuance of the Consumer Agreement Act
- The duty to give information – also in terms of individual notification/conditions- about the right of cancellation (the Danish Consumer Agreements Act)
- Policies on storage of personal data
- Distribution of unsolicited commercial communication (section 6 of the Marketing Practises Act)
- Terms concerning payment, delivery and storage
- Terms concerning defects, claims and compensation
- Other terms
All this information must be made available to the bidder in a so-called durable medium; most failed on at least one count.
A more detailed description of some of the counts/results follows below.
Definition of auctions
There are two types of Internet auctions.
Firstly, there is the traditional type where goods in commission are auctioned off on behalf of the seller. The buyer pays directly to the auction house and makes further agreements about delivery etc. with the auction house. In the event that the goods are faulty, the buyer can raise his or her claims against the auction house.
It is in effect a consumer purchase as the auction house is considered a professional trader, the buyer a private individual. This kind of Internet auction is little different from physical auctions.
The other kind of auction puts a website at the disposal of buyers and sellers - often for consideration. Potential buyers are – in the main – informed that the actual seller is not the auction house but a third party. After concluding a purchase it is up to the buyer and the seller – whose identity is now known to the buyer – to arrange delivery, payment etc. Therefore, it is, as a basis, the seller who is held responsible in the event of defects etc.
A purchase made on this kind of auction is also a consumer purchase although the seller is not professional. This owes to the fact that the sales transaction is made possible by the intervention of a professional business – the auction house behind the site. This makes a private individual a professional trader according to the Sales of Goods Act – to the surprise of even major players in the market as seen above.
The DCO says that online auctions operating in this manner should inform potential sellers of the statutory obligations they have to meet if they choose to use the auction site.
Both auction types must also see to it that they meet the information duty set out in the E-commerce Act and comply with the Consumer Agreement Act.
Before bidding: terms and conditions
The E-commerce Act and the Consumer Agreements Act set out that a selection of relevant information about the auction house, the seller, the product for sale, general terms and conditions, the rights of cancellation etc. should be available to the buyer before placing a bid.
On the whole, most auction sites did not have problems meeting these requirements. Substantial exceptions to this rule proved information about rights of cancellation and, to a minor extent, contact information.
Moreover, it is important that the bidder knows the exact terms and conditions for the sale. No explicit requirements exist as to the manner in which terms and conditions should be presented. However, as with online shops, the buyer should not be able to conclude an online sales transaction without having been introduced to the terms of contract. Bidder acceptance of terms of contract may be submitted by marking “I accept” in a tick-off box following an account of all applicable terms and conditions.
Some auction houses failed to ensure that the bidder is made aware of all terms and conditions surrounding the bidding procedure. Some had their terms and conditions scattered across the site. But terms and conditions which the bidder/buyer has not been introduced to cannot be used to support claims. In the event that the terms are particularly unusual, burdensome or diverge from normal legal doctrine, the terms in question must be clearly emphasised in the contract if they are to be considered valid.
Bad buy – what to do?
Recent debates on what legislation to apply to Internet auctions have now clarified that online sales transactions are covered by the Consumer Agreements Act.
This means that bidders have the same right to cancel a purchase on an online auction as they would have in an Internet shop. Before placing a bid, the consumer is entitled to know that he/she has the right to cancel a purchase. Where a contact has been concluded (i.e. when the lot is knocked down), he or she should receive information about cancellation rights, the conditions that apply to its use, potential limitations etc. in a durable medium as emphasized above.
Where the auction house fails to provide the bidder with information concerning the rights of cancellation in a durable medium, the bidder can cancel the purchase within three months from the time on which he/she received the purchase or the information.
Some of the terms listed by the auction houses were in conflict with the law. Some laid it on the bidder to pay for both delivery and return of the product. However, when rights of cancellation are invoked, only refund charges can be imposed on the consumer.
Other more or less imaginative terms included a claim which did not extend the right of cancellation to members of the seller’s household. Such a general curtailment is not deemed acceptable; it is in conflict with both the Consumer Agreements Act as well as section 1 of the Marketing Practises Act.
Another, more serious problem is the abuse of cancellation rights. If the auction house deemed that this right was abused by a bidder because he or she did not really intend to buy the product after all, the bidder could be excluded from the auction. While the DCO agree in principle with the need to restrict abusive bids, he is against the idea of drawing up fixed criteria such as the number of cancelled purchases, whether the bidder has inspected the product prior to purchase etc.
Other terms and conditions
A number of other problematic terms of contracts were criticised by the DCO. One auction house stated that substantial changes to the general terms of contract would appear from the website. The DCO, however, found that noteworthy changes should always be communicated to the site’s users via email or the like.
Who is responsible for online bids?
Another auction house claimed that the owner of the computer and Internet connection via which the bid had been placed would be held responsible. The DCO finds that only the person who has placed the bid, and thereby concluded the contract, can be held liable – and that is not necessarily the owner of the equipment.
Storage and delivery
As for storage and delivery after purchase, the successful bidder is often informed that the auction house does not accept any responsibility for the goods after it has been sold. Likewise, some renounce responsibility for damages to the goods occurring during transport and shipping although the responsibility for damages and lost deliveries lies with the seller. To disregard this term is highly problematic for the consumer, and in order to make it applicable, it must be clearly emphasized in the terms and conditions. It might still be set aside by the Contracts Act, however.
Limitation of liability
The Contracts Act might also set aside unfair terms regarding limitation of liability. One auction house did not pay damages for broken glass and frames although tort liability rests with the person whom the purchase is placed under the care of; another renounced liability for indirect damages, consequential damages etc. and limited its general liability to a fixed amount of money.
Lien and set-offs
Several auction houses referred to set-offs and possessory lien in their terms and conditions. The terms set out that if the bidder owed the auction house money for, say, a previous purchase while handing in an object for sale, the auction would sell this object regardless of an agreed minimum price. The money earned on this sale would then effect a set-off against any sum of money due.
Moreover, some auction houses reserved the right to claim possessory lien in objects handed in the event of unsettled debts.
However, the DCO is of the opinion that auction houses, as a basis, can only claim possessory lien if the claim and the possession of the object are somehow connected. This will hardly be the case where a bidder has failed to pay the purchase price and at the same time has handed in an object for sale at the auction. Possessory lien can, in other words, not be claimed for old arrears.
The steps taken subsequently
After having concluded the investigation – which did not include bids or purchases - the DCO contacted the respective auctions and called for a fairer approach in general while also pointing to more specific counts that the individual auction houses had problems complying with.
Now, 6 months later, it seems that most of the auction houses have paid heed to the DCO’s instructions. Unfair terms have, on the whole, been removed. However, a follow-up will nevertheless take place in the near future, although the exact procedure has yet to be decided on.
But not all issues have been dealt with.
A specific problem surrounding the cancellation procedure remains. Some auction houses operate with a ‘3 cancelled bids and you are out’ policy – meaning in effect a more or less deliberate contravention of DCO recommendations regarding abuse of bidding rights, cf. above. While it is very difficult to prove that bids are only placed to raise the price, the DCO does recognize that it is an untenable situation for both the bidder and the auction house. The DCO has received complaints from bidders who have been excluded from Internet auctions; however, as noted above, the DCO believes that neither Internet auctions nor bidders will benefit from a set of fixed guidelines on the matter.
The Danish National Consumer Agency has an online version of their publication ‘Ren besked’ (Straight Answers) out in November in Danish covering the advantages and pitfalls of Internet auctions for consumers.
See the March news release concerning the online auction check-up