The Consumer Rights Act 2015

Introduction This document aims to highlight the main provisions of the new Consumer Rights Act 2015. For information on specific adherence to the legislation please contact the HTA legal advice line or further information can be obtained by visiting www.legislation.gov.uk

The Consumer Rights Act 2015 sets out a framework that consolidates key consumer rights covering for goods, services, digital content and the law relating to unfair terms in consumer contracts.

The Act also introduces easier routes for consumers and small and medium sized enterprises (“SMEs”) to challenge anti-competitive behaviour through the Competition Appeal Tribunal (“CAT”).

The Act is in three Parts:

 Consumer contracts for goods, digital content and services;  Unfair terms; and  Enforcement, including investigatory powers and penalties.

Background The Consumer Rights Act aims to simplify law by consolidating existing consumer protection legislation. The relevant domestic law is currently mainly contained in the following legislation:

 Supply of Goods (Implied Terms) Act 1973  1979  Supply of Goods and Services Act 1982  Sale and Supply of Goods Act 1994  Sale and Supply of Goods to Consumers Regulations 2002  Unfair Terms Act 1977  Unfair Terms in Consumer Contracts Regulations 1999  Unfair Terms in Consumer Contracts (Amendment) Regulations 2001   Enterprise Act 2002

The European Directives implemented in the Act are:

 Directive 99/44/EC of the European Parliament and of the Council on certain aspects of the sale of consumer goods and associated guarantees;  Directive 93/13/EEC of the Council on unfair terms in consumer contracts;  Some provisions of Directive 2011/83/EU of the European Parliament and of the Council on consumer rights.

M:\Policy\(1) Policy Team Planning and Admin\Policy Publications\Information Sheets\The Consumer Rights Act 2015.docx 2

In addition, the Act implements some provisions (in respect of enforcement) of:

 Regulation (EC) No. 2006/2004 of the European Parliament and of the Council on cooperation between national authorities responsible for the enforcement of consumer protection laws;  Regulation (EC) No. 765/2008 of the European Parliament and of the Council setting out the requirements for accreditation and market surveillance relating to the marketing of products;  Directive 2001/95/EC of the European Parliament and of the Council on general product safety; and  Directive 98/27/EC of the European Parliament and of the Council on injunctions for the protection of consumers’ interests.

A small number of provisions contained in the Consumer Rights Directive regulation are also implemented in the Act, namely;

 for all contracts where a trader supplies goods, services or digital content to a consumer, requires that a trader must provide certain information (for example on the main characteristics of the goods, services and digital content) before the consumer is bound by the contract;  specifies the consumer’s cancellation rights (during so-called “cooling off periods”) for goods, services and digital content contracts concluded at a distance or off premises; and  introduces various measures aimed at protecting consumers from hidden charges once they have entered into a contract.

It should be noted that some provisions of the legislation referenced above extend beyond simply consumer contracts and with therefore still apply in their own right.

Specifically, legislation on unfair contract terms is contained in the UCTA, which currently applies to contracts between businesses and between consumers but contains some particular rules about business to consumer contracts. It makes some terms in contracts automatically non-binding and subjects others to a test of reasonableness.

The Unfair Terms in Consumer Contract Regulations 1999 (“UTCCRs”) enable consumers to challenge most non-negotiated terms of a contract on the grounds that they are unfair. There are certain terms that cannot be assessed for fairness: terms that relate to the definition of the main subject matter of the contract and those that relate to the adequacy of the price or remuneration as against the goods or services supplied in exchange. These are known as “exempt terms”.

There are a number of pieces of legislation that set out rights and duties on traders. To ensure effective enforcement of these rights and duties, enforcers such as local weights

M:\Policy\(1) Policy Team Planning and Admin\Policy Publications\Information Sheets\The Consumer Rights Act 2015.docx 3

and measures authorities (known as “Trading Standards”) and other regulators (such as the Competition and Markets Authority (“CMA”)) have powers to investigate compliance. These investigatory powers are usually set out in the individual pieces of legislation creating the rights or duties and whilst largely similar, have some differences between them.

The Consumer Rights Act The Consumer Rights Act replaces the Unfair Terms in Consumer Contract Regulations 1999, key provisions of the and the Supply of Goods and Services Act 1982, although the legal language will be familiar. The Act also contains revised provisions on enforcement powers and new defective goods remedies.

Key Definitions ‘Person’ – defined broadly to include an individual, partnership or company ‘Trader’ – a person acting personally or through an agent for purposes relating to that person’s trade, business, craft or profession. ‘Consumer’ – an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession. Note: The trader bears the burden of showing that an individual is not a consumer.

In summary, the Consumer Rights Act;

 Sets out the standards that goods must meet.  All products and goods must be of satisfactory quality, fit for purpose and as described.  Consolidates and aligns the remedies available to consumers for goods supplied under different contract types, such as sale, work and materials, conditional sale or hire purchase.  Sets a time period of 30 days in which consumers can reject substandard goods and be entitled to a full refund.  Limits the number of repairs or replacements of substandard goods before traders must offer some money back.  Following one failed attempt by a retailer to repair or replace a faulty item, consumers are entitled to request a refund or price reduction. Alternatively, they can request another repair or replacement at no cost to them.  Sets limits on the extent to which traders may reduce the level of refund (where goods are not rejected initially) to take account of the use of the goods the consumer has had up to that point.  No deduction can be made from a refund in the first six months after purchase. (specific exceptions exist regarding motor vehicles).

M:\Policy\(1) Policy Team Planning and Admin\Policy Publications\Information Sheets\The Consumer Rights Act 2015.docx 4

 Introduces a new category of digital content and tailored quality rights for digital content and remedies if the digital content rights are not met.  This new law gives consumers rights in relation to online digital content that is paid for, digital content supplied free with other paid for items and digital content supplied on a physical medium, such as a DVD.  Introduces a new statutory right that if a trader provides information in relation to a service, and the consumer takes this information into account, the service must comply with that information.  Introduces new statutory remedies when things go wrong with a service and makes it clear that consumers can always request these rights and remedies when a trader supplies a service to them.  Consolidates the legislation governing unfair contract terms in relation to consumer contracts.  Makes clearer the circumstances when the price or subject matter of the contract cannot be considered for fairness and in particular makes clear that to avoid being considered for fairness those terms must be transparent and prominent.  Clarifies the role of and extends the indicative list of terms which may be regarded as unfair.  Consolidates and simplifies the investigatory powers of consumer law enforcers in relation to the listed legislation.  Clarifies the law so that trading standards are able to work across local authority boundaries as simply and efficiently as possible.  Introduces new powers for public enforcers to seek, through applying to the civil courts redress for consumers who have been disadvantaged by breaches of consumer law; remedies from traders who have breached consumer law to improve their compliance and reduce the likelihood of future breaches, and/or remedies to give consumers more information.

The Act in more detail Changes to remedies Consumers now have statutory remedies of 'repeat performance' and price reduction if a service does not conform to the contract. The remedy available is dependent on the level of non-compliance, for example:

 if a trader breaches its duty to provide services with 'reasonable skill and care', or does not comply with information that they have provided to the consumer about the service, the consumer is entitled to repeat performance or a price reduction for the services;  if the service is not performed within a reasonable time, or the trader does not comply with the information that it has provided to the consumer which does not

M:\Policy\(1) Policy Team Planning and Admin\Policy Publications\Information Sheets\The Consumer Rights Act 2015.docx 5

relate to the service, then the consumer is entitled to a price reduction for the services.

Although the consumer has a statutory right to these particular remedies in the above circumstances, this does not exclude them from seeking other remedies such as or provided that they do not recover twice for the same loss. The inclusion of specific statutory remedies where none previously existed improves the consumer's position and provides clarity about their rights.

Changes to the contractual status of voluntary statements

Spoken or written voluntary statements, made by the trader, about the trader or the trader's service can now be deemed to be binding contractual terms. This can be the case where the statement is taken into account by the consumer when:

 deciding to enter into the contract;  making any decision about the service after entering into the contract.

Previously, if a consumer was presented with misleading information, this information would not be deemed part of the contract. This meant that the only remedy available to the consumer would be to raise an action of . As any misleading statements made by the trader can now become contractual terms, a consumer will now be entitled to raise a claim. This is significant because claims for breach of contract are generally easier to prove, and because damages will be awarded based on what the consumer's position would have been had the contract been performed.

Unfair terms

The test for 'unfair terms' in the Act is the same as that in the 1977 Unfair Contract Terms Act: it provides that a term is "unfair" if "contrary to the requirements of good faith, it causes a significant imbalance in the parties' rights and obligations to the detriment of the consumer". The test for unfair notices mirrors that for unfair terms except that it does not make reference to "the contract".

New 'prominence' requirement

The most significant change in the Act relates to 'relevant terms'; which are terms specifying the main subject matter of the contract or setting the price. These terms are not subject to the 'fairness' test provided that they are both:

 transparent: in plain and intelligible language and, if in writing, legible;  prominent: brought to the consumer's attention in such a way that the average customer – who is well informed, observant and circumspect - would be aware of the term.

M:\Policy\(1) Policy Team Planning and Admin\Policy Publications\Information Sheets\The Consumer Rights Act 2015.docx 6

This goes further than the existing law, which includes the 'transparency' requirement but not the 'prominence' requirement. This added requirement means that businesses should be even more vigilant in ensuring that relevant terms are clearly brought to a consumer's attention. The fact that a relevant term does not meet these requirements does not make it automatically unfair; however, it exposes that term to additional scrutiny.

Individually negotiated terms

The Act provides that a term can be deemed to be unfair even if it has been individually negotiated with the consumer. This goes further than both the existing law and the EU's Consumer Rights Directive. However, it is unlikely to have a major impact given that very few consumer contracts are actually individually negotiated, as consumers rarely have the bargaining power to negotiate their contract terms individually with traders.

Additions to the 'grey list'

The 'grey list' is an indicative and non-exhaustive list of terms in consumer contracts which may be regarded as being unfair. The list gives an indication of the types of terms which are likely to be considered unfair without any justification being provided. However, a term can be fair even if it is included on the grey list, and can be unfair even if it is not.

The Act adds an additional three terms to the grey list. These are terms which have the object or effect of:

 allowing the trader to decide the characteristics of the subject matter after the consumer is bound;  allowing disproportionate charges or requiring the consumer to pay for services which have not been supplied when the consumer ends the contract;  allowing the trader discretion over the price after the consumer is bound.

Inclusion of 'notices'

A consumer notice is broadly defined as a notice that relates to rights or obligations between the trader and the consumer or restricts the trader's liability. The definition includes announcements and other communications even where these are made orally.

Consumer notices were not expressly covered in previous legislation but they are specifically covered in the Act, which brings them within the fairness regime. The Act treats consumer notices in much the same way as contract terms. Businesses will therefore have to be conscious of the content which is included in notices and ensure that this complies with the fairness test.

New duty to consider fairness

A court is now under an obligation to consider contractual terms for fairness, even if neither party to the proceedings raises fairness as an issue. This is already the position of

M:\Policy\(1) Policy Team Planning and Admin\Policy Publications\Information Sheets\The Consumer Rights Act 2015.docx 7

the Court of Justice of the European Union (CJEU). This change will lead to contract terms coming under increasing scrutiny by the courts and terms may be held to be unfair even when the consumer has not complained of unfairness.

Digital content

The Act is the first piece of legislation to regulate the supply of digital content as such. Generally, the supply of digital content is treated in much the same way as the supply of goods in that it must be of satisfactory quality, fit for purpose, and conform with the description provided by the trader.

The supply of digital content will be regulated when:

 it is supplied for a price; or  it is supplied free with goods and services which the consumer has paid for, and would not be generally available to consumers otherwise.

The provisions do not apply merely because the trader supplies a service by which digital content reaches the consumer.

Summary The Consumer Rights Act achieves its aim of consolidating various disjointed pieces of legislation in an important public policy area. But with so many changes having been made at once the ‘system’ will take time to develop and adapt.

It is extremely important to review all policies and procedures to ensure compliance with the new regime and note that only the provisions in existing legislation referred to above, which trader to consumer contracts only, will be repealed.

The provisions which relate to other types of contract (for example contracts between businesses) will remain in the existing legislation. The table below summarises the impact of the Consumer Rights Act on existing legislation.

M:\Policy\(1) Policy Team Planning and Admin\Policy Publications\Information Sheets\The Consumer Rights Act 2015.docx 8

Supply of Goods (Implied For business to consumer contracts the provisions of the Terms) Act 1973 Supply of Goods (Implied Terms) Act 1973 (“SGITA”) will be replaced by the Consumer Rights Act 2015. It will be amended so that it covers business to business contracts and consumer to consumer contracts only.

Sale of Goods Act 1979 For business to consumer contracts this will mainly be replaced by the Consumer Rights Act 2015 but some provisions of SGA will still apply, for example, rules which are applicable to all contracts of sale of goods (as defined by that Act – essentially these are sales of goods for money), regarding matters such as when property in goods passes. The SGA will still apply to business to business contracts and to consumer to consumer contracts.

Supply of Goods and Services For business to consumer contracts, this Act’s provisions will Act 1982 be replaced by the Consumer Rights Act 2015. The SGSA will be amended so that it covers business to business contracts and consumer to consumer contracts only.

Sale and Supply of Goods Act This Act amended the SGA and the SGSA and as such will be 1994 superseded by provisions in the Consumer Rights Act 2015 for business to consumer contracts.

Sale and Supply of Goods to These will be replaced by provisions in the Consumer Rights Consumers Regulations 2002 Act 2015.

Unfair Contract Terms Act In respect of business to consumer contracts the Act’s 1977 provisions will be replaced by the Consumer Rights Act 2015. The UCTA will be amended so that it covers business to business and consumer to consumer contracts only.

Unfair Terms in Consumer These will be replaced by the Consumer Rights Act 2015. Contracts Regulations 1999

M:\Policy\(1) Policy Team Planning and Admin\Policy Publications\Information Sheets\The Consumer Rights Act 2015.docx 9