Many businesses have had to adapt their sales practices and focus on ‘distance selling’, moving away from the high street and selling to customers online to continue to trade. It’s no surprise then that if you’re starting-up a new business venture where distance selling will play an important part in your plans, you’ll need to quickly familiarise yourself with distance selling regulations and the relevant legislation to ensure you comply. Here, we look at the rules that apply to commercial contracts if your business sells products or services away from your business premises and ‘at a distance’, for example, over the phone or via your website.
- Distance selling regulations: an overview
- What is distance selling?
- What are the fundamentals of a distance selling contract?
- What regulations apply to distance selling?
- Consumer protection distance selling regulations
- What’s the difference between distance selling and online selling?
- Distance selling rules
- Do the Consumer Contract Regulations apply to your business?
- Information you must provide under the Consumer Contract Regulations
- Consumer cancellation rights and the distance selling cooling off period
- The distance selling regulations on returns and refunds
- When do the Consumer Contract Regulations not apply to distance selling?
- How do the Electronic Commerce Regulations affect online selling?
- Other relevant distance selling laws
- Distance selling business to business
- Distance selling and the impact of Brexit
Distance selling regulations: an overview
What is distance selling?
Distance selling is defined as selling goods or services at a distance as opposed to selling goods or products over the shop counter or professional services over a desk at a professional services firm. The definition of distance selling is very wide and growing as technology evolves to give consumers the option to purchase more items at a distance, for example, through the likes of Just Eat and the increased availability of phone apps.
Once the internet made it possible to buy most things online, from clothes to books, to streaming films and buying accountancy and legal services, it became clear that regulations on distance selling needed to be updated. That’s because the concept of distance selling has evolved from the traditional distance selling method of the salesperson at the customer’s doorstep.
As a customer isn’t able to try on the new pair of shoes prior to purchase through online shopping or reflect on their planned new conservatory they’ve ordered from a trade stall or the UPVC windows the sales person energetically recommended during a home visit, you’ll recognise why there is a need for distance selling regulations to protect both business owner and customer.
What are the fundamentals of a distance selling contract?
The two essential aspects of a distance selling contract are:
- The business is operating the organised distance sale of goods or services – it isn’t a one-off phone order.
- The business and consumer only engage in distance communication (such as online or telephone) until the contract is finalised.
What regulations apply to distance selling?
Two sets of regulations apply to distance sales, namely:
- The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCR) – These regulations cover the sales of most kinds of goods and services at a distance.
- The Electronic Commerce (EC Directive) Regulations 2002 (ECR) – These regulations cover contracts made electronically. For example, purchases from a business online via a business website, by email, text or SMS. A business must comply with the Electronic Commerce Regulations regardless of whether customers are individuals or businesses.
Any business selling goods or services, including digital content, to customers from home must also comply with the Consumer Rights Act. The Act covers goods and services ordered from a customer’s home (For example through use of a mail order catalogue, direct selling salesman visit to the home or online) and digital content.
Under the Act goods must be as described, fit for purpose and of satisfactory quality. If goods are faulty, the business must give a full refund up thirty days after the item was purchased. If goods are found faulty up to six months after purchase and the goods can’t be repaired or replaced, then a consumer can also ask for a full refund in most cases.
Consumer protection distance selling regulations
The law on sales contracts is complex and there are specific rules and regulations relating to various areas such as:
- Direct marketing by telephone, mail order or email – Regulated by data protection laws and codes of practice.
- Premium-rate phone services – Regulated by the Phone-paid Services Authority under its Code of Practice.
If your business is engaged in distance selling it is best to check with an expert commercial solicitor to see what additional industry specific distance selling regulations will apply to your transactions.
Prior to 2014, distance selling was also regulated by the Consumer Protection (Distance Selling) Regulations. Whilst these regulations have now been superseded by the CCR, the Distance Selling Regulations still apply to any contracts concluded on or before 12 June 2014. The principal difference between the Distance Selling regulations and the Consumer Contract Regulations are:
- Cancellation – The cancellation period has been extended from seven days under the Distance Selling Regulations to fourteen days under the Consumer Contract Regulations.
- Refund – A business only needs to provide a customer with a refund once the business has received the goods back from the buyer (or confirmation that the goods have been posted).
What’s the difference between distance selling and online selling?
Distance selling includes any sales contract made where there is no face-to-face contact between seller and purchaser. Distance selling is therefore wider in scope than online selling but incorporates online selling within the broader definition of distance selling.
At its widest, distance selling includes many different types of transactions. Here are the most common types:
- Website sales – Either your business operates its own website to display and sell your products, or you use a service like Amazon, eBay, or Etsy. If a consumer chooses to ‘click and collect’ this is still classed as distance selling as the contract was agreed at a distance, even though the goods are collected in person. However, the distance selling regulations would not apply if a consumer chose to reserve goods online and then goes to your shop to review the reserved items with no commitment to purchase. That’s because the goods aren’t purchased in an online transaction as that is simply a goods reservation.
- Telesales – Your business operates a call centre and operators talk to purchasers about your goods or services and conclude sales contracts over the phone.
- TV shopping – Any interactive TV show where viewers can call into the show by phone, app or online to purchase and pay for products or services as part of the show is treated as distance selling.
- Door to door sales – The traditional salesperson knocking at a consumer’s door is the classic example of distance selling.
- Mail order catalogues – In the days before the internet mail order catalogues were a very popular form of distance selling.
- Temporary stalls – Stalls, for example, at a fair or an exhibition centre, can count as distance selling where preliminary purchase details are discussed at the temporary venue but the commitment to purchase and the contract are concluded when the customer returns home by phone, internet or other means. Sales from a trade fair, market stall or movable business premises don’t count as distance selling where the commitment to purchaseisconducted face-to face with the customer. If the decision to buy is made after the face to face contact and takes place by phone or on-line then these types of sales do amount to distance selling.
Distance selling rules
Every business needs to understand distance selling rules and have procedures in place to follow them. Here are the key rules your business must follow when your organisation concludes distance sales:
- Information – You must give your customers detailed information before the contract is entered into.
- Costs and fees – You must clearly identify the costs and any extra fees, and your customer must explicitly agree to them.
- Payment – When payment is required any ‘call to action’ to pay or buy online must be clearly labelled as such. For example, ‘Buy Now’ or ‘Pay Now’.
- Paperwork – You must give your customers a hard or soft copy of the contract in writing or by email once the contract has been entered into.
- Return of goods – Subject to various exceptions, exemptions and time limits, customers can return goods and must be offered a refund if they change their mind. Consumers are allowed a minimum fourteen day period to test the products. There are also distance selling ‘cooling-off’ periods within which a buyer can cancel the contract.
- Telephone calls – You cannot use a premium cost telephone line for existing contracts.
Do the Consumer Contract Regulations apply to your business?
If your business sells to individual consumers that you don’t meet in person, either because you have an online business or your business simply doesn’t trade out of traditional business premises, it’s likely that the Consumer Contract Regulations will apply to your business. It’s critically important that you’re aware of the additional consumer rights that apply to these kinds of ‘distance sales’ to avoid any costly mistakes.
Consumers are people that contract with you as an individual, and not as part of their own business, trade or profession. The Consumer Contract Regulations don’t apply to some types of business where the business activity falls within the Consumer Contract Regulations exemptions.
It is important to understand whether your business is engaged in any form distance selling and, if so, to carefully consider whether the practices and procedures that your business has adopted are compliant with the Consumer Contract Regulations and the Electronic Commerce Regulations. That’s because if your business doesn’t follow the rules your business could be made to:
- Provide the goods or services as agreed
- Pay compensation
- Pay an unlimited fine or receive a prison sentence
Information you must provide under the Consumer Contract Regulations
The Consumer Contract Regulations sets out the information your business must provide to the consumer before and after the sale of goods or services has taken place. If the distance selling is taking place online then the additional obligations under the Electronic Commerce Regulations are also applicable.
Before an order is placed your business must provide the following information:
- Identity – At the start of any telephone call, the identity of your business and the commercial purpose of the call. The name of your business, your email address, and, if you require payment in advance, your postal address, and your VAT number if you are VAT registered need to be detailed.
- Description and duration – A clear and thorough description of the products and services must be provided. In addition, information needs to be given on the minimum contract duration, and if the contract is a rolling contract, any conditions for ending the contract.
- Action – What steps the customer must take to conclude the sale and how a customer can place an order and make payment.
- Price and payment – The total price (including taxes), how long this is valid, and how it is calculated must be stated as well as the methods of payment, and the different options for delivery and the costs involved.
- Cancellation rights – A business not only needs to set out cancellation rights and provide a cancellation form but also say whether the business will provide a substitute if the product or service is not available and the cost of returns (if any) in the event that the consumer returns goods. A customer must be told that they can cancel their order up to fourteen days after their order is delivered. The customer doesn’t need to give a reason for cancelling the order. If a customer isn’t told about their right to cancel, they can cancel at any time in the next twelve months but if a business informs them about the right to cancel during the twelve months, they have fourteen days to cancel the contract or order from when they were told about their rights.
- Guarantees – Any guarantees that apply to the goods.
- Complaints – An address that the customer can use to contact you with any complaints.
- Phone calls – If your business has a dedicated phone line for sales, then the costs of calling this number should be stated (if it is more than the basic or standard rate) and any other communication channels used.
- Digital materials – If you are selling digital material, information about compatibility and functionality.
After a distance selling order is placed your business must:
- Contract – Provide a copy of the contract by paper, email or another format so that the customer can save it for future reference. The copy of the contract must be provided no later than when the goods are delivered.
- Delivery – The goods must be delivered within thirty days unless a different timescale has been agreed with the customer.
Under the Electronic Commerce Regulations (that applies to business-to-business sales as well as to business to consumer sales) if your business sells goods online, by email or by text message, you must also provide details of any trade organisations or professional bodies your business belongs to and give information about any authorisation scheme that is applicable to your business. For example, in the financial services industry any applicable financial services scheme.
If your business advertises on the internet, by email or by SMS, you must clearly state where the information is from (that is, the identity of the company), that this is an advert or promotion, and identify the terms of any offers.
Consumer cancellation rights and the distance selling cooling off period
When purchasing as a result of a distance sale, your customers have the right to cancel their purchase within fourteen days of the date they receive the goods, or the durable confirmation, whichever comes later. It is important that consumer cancellation regulations are complied with because if your business doesn’t provide the durable confirmation and written confirmation of the right to cancel, then the fourteen-day cancellation period is extended.
With distance selling, a business has to provide a model cancellation form so that customers can easily exercise their right to cancel.
The cancellation period under the Consumer Contract Regulations is also known as the ‘cooling-off period’. It is open to your business to offer a longer cooling off period should you choose to do so. The customer does however have a minimum period of fourteen days to send the goods back to your business. The business then needs to refund the original purchase price within fourteen days of your business receiving the goods back from the customer.
The right to cancel does not apply to certain specific categories of goods and services, namely:
- Goods that deteriorate , such as perishable food products
- Goods with fluctuating prices
- Newspapers and magazines
- Betting and gambling services
- Goods that are made to a customer’s order, for example, tailored clothing
- Accommodation, transport, food and drink and leisure services that are provided for a specific event or on a particular date or within a specified period
- Day-to-day food and drink delivered house to house
- Package travel and timeshares
- Software, CDs and similar items that have been unsealed
- Digital downloads once the download process has started
The distance selling regulations on returns and refunds
Customers are entitled to a refund within fourteen days of your business:
- Receiving the goods back from the consumer or
- Evidence that the consumer has posted the goods to you, whichever is sooner.
Your business can make a deduction from the value of the goods if you consider the customer has handled the goods excessively. You can’t deduct monies from the refund simply because the goods have been removed from the packaging or because the goods have been tried on or checked.
In essence, distance selling purchasers are entitled to handle goods in the same way that they would in a normal retail store. That therefore includes touching the item or trying it on.
If a buyer decides to cancel a purchase because they’ve changed their mind, a business can charge for the cost of the return if this cost was stipulated in the pre-contract information. However, if the goods are faulty the business must pay for the costs of returning the item and the business must also refund the cost of the original delivery at the basic rate.
The regulations make it clear that consumers are not entitled to return some types of goods simply because the customer doesn’t want them. A business should make it clear if items can be returned or not, such as perishable goods, recordings or CDs that have been opened, consumer goods with a health and safety or hygiene issue, such as earrings, where the packaging has been opened. However, whatever the nature of the item, the purchaser is entitled to return faulty goods, such as food products that have perished prior to delivery or earrings that are faulty.
When do the Consumer Contract Regulations not apply to distance selling?
The Consumer Contract Regulations don’t apply to distance selling where the goods or services are:
- Worth £42 or less
- Free or paid for NHS prescriptions and treatment
- Financial services, for example, pensions or mortgages
- New building construction (but the rules do apply to extensions)
- Food and drink or consumables supplied regularly (such as milkmen deliveries or vegetable box deliveries)
- Package travel costs – holidays, timeshares and holiday clubs
- Flight, bus, train and other tickets for passenger travel
- Contracts to let a property that the customer will live in (but the rules do apply to estate agency marketing services)
- Goods purchased from a vending machine
- The use of a payphone or paying to use an internet connection
How do the Electronic Commerce Regulations affect online selling?
As well as complying with the distance selling regulations, your business has to comply with the Electronic Commerce Regulations if selling online. The regulations are broken down into what your business must do prior to the customer placing an order and after the order is placed.
Before an online order is placed your business must:
- Description and contract terms – Provide a description of your goods, services, or digital content and, if the customer is committing to an ongoing contract to buy, the customer must be told the minimum length of their contract and given information on any conditions for ending rolling contracts or contracts with no clear end date.
- Payment – Ensure it is clear to customers they have to pay when they place an order for your goods or services and list the steps involved in a customer placing an order. The total price for the goods or services must be given or an explanation as to how the price will be calculated.
- Delivery – Clearly give the delivery options as well as the total delivery cost or how the delivery costs will be calculated.
- Order errors – Take reasonable steps to let customers correct errors in their order, for example, ordering too many of an item.
- Languages – Tell customers what languages are available.
- Sales contract – Ensure that customers can locate and copy your terms and conditions of sale, for example, by providing the terms as a PDF or downloadable. The contract should be confirmed as soon as possible after the sale, for example by an email.
- Information – Provide your email address and VAT number (if registered for VAT) and the cost of using phone lines or other means of communication to complete the purchase if there is a charge at anything other than the standard or basic rate.
After an online order is placed your business must:
- Confirm the contract – This should take place as soon as possible and no later than when the goods are delivered, or a service is commenced, or digital content is downloaded.
- Provide a copy of the contract – This can be done by post, email, or other format but the customer must be able to save the contract so that they can look at it in future.
- Delivery – The goods or service or digital content must be delivered within thirty days, unless there is an agreed alternative delivery date.
In addition to the regulations for online sales there are further rules applicable to businesses that sell digital services that are downloaded or streamed online. Examples of such digital services include computer games, film and books and mobile phone apps. If your business supplies downloads or streaming services then you must:
- Ensure the customer confirms that they are aware they’ll lose their fourteen day right to cancel before they download or stream content.
- Ensure the customer agrees to an instant download before they start the download process.
- Provide this information in your confirmation of the contract together with the other pre-contract information.
If your business doesn’t comply with these additional digital service rules then your customer will retain their fourteen day right to cancel without paying for the digital services that they have downloaded or streamed.
Other relevant distance selling laws
If your business engages in off-premises distance selling and online sales, the Consumer Rights Act 2015 consolidates consumer legislation in respect to quality and fitness for purpose. The law says that:
- All goods and services must be as your business described them.
- The goods must be of satisfactory quality and fit for purpose. If the goods are faulty, you must give a full refund within thirty days. The period within which a consumer is entitled to a refund for faulty goods is extended to six months if the goods can’t be repaired or replaced, although, unlike the Consumer Contract Regulations, customers are not entitled to a refund because they’ve changed their mind, except in the case of purchase of digital content.
Distance selling business to business
When selling B2B via email, text or online, certain consumer-type regulations also apply to your activities under the Electronic Commerce Regulations. When your business advertises or sells through distance selling your business must state:
- Your business name, address and contact details
- Your VAT number
- Any authorisation scheme to which you are subject
- Any trade or professional organisations you belong to
- The prices, taxes, and delivery costs
In addition, your business must make it clear in communications that the information is for commercial purposes and identify any promotions or competitions and any conditions of purchase. Your business also has to provide the purchasing business with clear details of how contracts are concluded and your terms and conditions.
Distance selling and the impact of Brexit
Although the UK left the EU on 31 January 2020, the UK will continue to apply most EU law in the UK after the end of the transition period unless the UK specifically amends existing legislation and rules. Therefore, there will be no immediate changes in consumer protection law but there are no guarantees that UK and EU consumer protection law will remain fully aligned in future. This will be an issue for your business if you conduct distance selling in both the UK and within the EU so it is important that you keep up with legal developments with your commercial contract solicitor.
When it comes to sales contracts and distance selling in the EU, UK businesses need to be aware of the Omnibus Directive and the consumer new deal. Consumer protection is being strengthened in the EU in what is referred to as a ‘new deal for consumers’. The Omnibus Directive will affect UK businesses that trade in EU member states. The Omnibus Directive could also affect UK businesses that trade within the UK if the UK government aligns all or some of the existing UK consumer protection legislation and regulations with the EU Omnibus Directive. For more information on the new consumer deal and the implications for your business read our article on the modernisation of consumer rules and the Omnibus Directive.