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ENHANCING CONSUMER CONFIDENCE BY CLARIFYING CONSUMER LAW – CONSULTATION OF THE SUPPLY OF GOODS, SERVICES AND DIGITAL CONTENT

About the RMI

The Retail Motor Industry Federation (RMI) is the UK's leading automotive trade body, representing franchised car and commercial vehicle dealers, independent garages, bodyshops, motorcycle dealers, petrol retailers, auction houses and cherished number plate dealers, who provide sales and services to motorists and businesses across the UK.

Introduction

The following submission is in response to the consultation paper put forward by BIS in relation to consumer rights and consumer law. The following is to be read in accordance with the consultation paper and endeavours to answer succinctly the questions put forward within the consultation. The answers that follow do not run in chronological order as set out in the paper but rather cover the key areas of reform under headings with the appropriate questions listed below. The RMI look forward to reading the delivered response.

It is clear the aims of the proposed reforms are to clarify and simplify consumer rights for the benefit of consumers and businesses. The European Consumer Rights Directive (CRD) was openly reformed in order to narrow the scope of its legal width, and as such it is worth questioning to what extent the Government will be able to successfully develop a piece of legislation to be all encompassing as proposed. The weight of the legislation alone will be dense due to the scale of reform proposed, irrespective of the complex nature of the content of consumer law. As such, it must be considered at length if simplification can be truly achieved from such a project.

It is worth noting within each of the three reform areas; supply of goods, supply of services and digital content, huge differences can be found in how each are practised by businesses. The differences can be attributed to the nature of each area. For example, when considering business methods involved in the supply of goods, the very cost of a good can have a huge impact upon consumer’s expectations. This affects how sub-standards should be rectified, which is not often the case in terms of the supply of services. It is to be submitted that the three areas are to be tackled separately, even if placed in one piece of legislation and as such, any section within the act should direct a consumer or trader specifically to the legislative guideline regulating the supply of goods, services or digital content. Any cross over or repetition should be repeated again within the appropriate statutory section. The importance of creating clearly separate guidelines is to ensure clarity is achieved in a complex area of law.

As heavy emphasis is placed throughout the consultation paper on the need for consumer confidence, the RMI is concerned as to the neutrality of the finalised statute if many of the proposals are adopted. It is important not to alienate businesses and ensure an impartial piece of legislation is achieved, to certify businesses do not suffer from an increase in consumers seeking costly and unnecessary redress, ultimately leading to theincreased purchase price of goods and services to cover profit deficits and an increase in insurance policies.

The RMI will answersquestions concerning the supply of goods and the supply of services.

Formation

Question 1. Do you agree that all businesses should be subject to the same framework of consumer protection for the sale and supply of goods, services and digital content, or

Do you consider that micro-businesses should be exempt from any or all of the new proposals and remain subject to the current framework? (4.21-22)

Whilst all businesses working in the same sector should arguably be subject to the same legal framework, this is not necessarily appropriate across the market as a whole. Differences, for example between liability for goods and liability for services should remain different.A degree of flexibility needs to be ensured within the legal frameworks for each area of trade (goods, services, digital content) to account for the different types of goods and services that are available and the unforeseen circumstances that may be a hindrance to one but not the other.

The result of creating a long, lengthy and restrictive piece of legislation is far from simplicity and clarity but further confusion and legal cost. Ultimately any additionally incurred costs will be burdened upon consumers asbusinesses find alternatives to account for profit deficits – often through increasing purchase prices. It must not be disregarded through providing over expansive rights to consumers, businesses will be left in a restricted and vulnerable position due to the consumer’s ability to manipulate their rights over the business. This is dangerous as exampled above; a high turnover in consumer redress will result in increased purchase prices for goods and services.

Micro businesses

The RMI feel it is important to hold accountable micro businesses under the same statutory instruments as other businesses.Micro businesses thus should not be exempt from the reforms.This will allow for market access and development – encouraging consumers to use businesses not necessarily part of a known brand or franchise – feeling safe in the knowledge their rights are protected. This enables the removal of market manipulation and provides equal market opportunities for businesses.

Definitions

Throughout the consultation paper, a proposal has been submitted to unify the definitions of key terms. The position of the RMI in respect of doing so will be answered in one response. The following questions will be considered in this response:

-Question 2

-Question 3

-Question 24

-Question 16

The RMI does not see any potential problem occurring from providing unified definitions for ‘consumer’or ‘trader’, nor with the proposed definition for ‘goods’ or the divisions of services.

The RMI’s National Association of Motor Auctions (NAMA) is keen to enforce the importance of maintaining auctions beyond the remit of consumer and agrees strongly with the government proposition to be exempt from this.

Dangerous Goods

In defining ‘dangerous’, the consultation paper has suggested using the General Product Safety Regulations 2005 (GPSR 2005) as the model for which the definition will be taken. However, the requirements and definition of ‘dangerous’ provided by the regulation is simplistic in approach:

General Safety Requirement

5(1) No producer shall place a product on the market unless the product is a safe product.

As such, all reference is made towards a product being ‘safe’ as opposed to defining what dangerous is.Neither ‘safe’ nor ‘dangerous’ are accompanied by criteria. Therefore, in order for simplification and to ensure traders and consumers can determine the status of a product correctly (preventing/minimising legal costs through dispute), a test or full bodied definition must be drafted and implemented into the revised statutory instrument.

Terms and creating a contractual relationship

A heavy focus has been placed on moving away from implied terms and towards the creation of statutory guarantees. The following submission is in response to:

-Question 4

-Question 5

-Question 25

-Question 27

-Question 33

-Question 34

-Question 39

Implied Terms – statutory guarantees

The RMI can see both positives and negatives to the introduction of statutory guarantees in replacement of implied terms.Objectively, the Government’s reasoning behind proposing to adopt statutory guarantees is stated within the word itself. Guarantees enable a guaranteed set of rights and standards that consumers are entitled to receive and traders must provide. The result of this is proposed to eliminate costly disputes arising as to whether an implied term is present or has been adhered too.However, the RMI feel that the benefits of statutory guarantees are not necessarily as clear cut as presented in the reform package.

Moving away from a model of implied terms may cause restraints on businesses and as such any restraint will be felt to the detriment of consumers.Implied terms enable businesses to account for individual contracts. For example, a term can be implied for one consumer that may not necessarily be needed for another, without causing significant changes to a traders’ business practice. Furthermore, implied terms account for the realitythat both traders and consumers (both agreeing to the terms) may not contemplate all contingencies that could arise. However, with the ability of interpretation and flexibility accessible through implied terms, these can be accounted for. As contracting parties, consumers and traders have a desire to create contracts which will work to achieve the needs they require of itand as such the specific requirements of thecontract.The inference of creating a contract is it is ‘willed’ by the parties, ‘as part of their contract...implied terms can all, therefore, be imputed to the will of the parties’[1].

Goods

It is acknowledged within the consultation paper, in relation to goods, the terms presented as the statutory guarantees would not be far removed from the current implied terms. Therefore, it is questionable what beneficial changes to the current system of implied terms would practically generate. Whilst undoubtedly a set of statutory guarantees would provide an element of clarity, in so far as the terms could be accessed from one piece of legislation, the element of subjectivity within the guarantees is not necessarily set to be eliminated. ‘Goods’ themselves are a vast range of commodities and as such cannot necessarily be compared. The needs, requirements and expectations of a car cannot be compared to that of a cosmetic product, however, these are both ‘goods’ and will fall under the definition of ‘goods’.

In response to this, the proposed statutory guarantees will have to be both flexible and adaptable to account for the differences in traders supplying different goods. Therefore, an element of subjectivism would still be required in terms of whether it was reasonable to impose a guarantee to a specific good. It is thus arguable that the legal uncertainties of these statutory guarantees will be the same, if not intensified, with the removal of implied terms. Flexibility for businesses to adapt contracts to the needs of goods will be compromised and with set standards visible, goods may be subjected to conditions that are unreasonable to that specific product.

In addition, it is widely recognised the ‘courts do not imply terms where it would be reasonable to do so but only where it is necessary to give business efficiency to the contract[2]’.Therefore it can be stated implied terms, whilst remaining flexible, are not detrimental to consumers or abused in favour of either party, hinging on the principle the law should be certain over fair. In terms of higher value goods, contracts (and thus the implied terms that compromise the contract) will be examined by a consumer to a greater degree and any uncertainties that may be found confusing can be queried by the consumer and answered by the trader during negotiations. It is common practice for traders to disclose andclarify contractual terms and the conditions of products when questioned so as to avoid a later challenge of misrepresentation.

Services

The restrictions that would be felt for the supply of goods through the implementation of statutory guarantees will also be faced by those traders providing services.

The RMI thus directs thought as to the consequence of statutory guarantees. If the former are to be adopted for the benefit of consumer simplicity, weighty consideration must be given to the flexibility that will be required to enableconcessions, amendments and flexibility to accommodate the differences withingoods and within services. Arguably, this will compromise the simplicity of the proposal as a result.A trader or service provider must still be provided with flexibility to account for varying circumstances. For example, a consumer may want a good replaced when economically it would be more cost effective to repair the good and the discretion and expertise of the trader must be accounted for in such circumstances. Flexibility is especially required when a trader is dealing with consumers holding emotional attachment to products. Ultimately guarantees would require extensively accurate drafting and be subject to regular review to ensure they remain functional within changing markets and economic climates.

Statutory guarantees and pre-contractual descriptions

Providing a statutory guarantee that a service will meet the description given pre-contractually is again too restrictive and falls heavily against traders.Whilst the RMI firmly believes that any information given by a consumer in advance should be clearly linked to the outcome of the service provided and any trader should perform to the aim of fulfilling contractual standards, a statutory guarantee does not provide for the inevitability of additional information acquired after contracts are completed. Additionally, in terms of services, to enforce a policy whereby a contract can be rescinded because of a failure on the part of the servicer to meet pre-contractual information does not provide for unforeseeable obstructions that may permit a service being carried to the pre-contractual agreement. There must be flexibility within any tier two remedy to provide for the unforeseeable whilst still giving a consumer access to seek redress without termination of the contract being unduly accessible.

For example, in terms of the motor industry and repair services as a whole, initial assessments are based on traders relying on information provided by a consumer when assessing the likely time frame and costs of a service. Therefore, the statutory guarantee would not allow for further development of the requirements of a service which may need to be extended or limited on further analysis of the work required. If a statutory guarantee would not allow for additions to the original time frames or costs a trader will incur, traders will attempt to protect themselves against unforeseen additional costs and as such extend the purchase price or time given. This will ultimately be at the detriment of the consumer.

Remedies and implied terms

In terms of whether remedies for a breach of contract are compromised at the expense of implied terms, it is to be submitted that, providing remedies are clearly understood, remedies are accessible.To comprehend the former does not require statutory guidance.It can be objectively assessed as to whether a good is fit for purpose and thus used for what is required of it or not.As a contract is entered in to for a specific purpose, it can be inferred in most cases both parties wish for the contract to hold and thus will fulfil any remedial obligation and/or endeavour to implement the most practical remedy.

The measurement of 30days

Throughout the consultation paper, a requirement of 30day’s as a length of time for consumers to assess or return goods or seek redress for servicesis deliberated. This concerns subjects such as the designated period for which a consumer has a right to reject substandard goods and repair times, as well as whether a default period of 30 days is appropriate to carry out services.

The following submission is in response to:

-Question 6

-Question 11

-Question 14

-Question 35

The RMI moots that a 30day period is a reasonable amount of time to ascertain whether a good fits the standard required of it. As such this would, for simplicity purposes, be the logical period provided for a consumer to assess whether a good matches its description. If a good can be assessed to work in terms of the purposes it was bought for, the same would be expected in terms of description.

The RMI endorses the necessity of a set time period for ‘reasonable’ time in terms of assessing the quality of a good. However, this same period cannot be extended to the repair and replacement process, or in relation to the period for which a service must be carried out. The RMI fully agrees that an extension to the period available for repair and replacement should be extended providing that a replacement good is given for the interim period.This is of the upmost importance in areas of high value goods whereby the standards expected of a product are higher and often the higher the value of the product; the more complicated the functions of the good and the repair procedure. For example, where having to repair products such as cars and laptops, often a third party will have to provide specific parts to repair a problem, namely a manufacturer. A trader or service provider cannot guarantee a manufacturer will provide the replacement needed within the 30day period suggested. If the 30day period is to be sustained, then this must be dated from the date the replacement fixture is obtained or the requirements to provide a service have been obtained. This could be provided for by evidence of receipt or delivery. This argument also applies in terms of providing services. Furthermore, if it is unclear as to whether the breach is one of service or of good, this will extend the time period the servicer will require in order to perform the service. In relation to the above points, it is to be submitted, a statutory provision must allow for the fair and reasonable amendment of such a time frame in cases mutually recognised and agreed by both parties.

Thirdly, while the RMI welcomes the advantages of providing a replacement product to ensure significant inconvenience is not suffered by the consumer, the concession that the replacement must be of equal or higher qualityto the original product is a heavy concern. This may provide for a costly burden upon some businesses.Whilst it is often general practice in many industries to provide a replacement, this is not necessarily to the same or higher standard of the original product. For example within the motor industry, a large luxury car, such as a new Range Rover Sport may be temporarily replaced with a Nissan Micra. The RMI therefore submits that providing the replacement is sufficient for the purpose of the product and it is reasonable to provide a replacement product of a less quality this should be acceptable. The product must be of sufficient use for the primary purpose and use of the product.

Exemptions to the 30 day rule

There is also a focus within the paper concerning the need for exemptions. The key question discussed here is to what extent an exemption should be allowed to the 30day return policy when there is a clear understanding between the trader and consumer - or it is common practice there will be a delay - in using the purchased good after the purchase date. It has been mooted that delay before use of goods must be considered in terms of remedial policy for goods.