Tuesday, 26 April 2011

New EU consumer rights place ‘unfair burden on retailers’

LONDON - Europe’s business community has responded negatively to a number of amendments to the Consumer Rights Directive (CRD), which were approved by the European Parliament (EP) on 24 March.

“[This is] a costly vote for businesses, and it shows that Members of the European Parliament (MEPs) have lost sight of one of the key objectives [of the CRD], which was to cut legal costs for businesses wishing to sell cross-border,” said Arnaldo Abruzzini, Secretary General of Eurochambers, representing around 1,200 European Chambers of Commerce.

Andrew McClelland, Director of Operations and Regulatory Affairs at the Interactive Media in Retail Group (IMRG), believes that “some of these amendments will have a terrible effect on the growth of e-commerce”.

Although a final vote has been postponed until an agreement with the Council of Ministers - representing the Member States (MS) - is reached, the amendments are ‘to protect online shoppers and boost consumer confidence in buying in other MS’ and ‘will be the basis on which MEPs will try to reach an agreement with MS,’ the EP said in a statement.

“The new EP position is bad news for businesses,” explains Nick Johnson, Partner at Osborne Clarke. “[Businesses] will have to incur significant costs, but with little benefit in return.”

New rules
Under the new rules, goods must be delivered within 30 days and consumers will have a 14-day EU-wide withdrawal period in which they may change their minds. The newly introduced Article 17 has especially angered many e-businesses, since it will make retailers liable for covering the cost of the return of a product valued over €40 after a consumer exercises their right to withdraw.

‘This places an unfair burden on e-retailers,’ the IMRG said in a statement. ‘For those sectors that have high return rates and low product costs, the potential losses could be catastrophic.’

Rohan Massey, Partner at McDermott Will & Emery, is not surprised many retailers have responded negatively since “the obligations [are] being placed on traders”. He predicts products are going to be more expensive since “traders will look to offset costs by increasing prices”.

Johnson agrees with this: “Of course, consumers will ultimately pay for all of this. Prices [will] go up. That, in turn, means EU businesses lose out to competitors in the US, Asia and elsewhere - hardly a recipe for job creation and economic growth in Europe.”

Michiel Willems. Published previously in E-Commerce L&P, London 2010. Copyrights apply.