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					                Institute of Fundraising IT Special Interest Group

                            Is your online store illegal?

                                Julia Wylie, JW Law

                             Tuesday 2 December 2003


These notes cover some of the key legal issues that apply to your online stores. As
well as covering legal requirements for your sites, I have also covered other practical
issues to take into account, such as trying to ensure that your Terms & Conditions
actually apply and trying to avoid problems through pricing errors.

Online trading is covered by all the usual sale of goods and consumer laws and
regulations, but the law has also tried to govern specific issues which apply to
internet retail sites, many of which apply equally to other forms of distance selling.
For example, the Distance Selling Regulations will apply equally to your paper
catalogue as to your online store.

The 4 main Regulations covered in my talk are:-

1. Consumer Protection (Distance Selling) Regulations 2000 (“Distance Selling
   Regulations”)
2. Electronic Commerce (EC Directive) Regulations 2002 (“E-commerce
   Regulations”)
3. Privacy and Electronic Communications (EC Directive) Regulations 2003
   (“Privacy and Electronic Communications Regulations”)
4. Unfair Terms in Consumer Contracts Regulations 1999

1. Information Requirements

Both the Distance Selling Regulations and the E-commerce Regulations specify
information which you need to provide to users and customers. Some of this
information can or must be provided on the web site itself. Other information needs to
be set out in a specific communication to customers.

E-commerce Regulations

The E-commerce Regulations specify information which you must provide on the site,
including:-

    Seller’s name, email and land address (eg your Trading Company if it operates
     the store or the company which does so if not). It is not enough to just provide
     an email address or a Contact Us link button. You need also to give a postal
     address
    Prices - Prices on the web site must be clear and unambiguous and state
     whether prices are inclusive of tax and delivery costs)
    Details of the technical steps which a customer has to follow to conclude a sale
     contract
    You must also give customers a way to identify and correct input errors before
     completing their orders and explain how they can do so
    Whether or not the sale contract will be filed by you and whether the concluded
     contract will be accessible
    Where the seller is registered in a trade or similar register available to the
     public, details of the register in which the service provider is entered and his
     registration number, or equivalent means of identification in that register – eg
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     this may cover the Institute of Fundraising and the Direct Marketing Association
     and possibly also the Charity Commission although it is the charity itself which
     will be registered
    Any relevant codes of conduct the seller subscribes to and information on how
     those codes can be consulted electronically, ie provide a website address
    VAT no.
    Language offered for the conclusion of the sale contract, even if the only
     language is English.

Distance Selling Regulations

There is some overlap here with the E-commerce Regulations but the requirements
focus more on information regarding the sale.

The Regulations requires two types of information:-
       Prior information – should be set out in your web site as part of your
          Terms & Conditions, order forms, other sections eg Cancellations and
          Returns Policy, Contact Us and Delivery sections
       Written information – should be set out in a specific email or delivery note
          to the customer. I recommend that it goes in an acknowledgement email
          issued following an order since the information must go to the customer,
          and in the case of a gift, delivery may be to someone else.

Information which must be provided before an order is placed

Under the Distance Selling Regulations, the sale contract will not be enforceable
against a consumer unless you have provided to the customer in good time prior to
the conclusion of the contract the following information (“Prior information”):-

    Seller's name and its postal address
    Description of the goods or services
    Price including all taxes
    Delivery costs
    Arrangements for payment
    Arrangements and date for delivery or performance
    Cancellation rights, explain:-
          That the customer has a right to cancel the order
          Any exceptions to this right
          How the right must be exercised, including where the customer should
           send any cancellation notice
          That you require the customer to return the goods in the event of
           cancellation (if applicable)
          Where the goods must be returned to
          Whether return is at the customer’s or the Seller’s cost
    If the customer is to use a premium rate telephone number, the cost of the call
     must be specified
    How long the offer or the price remains valid
    You must state if it is proposed to supply alternative goods if the goods ordered
     are unavailable and if so indicate that you will bear the cost of return of those
     goods if they are not wanted
    Where complaints should be addressed to – email and a land address

You must provide the Prior Information in a clear and comprehensible manner on the
site, eg in the T&Cs, Cancellations and Returns Policy, Contact us, Delivery sections
etc.


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Written confirmation

When an order has been made you must send to the customer confirmation of the
Prior Information in writing or another durable medium, such as fax or e-mail, unless
it has already been provided in writing, eg. in a catalogue or advertisement.

OFT1 Guidance on this requirement provides that a consumer must be able to keep
the information, unchanged, for the time that it is needed, and access it for future
reference. Emails are a durable medium but website information, which may change,
will not normally meet this requirement.

In addition to confirming the Prior Information, you must also provide the following
information to customers in writing:-

          A statement that the customer has a right to cancel the contract if he wishes
           and information on when and how the customer can exercise the right to cancel,
           as referred to under Prior Information above
          Postal address of the place of business of the Seller to which the customer may
           address any complaints
          Information on any after-sales services and guarantees.

The information must be provided either:-

          prior to the conclusion of the sale contract, or
          in good time before or during the performance of the contract and, at the latest,
           at the time of delivery where goods not for delivery to someone other than the
           purchaser are concerned. This means that where a customer orders goods to
           be despatched to someone else, the information must be given to the customer
           who placed the order prior to the conclusion of the contract. The best option is
           for this information to all go in the order confirmation email.

Other legal requirements

You also need to include the following information on your web site in relation to the
company providing the online store, eg your trading company:-

            Company number
            Registered office
            Where the company is registered, eg England.

2. Cancellation Right:-

Under the Distance Selling Regulations a consumer will generally have a statutory
right to cancel their order within 7 working days by notifying you in writing.

If the information requirements above are not complied with, the period during which
the customer has a right to cancel is extended.

Assuming that the information requirements have been complied with, the
cancellation period is seven working days beginning with the day after the day on
which the goods are delivered.

Exceptions - If you want you can except from the right to cancel certain items
including the following:-


1
    Office of Fair Trading
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    Goods which due to their nature cannot be returned (e.g. personalised goods or
     goods made to the customer’s specification) or goods which are likely to
     deteriorate or expire rapidly (e.g. dairy products).
    Audio or video recordings or computer software which are unsealed by the
     customer
    Newspapers, periodicals or magazines.

On the cancellation of an order, any money paid by the customer must be repaid as
soon as possible and, in any case, within thirty days of cancellation. You cannot
impose any charge on the customer for the exercise of this right.

If the customer cancels after receiving the goods they must restore the goods to you
and in the meantime retain possession of the goods and take reasonable care of
them. They must also make them available for collection if you request them to do so
in writing.

You can include a term in your site’s Terms & Conditions which requires the
customer to return the goods at their expense and indicates that you will impose a
reasonable charge to cover costs incurred by you in collecting the goods if they fail to
do so. If so, you must also include this information in the written confirmation
information relating to the right to cancel.

However, these terms merely mean that you can charge for your direct costs of
recovering the goods if the customer fails to return them. You can’t make cancellation
conditional on return of the goods.

If you want to be able to supply substitute goods (e.g. where the original goods
ordered are not in stock, but similar goods are available), you must provide for this in
the site’s T&Cs and you must bear the cost of return of the substitutes if the customer
doesn’t want them.

3. Performance of the contract

Under the Distance Selling Regulations, unless the parties agree otherwise, you
must perform the contract within thirty days from the day after the customer sends his
order.

If you are unable to perform the contract within this period because the goods are
unavailable, you must inform the customer before the end of the period and you can
then agree an extension of the period. If you fail to do this, or if the customer does
not agree an extension, you must repay any sum paid as soon as possible (and in
any event within 30 days).

A contract which is not performed within the 30 day period is treated as if the
customer never entered into it, but the customer will still have remedies for non-
performance. This means that if you are unlikely to be able to deliver within 30 days,
then you must specifically provide for this in the site’s T&Cs and make this fact clear
to the customer before the sale contract is entered into.

4. Incorporating the Terms & Conditions in the contract

Having well written Terms & Conditions is not much help if you have not managed to
ensure that they form part of the contract with the customer. To try to achieve this:-

    Require the customer to go to and scroll down the T&Cs before accepting them
     and being able to proceed with their order. Simply giving the customer the
     opportunity to follow a link to the T&Cs before placing an order is probably
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     insufficient. Obviously you can’t make them read the T&Cs but you can at least
     require them to actually bring the T&Cs up on screen
    Require the customer to tick or click to indicate acceptance of the T&Cs before
     proceeding with their order
    Provide an option to decline the T&Cs and exit the site
    Add a print button to the T&Cs and Order Confirmation message
    Highlight key terms and draw them to the attention of customers.

The E-commerce Regulations require that the T&Cs must be made available in a
way which allows a user to store and reproduce them.

5. Pricing Mistakes

Trying to protect against the consequences of costly pricing errors is possibly one of
the most practical purposes of your site’s Terms & Conditions. To try to achieve this
you need to:-

    Make it clear in the T&Cs at what point a contract is formed with the customer.
     The T&Cs should expressly state that the contract is not formed when the
     automatic acknowledgement message is received by the customer but is
     formed at a later point (eg upon dispatch of the goods or upon receipt of an
     email confirming dispatch of the goods) once you have had a chance to check
     and confirm that you will fulfil the order
    Ensure that the T&Cs are properly incorporated in the sale contract
    Ensure that the wording of the automatic acknowledgement message properly
     reflects the T&Cs and doesn’t indicate acceptance of the customer’s offer to
     buy.

6. Unfair Terms

In addition to those Regulations which are specific to internet trading, general
consumer and sale of goods laws and regulations also apply. Of particular
importance is the Unfair Terms in Consumer Contracts Regulations 1999.

Under these Regulations, any provisions of your site’s Terms & Conditions which are
unfair will be unenforceable. A term is unfair if it causes a significant imbalance in the
parties’ rights and obligations under the contract to the detriment of the consumer,
and contrary to the requirement of good faith. Good faith means that suppliers must
deal fairly and equitably with consumers.

The Office of Fair Trading oversee compliance with the Regulations and give detailed
guidance on the types of clauses which will be considered unfair. They have recently
issued draft guidance on IT consumer contracts made at a distance. Whilst this
guidance deals specifically with IT contracts, much of its content will be equally
relevant to your online stores.

The Regulations tend to deem unfair clauses which aim to either protect the supplier
from certain sorts of claim which the consumer might otherwise make, or give the
supplier rights against the consumer which the supplier would not otherwise have.
Clauses which attempt to exclude or limit liability are particularly likely to fall foul of
these Regulations and need carefully wording if they are to be effective.

Transparency is also considered key, and plain and intelligible language must be
used in your site’s T&Cs. Guidance indicates that legal jargon and statutory
references should be avoided, sentences short, layout clear, with easily understood
sub-headings. Intelligibility also depends on how the terms are presented and used,

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eg size and colour of text and background. Consumers also need to be given the
opportunity to examine all the Terms before purchase.

The Sale and Supply of Goods to Consumers Regulations 2002 also give consumers
new remedies against suppliers in certain circumstances. Under these Regulations:-

       Guarantees provided by manufacturers or suppliers are made legally binding
       Public statements made about products must be factually correct and any
        assessment of whether goods are of satisfactory quality must take account of
        any pre-contractual statements made about them, eg on your site.

Any terms which have the effect of limiting or excluding these rights will be regarded
by the OFT as unfair, eg an entire agreement clause which indicates that the Terms
& Conditions form the entire agreement with the consumer to the exclusion of any
statements made before the contract is entered into.

Not only may terms which attempt to exclude liability under sale of goods legislation
be unenforceable, use of terms which attempt to deprive a consumer of their
statutory rights may also be a criminal offence under the Consumer Transactions
(Restrictions on Statements) Order 1976.

7. International Sales

Does your online catalogue sell just to the UK or to other countries also?

If you are selling outside the UK the likelihood is that you will be subject to the local
laws of the countries that you sell to, in particular laws protecting consumers,
governing product liability etc. This is one of the added risks of selling outside the
UK.

The safest practice is to only sell to countries where you are confident that both the
products that you sell, and the way that you sell them, comply with local laws.

The E-commerce Regulations deal to some extent with the issue of which laws
apply to e-commerce transactions between countries in the European Economic
Area. In its simplest form, the Regulations impose a “country of origin” principle,
meaning that as long as a UK business complies with UK laws, it doesn’t have to
worry about the laws of other Member States. However, this is not of much use to
your shopping websites, since the country of origin principle does not apply to the
terms of consumer contracts and there are other exceptions also. This means that
your site, the products which you sell from the site and the way that you sell them all
need to meet the laws of every Member State (and probably those of non-Member
States also) in which consumers can buy from the site, not just UK laws.

For example, if you sell to French consumers your site’s Terms & Conditions must be
provided in French as well as English, otherwise the T&Cs may be unenforceable. In
other countries consumers get a longer period within which to cancel than the 7 days
provided by the Distance Selling Regulations.

If any problems arise and returns or product recalls are necessary matters will be
much more complicated if you have sold outside the UK. If you do decide to sell
abroad I imagine that you will at least want to restrict the countries that you will
deliver to. Do you really want to get involved in issues with someone in Outer
Mongolia?

It may in fact be illegal to supply some products to certain countries, eg alcohol, or
even chocolates containing alcohol.

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Trade Marks

There is also the possibility of infringing the trade marks of organisations who in their
country own the rights in respect of logos or other marks that you use on the site.
Whilst you or your licensors may have the necessary trade mark rights in respect of
use of the marks in the UK or even in the EC, are you confident of worldwide
protection? The position on this is still a bit unclear. However, there have been cases
that suggest that allowing individuals from a country to buy from your web site could
constitute use of the trade marks on your web site in that country. As such, if marks
on your web site conflict with trade marks registered in that country you may be liable
for trade mark infringement.

Is it worth the risk?

Depending on the revenue you get from international sales you may feel that the
added risks and effort are worth taking, but if the sums involved are fairly small it may
be better to keep things simple, which seems to be the view taken by several big
name web site traders many of whom restrict sales to the UK.

8. Privacy Policy

Your Privacy Policy needs to clearly explain what personal information you
collect, how you use it, who you share it with and what rights users have in
connection with that data.

If you want to use data collected for marketing by your trading company, charity or by
other organisations that you work with, eg the bank providing your affinity credit card,
you need to explain this clearly and cover this not only in the Privacy Policy but also
at any data collection points by appropriate opt-in/opt-out statements.

Use of data is always a big issue for charities and in light of the new Privacy and
Electronic Communications Regulations it is now more of an issue than ever. I am
not going to talk about these Regulations in detail as they are being covered by Mike,
but simply mention that in the light of these Regulations you will need to review your
Privacy Policy.

As well as introducing a requirement for valid informed consent for most forms of
email direct mailings, the Regulations introduce new requirements regarding
information on use of cookies and require that users be given the opportunity to
reject cookies.

The Information Commissioner has recently issued guidance2 on the Privacy and
Electronic Communications Regulations and the content of both your Privacy Policy
and data collection statements should be reviewed in the light of this guidance.

The guidance indicates that where cookies or similar devices are used, users must
be given:-

       Clear and comprehensible information about the purposes of the storage of,
        or access to, information collected; and
       The opportunity to refuse the storage of, or access to, that information.




2
 Guidance to the Privacy and Electronic Communications (EC Directive) Regulations 2003 – issued
November 2003
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The guidance does not prescribe how these obligations should be complied with.
However, it does indicate that the mechanism by which a user may refuse access to
information by a cookie must be prominent, intelligible and readily available to all, not
just the most computer literate or technically aware. It indicates that “whether service
providers choose to make their own switch off facilities available or else explain to
the user or subscriber how they can use the facilities specific to their browser type is
less important than that the mechanism is uncomplicated, easy to understand and
accessible to all.”

The guidance refers to the web pages provided by the Interactive Advertising Bureau
(“IAB” - an industry body which develops standards and guidelines to support online
business processes) at www.allaboutcookies.org, which explains to users how
cookies work and can be managed. Whilst the guidance does not specifically
recommend that you link to these pages in your Privacy Policy, the reference to the
pages in the guidance does suggest that the Information Commissioner considers it a
good idea to do so.

If your web site contains adverts by third parties who themselves use cookies in the
adverts, as the cookies are in your site you will be responsible for complying with the
information requirements in relation to those cookies.

9. Disabled Access

I have mostly focused on the issues relating to selling through your site, but other
legal issues also need to be taken into account. For example, have you assessed
whether your site comes up to the necessary standard for disabled access under the
Disability Discrimination Act of 1995?

A Code of Practice issued by the DRC makes clear that the requirement for service
providers not to discriminate against the disabled applies to accessibility of online
services. There have not been any cases on this yet, but a test case is expected in
the near future. If you are re-developing your site it is essential to take account of
latest best practice in this area.

10. Review

This is an area where things change fast and so its important to keep your online
store’s Terms & Conditions, Privacy Policy and content under regular review. There
have been many new regulations in this area in the past few years, and I imagine
that there are still more to come as new issues arise through increasing use of
internet trading.

The Distance Selling Regulations apply equally to your paper catalogue and so you
should also check the statements, order process and T&Cs there in line with the
above points.

Need any help?

I’ve recently worked with several national charities on updating their online stores to
take account of the above requirements. If you need any help with any of this you
can contact me at:

juliawylie@jw-law.co.uk

Please note that the information contained in these notes is intended as a general
review of the subject and detailed specialist advice should always be taken before
taking or refraining from taking any action.

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