Technology &
Internet Law

The Devil‘s in the Detail - The Distance Selling Regulations

NB the distance selling regulations have been changed so some of the information in this article is now out of date - it still covers other subjects including defamation on the Internet.

The sheer volume of regulations in the last year is huge and for the average business it is hard, if not impossible, to keep up.  In ecommerce the pace of change is mind-blowing.  Besides all the new regulations (the Data Protection Act, the Distance Selling Directive, the Human Rights Act (yes, it does have an impact, etc.), the number of disputes on Internet related matters is increasing all the time with court decisions in effect laying down further laws. 

The recent Demon case has made headlines by making Internet Service Providers ("ISPs") liable for defamatory material posted on their server even though they argued that they are in no different a position that say BT in relation to the content of telephone calls. 

The Demon case is different in that it involved ISP liability.  The position for us mere mortals is that we would have a more direct connection with any material posted to our sites and therefore if we allow people to upload information onto our sites and it is defamatory, chances are that we would be liable to the defamed person in damages (i.e. we would get sued and have to pay out). 

Even business-to-business sites have interactive elements and forums or newsgroups where industry issues can be aired openly.  This sort of activity can add serious credibility to a site.  By allowing people access to your site in this way you have to decide whether to edit the material before it can appear (in which case you face direct liability as editor and also need the resources to manage the review of all postings to the site which could be time-consuming) or simply ignore the content and allow people to submit entries without control (in which case you will not be liable as editor but could be for failing to take reasonable care to prevent defamatory statements appearing): somewhere between the devil and the deep blue sea. 

However, there are things you can do to protect your business in these circumstances: 

1. Have a complaints procedure clearly marked on your site.  Make sure that you have the human resources to respond fast to a complaint (usually by pulling off the offending material without delay).  Also brief all staff in advance as to how to respond to the complaints. 
2. Get people to sign up to legally binding terms and conditions before they are allowed to post things on your site.  In particular, include a warranty by the visitor that they will not post any offensive or defamatory material (nor any which would breach a third party's intellectual property rights).  Be realistic and accept that this provision is more of a warning sign post that a practical tool because it will be hard if not impossible to trace many visitors. 
3. Your terms should also allow you to "pull" the material at any time without justification - on a separate issue you might also want to reserve the right to quote the postings and use them for whatever purpose you deem appropriate without needing to give a credit to the author. 
4. Take out defamation insurance.  The level of premiums varies and to some extent will reflect the steps you have taken to minimise the risk of defamatory material appearing and the adequacy of the complaints procedure. 

Bearing in mind that most ecommerce sales in the electronic components industry will not involve business-to-consumer ("B2C") sales, I have not devoted an entire article to the Consumer Protection (Contracts Concluded By Means of Distance Communication) Regulations 2000 but it is worth mentioning that it comes into effect on 4^th June 2000. 

In B2C dealings (even if only a small part of your business): 

1. You have to give the buyer a 7 working day cooling-off period (from the date of delivery) - it applies to the on-line sale of both goods and services (including so-called "virtual components").  If the contract is cancelled within the 7 working day period, you have to refund the money as soon as possible.  If goods are returned at your expense, you can deduct the actual postage costs only before refunding the price to the buyer (who can hold onto the goods until you do so).  Furthermore, if you do not tell the buyer to keep the goods safe until they are returned (within 21 days of cancellation), after that they do not have to do so. 
2. All goods have to be delivered within 30 days of the ordering being placed (unless the buyer agreed a longer delivery period on placing the order), so you need to ensure your ecommerce software has back-office support to prevent orders being taken when you are out of stock. 
3. You have to give buyers warning about their rights (as in 1 and 2 above) which must appear before the customer places the order (i.e. clicks the "submit" button, or whatever button is used finally to confirm the order).  The warning should be in writing "or other durable form" (e.g. electronically) so you should advise the buyer to print them off or download them in the case of on-line sales. 
4. The "written" warning must include your company name and, where payment is taken in whole or part up front, your trading address.  It must describe the main characteristics of the goods or services as well as the price including all taxes and delivery charges, the arrangements for payment, delivery or performance and the period for which the price remains open.  Where relevant it must also state the cost of using the means of distance selling (e.g. the cost of a premium rate call) and the minimum duration of the contract where the contract is of an on-going nature. 
5. You should also set out a form of notice of cancellation and ensure you give details of the name and address of the person to whom the notice has to be sent. 
6. Remember that failure to comply with the laws not only makes your contract unenforceable but also renders the company's directors, secretary and managers liable to heavy fines. 
7. The Regulations do not apply to certain contracts but the exceptions will not apply to electronic components (whether virtual of otherwise). 

As you can imagine, the Regulations are of far-reaching effect to those involve in B2C ecommerce and the cost of compliance will be huge.  I hope this simple summary is useful but, as always, the information in these articles is of a general nature and is not intended to constitute advice, so you should seek advice tailored to your circumstances before taking or omitting to take action.

NEED TO KNOW MORE?

For further information on the distance selling regulations and how they apply to you, contact Maitland Kalton or Julian Danobeitia.  Should you prefer to telephone, call us on +44 (0)207 278 1817.

Kaltons Solicitors, Suite 302, Spitfire Studios, 63-71 Collier Street, London, N1 9BE. Telephone +44 (0)20 7278 1817; Fax: +44 (0)207 278 1835.

© Kaltons Solicitors May 2000.  All rights reserved.