Author: Ivan Rámeš
From 6 January 2023, a large amendment to consumer law will come into force, introducing a number of changes for e-commerce entrepreneurs as well as the operators of brick-and-mortar stores, aiming to further strengthen the protection of consumers. The amendment introduces, among other things, an extension of information obligations of entrepreneurs towards customers, tightening the rules on discount sales, changes to regulation of complaints procedure rules, and introduces new regulation on provision of digital content and services. In light of these changes, the business documents such as terms and conditions and complaints procedure policies will have to be adapted to the new rules. In some cases the information on websites will also have to be modified. Failure to comply with the changes may be heavily fined by the authorities – for the most serious infringements, the entrepreneurs might face the fines of up to 4% of total annual turnover.
The amendment to the Civil Code (“CC”) and to the Consumer Protection Act (“CPA”) implements the requirements of European law (including the Omnibus Directive) and entails a number of changes for both consumers and entrepreneurs. The approved amendment was published in the Collection of Laws last week and will enter into force on 6 January 2023. The new regulation further strengthens the position of the consumer and reflects the development of digital technologies. What are the most significant changes?
Probably the most discussed topic is the new rules for discount sales, applicable both to online sales and in brick-and-mortar stores. If the goods are offered at a discount, the lowest price at which the goods were sold in the last 30 days prior to the discount was granted must also be now indicated. The discount indicated in percentage must be calculated from the lowest price in the past 30 days. The change aims to prevent “artificial” price increases before the start of discount sales (such as Black Friday or post-Christmas sales), as a result of which the discounts may appear to be higher than they actually are. An exception to this new obligation applies to perishable or short-life products, as well as to 2+1 free promotions, i.e., combined or tied conditional offers, or loyalty programmes.
Under the new legal regulation, the entrepreneur shall, without any further circumstances taken into account, only be liable to the consumer for the defects of the goods which the goods already had when accepted by the consumer and which become apparent during the two-year period for exercising rights due to defective performance. Should a defect in goods become apparent during the first year, the presumption is that it already existed at the moment the consumer accepted the goods (previously, this period was only six months). This is another benefit to the consumer as the entrepreneur carries the burden of proof in case of lack of conformity of the goods which occur within the first two years of the time of acceptance of the goods. In order to avoid liability for the defective performance, it is up to the entrepreneur to convincingly prove that the defect did not exist at the time of acceptance of the goods by the consumer.
Another novelty is the possibility of a consumer affected by an unfair commercial practice (e.g., in case of violation of discount sales rules – see above) to withdraw from the contract within 90 days of its conclusion. Depending on how serious the unfair commercial practice is, the customer may alternatively request a reasonable discount or withdraw from the contract. For example, the consumer could request a reasonable price reduction if he finds that he has purchased a product based on a misleading claim falsely guaranteeing the lowest price on the market.
Under the new regulation, the default time limit for delivery of ordered goods shall be 30 days from the conclusion of the contract. The entrepreneur shall be obliged to deliver the goods to the consumer within 30 days unless otherwise agreed with the consumer. It is not sufficient to inform the consumer about a longer delivery period in the business terms and conditions on the website. The amendment requires the entrepreneur to agree on a longer delivery period with the consumer – a practical option is, for example, a check box within the ordering process.
The “order” button we are used to when shopping on-line needs to change its appearance. It needs to be clearer to the consumers that by clicking the button they actually undertake to place an order. It is no longer sufficient that the button only states “order” alone. If placing an order entails clicking on a button, it must be labelled with the words “order with obligation to pay” or other similar wording which makes it clear to the consumer that he must pay when he clicks. If this requirement is not met and the consumer subsequently disputes his order, he may be successful, and the contract will not be valid. If the button remains in its original wording but the customer wishes to place an order, the order will of course be valid. However, in such a case, the e-shop operator faces the risk of being fined by the Czech Trade Inspection Authority.
The new regulation explicitly defines such conduct as an unfair commercial practice – supervisory authorities will therefore more rigorously sanction publication of fake reviews by anonymous users who may have nothing in common with consumers ordering the goods of a given entrepreneur, as well as hiding or modifying reviews already given to make them seem more positive. Under the new regulation, each review should be linked to a specific order of a consumer. Such information is not public, however, the Czech Trade Inspection Authority may request it in the case of an inspection. However, we know from our experience that manipulation of reviews is sanctioned by the Czech Trade Inspection Authority even under the current legislation.
The amendment will also bring about stricter regulation for informing consumers about personalised pricing – commonly used for example for sales of airline tickets.i The change is justified by the practice of entrepreneurs who track and profile consumer behaviour based on automatically stored behavioural data and customize the prices on that basis. Where the price is personalised to the consumer on the basis of automated decision-making, the consumer must be transparently informed of this fact prior to the conclusion of the contract. The customer may be informed during the ordering process or directly with the specific goods (or, where appropriate, additionally in business terms and conditions). When applying personalised pricing, the entrepreneurs must also continue to comply with the requirements of other applicable legislation (in particular in the areas of data protection and discrimination).
The current legislation requires the product to be accompanied by written instructions. The written form means also electronic form under the Czech legislation, therefore the requirement for a written form should not be confused with the need to provide instructions on paper. However, the current legislation requires written instructions to be “attached”, which is interpreted in practice to mean that the instructions must be provided in paper form together with the product. The amendment abolishes this requirement especially in light of the development of modern technologies. For example, in the case of provision of digital content such as mobile applications, attaching a paper manual would not even be feasible. If the consumer requests it, he will be entitled to be provided with the instructions on a durable medium – which can be paper as well as electronic mail.
The consumer is still entitled to withdraw from the contract for goods purchased through an e-shop within 14 days. The consumer should now, however, only test the goods purchased online in the same way as it would be allowed for him when testing in a brick-and-mortar store – this rule was already applicable prior to the amendment, but was not explicitly provided for in the text of the legislation. If the consumer uses the goods for a common use within 14 days of purchase and then decides to return them, the seller does not have to refund the full price. The consumer is now liable to the entrepreneur for any diminished value of the goods due to a higher degree of use than is necessary to check characteristics and functionality of the goods.
The amendment tightens the terms and conditions for concluding contracts over the phone. Such a contract will now be concluded only after the consumer has received the contract in text form from the entrepreneur and has confirmed the offer to the entrepreneur electronically or signed it in paper form. Anchoring that rule in the new regulation is justified by the abuse of this method of concluding contracts towards the elderly people.
Another novelty is the regulation of on-line marketplaces – an on-line marketplace is a portal operated by an entrepreneur that allows consumers to conclude contracts remotely with other traders or consumers (for example, Amazon globally). So far, this type of service has not been defined in the legislation, although it is increasingly used. On-line marketplaces must, among other things, transparently provide information about the criteria used to determine the order of services or products displayed or searched for on the web (including, for example, information as to whether certain services or products are favoured over others on the basis of paid advertising). They must also inform whether the third party offering the services or products is an entrepreneur or not (this is important for consumers because if the seller is not an entrepreneur, many of the rights that consumers have in their relationship with an entrepreneur do not apply).
The amendment introduces new regulation of provision of digital content and services, an area which has not been comprehensively regulated at EU or national level so far. Digital content includes software, applications, e-books or audio files in any form (for example, even in a smart watch or smart phone). For example, video, audio or other file sharing services, digital games or social media can be described as digital services. The amendment deals with specific features of digital products, such as the obligation to provide updates of the digital content or services for a certain period of time or how to establish liability for defects in such products and introduces certain obligations for entrepreneurs in this respect. In addition, digital content and services are usually protected by intellectual property rights, so their provider must possess the respective licence.
In view of potential high fines, we are already adjusting our clients’ purchasing processes, business terms and conditions and complaints procedure policies, as well as the information required to be published on their websites. We will also be happy to assist you with interpretation of proposed legal provisions, modification of legal documents or correct setting of information obligations. We will also present some of the most significant changes in more detail on our blog where we regularly inform not only about new developments in consumer law.
