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Review urged as regulators crackdown on non-compliant websites

24 September 2008

With a crack-down on non-compliant online retailers under way, now is a good time for operators of e-commerce sites to give themselves a legal health-check.

In times of economic difficulty, IT spending is often one of the first casualties as companies look to shore up their bottom line.

So headlines like this are hardly surprising: UK is likely to follow US slowdown on IT spending.

But despite the chilly economic climate, with trading standards authorities taking action against retailers whose websites do not comply with online selling laws, the operators of such sites would be wise to bring their businesses into line with the law.

A recent sweep of retail websites by 90 local trading standards organisations and the Office of Fair Trading (OFT) included a review of whether the complied with the laws concerning online selling.

The two main laws are:

Under these laws, online retailers must ensure that their websites contain certain information, process sales in a particular way, and give customers a number of rights.
The most important of these rights is the right to cancel an order, given by the first Regulation. If that Regulation is complied with, the right to cancel applies for a seven day period. Crucially, if a retailer fails to comply with certain parts of the Regulations, that right can last for more than three months.

The OFT report found that whilst most of the 600 websites complied with the main legal requirements, certain areas of non-compliance cropped up again and again.

More than 40% were not transparent on pricing, 31% did not comply with their refund obligations, and 15% did not give full details of the right to cancel.

Failure to comply with the Regulations does not open up a retailer to fines or other sanctions. However, being reprimanded by the OFT or trading standards would cause reputational damage to a business.

And giving their more wily customers a legal right to cancel orders more than three months after the sale is not something many retailers would willingly agree to.

Both these risks can be avoided by complying with the relevant laws, and we recommend that retailers should therefore review their websites for legal compliance before risk becomes reality.

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Alex Newson

Solicitor
T: 08700 86 5084
I: +44 (0)115 906 5084
E: alex.newson@shoosmiths.co.uk