We use cookies to customise content for your subscription and for analytics.
If you continue to browse the International Law Office website, we will assume you are happy to receive all of our cookies. For further information please read our Cookie Policy.

Why e-businesses need to be on the button - International Law Office

International Law Office

IT & Internet - Germany

Why e-businesses need to be on the button

October 16 2012

New rules
Labelling requirements

Consequences for violations
Comment


The Act on Improving Customer Protection in E-commerce has now come into force. The act obliges all online traders (e- and m-commerce businesses) to provide consumers with information in a more explicit way. The provisions, which implement the new EU Consumer Rights Directive (2011/83/EC), apply to business-to-consumer contractual relationships only and affect scenarios such as downloading applications or games on smartphones or the 'sale' of virtual in-game currency for online games (against payment). However, the new rules do not apply where contracts have been finalised on the basis of an individual offer and acceptance.

New rules

E-commerce traders already had to provide customers with specific information and must still deliver this. However, the act introduces particular rules regarding the presentation of certain types of information. In particular, the last step of the ordering process must clearly state that proceeding results in closing a contract leading to payment obligations for the consumer. If the trader violates the obligation to label the order button correctly, the contract as a whole becomes invalid by law.

Information subject to the new rules
Before consumers reach the order button to click and thereby finally buy their chosen product, they must have been informed of:

  • the product's essential characteristics;
  • the minimum term of the contract, if the contract's subject is a permanent or regularly recurring contractual performance;
  • the total price (including value added tax); and
  • the shipping costs (if any).

Contrary to the old provisions, online traders must now ensure that consumers are provided with this information "clearly and unequivocally". It must be highlighted and made visible for the consumer immediately before the contact is closed - that is, placed right above the order button; hyperlinks to other pages or references to information below the order button are not sufficient. Further, this requirement of immediacy will not be met where elements or structures separate the order button from the information. Such separations are regarded as giving consumers the misleading impression that the button and the information bear no relation to one another.

Difficulties can arise in e- and m-commerce contracts. As smartphone screens are limited in size, traders must pay close attention not to violate the new provisions by using, for example, a too-small font size.

Exceptions
Online auction portals (eg, eBay) are legally bound to list the above-mentioned information, just like any other e-commerce company closing a contract via the Internet. However, as it is up to the consumer only (and not the seller) to determine how much he or she is willing to pay for a certain product, its total price cannot be displayed. Therefore, it is sufficient to show only the highest bid that the consumer has placed.

Labelling requirements

According to the new law the labelling of the order button must mention the words 'order with costs' or other such unequivocal wording (eg, 'conclude contract with costs' or simply 'buy'), which highlights that the consumer will face payment obligations. It is the legislature's intention that traders inform consumers at the latest step before contracting that by clicking the button they will face claims for money. Words such as 'continue', 'register', 'order' or 'place order' do not fulfil this legal requirement. In any event, the wording must be clearly visible. Placing grey letters against a light grey background, for example, will not be acceptable. Neither is using icons (eg, currency symbols such as '$') instead of words. Although order buttons are most frequently used, sellers are not limited to them. Other devices, such as hyperlinks or check boxes are permitted, provided they meet the legal requirements.

The burden of proof for complying with this provision lies with the trader – in a lawsuit he or she must be able to prove that the order button was correctly labelled.

Exceptions
Again, there are exceptions for online auction portals: instead of 'buy' and so on, the order button may be labelled with 'bid' or 'confirm bid'.

Consequences for violations

If a trader violates the provision to label the order button clearly in this way, the entire contract will be invalid. Consequently the trader may not demand payment and the consumer may not demand performance. However, the legality of this legal consequence is debatable.

Violations of the new provisions, which serve to protect consumers, entitle consumer advice agencies or chambers of commerce or crafts to seek an injunction. Further, competitors, along with the above-mentioned chambers, are entitled to sue for:

  • removal;
  • skimming of excess profit; and
  • damages (competitors only).

Further changes can be expected. As mentioned above, any violation of the provision to label the order button correctly will lead to the contract's invalidity – it will be regarded as never having been concluded. However, this contradicts the wording of the EU Consumer Rights Directive, which states only that consumers shall not to be bound by contracts where buttons were incorrectly labelled. The idea is to force traders to follow the provision to label order buttons correctly: in the event of a violation, consumers may demand performance without being obliged to pay. Should the German Parliament not change the actual law, it will be interpreted in the light of the directive, which must be implemented by December 13 2013. However, some critics are demanding that such an interpretation must conform with the directive as it already exists. It is therefore advisable to pay close attention to further developments in this area of law.

Comment

Since August 1 2012 information being provided to consumers must be placed prominently above the order button. This button must clearly indicate that by clicking it, the consumer will face payment obligations. Failure to comply with these requirements will result in the contract being regarded as invalid. However, this contradicts the provisions of the directive, which the German legislature was trying to implement. Therefore further changes are likely.

For further information on this topic please contact Konstantin Ewald at Osborne Clarke by telephone (+49 221 5108 4160), fax (+49 221 5108 4161) or email (konstantin.ewald@osborneclarke.de).


Comment or question for author

ILO provides online commentaries as specialist Legal Newsletters. Written in collaboration with over 500 of the world's leading experts and covering more than 100 jurisdictions, it delivers individually requested information via email to an influential global audience of law firm partners and international corporate counsel. Please click here to register for the service.

The materials contained on this website are for general information purposes only and are subject to the disclaimer.

ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription. Register at www.iloinfo.com.