Internet Auctions The Law for Business Sellers When you sell goods on an internet auction site, the law requires you to comply with certain rules. This page provides a summary of some the most important rules for businesses selling goods at internet auctions. Are you selling to consumers? When you sell goods over the internet, some rules apply even if you are selling to businesses, but many apply only if you sell to consumers. A consumer is someone who is buying goods for their own personal use. If there is a dispute over whether the buyer is a consumer (and therefore about what their rights are), it is usually up to the seller to prove that the buyer was not a consumer. If you intend to sell only to businesses, you should make this absolutely clear in any item listing and other advertising. If you sell to businesses and consumers, you may wish to adopt separate terms and conditions for each type of buyer. If you are a business, you should make this clear in your item listing. It is a criminal offence to fail to make it clear that you are a business, except in sales by auction. Selling to buyers outside the UK If you present your goods as available to buyers outside the UK, you cannot assume that UK law will apply to the contract, or that disputes will be dealt with exclusively in the UK courts. Where buyers are consumers in the EU, they will generally be entitled to benefit from the protection of the laws of their own country, and to bring Court actions in their own country. In other cases (consumers outside the EU, business buyers), you may wish to specify that UK laws apply and that the UK Courts will have jurisdiction, but even this may not be effective in every case. Ca12 06/13 1
Information Requirements Certain information must be provided to your customers. For much of this information, it is critical that it is provided before a contract is made, so you should include it in your item listing. In all cases, you must declare: The identity of your business. A trading name (e.g. 'Marks and Spencer') is not enough. The listing should include the full corporate name of a company (e.g. 'Marks and Spencer plc'), the names of all partners in a partnership (e.g. Mr K Marks and Mr R Spencer), or the name of a sole trader (e.g. Mr K Marks). The geographic address of your business. A PO Box address is not enough. If the item is being offered to consumers, you must also include the following information, except where the item sold by auction: A description of the item The price, including all taxes Delivery costs Arrangements for payment and delivery The existence of the right to cancel, unless this does not apply Cancellation Rights If the sale is not an auction, then any consumer buyer will normally have the right to cancel the contract without giving any reason at all, even after they have received the goods. This always applies unless the law allows an exemption. What is the cooling-off period? The cooling-off period is 7 clear working days after the consumer receives the goods. If you fail to provide the required information, the cooling-off period of 7 working days starts when the consumer eventually receives that information, or after 3 months, whichever is the sooner. To exercise the right to cancel, the consumer must notify you in writing (an e-mail is sufficient) within this period. 2
What happens to the goods? When the contract is cancelled, you can collect the goods from the consumer. You must do this at your own expense unless you have told the consumer, before they agreed to buy the item, that they would have to pay the return postage costs. You are required to refund the item price in full, the original delivery costs and any other charges, within 30 days. The consumer must take good care of the goods until they are returned or collected. However, they do not have to return goods unused or in unopened packaging. If the consumer fails to take reasonable care of the goods, they do not lose their right to cancel, but you may be able to offset the cost of any unreasonable damage against the refund due. What are the exemptions? In the following cases, the consumer has no right to change their mind about the purchase (unless you decide to offer this as an extra service): Where the consumer meets you in person, for example to view the goods, before agreeing to buy Goods whose price fluctuates with financial markets (this may apply, for example, to gold coins whose value is based mainly or entirely on the weight of metal in them) Goods made to the consumer's specification (but this does not include goods, such as cars or computers, where extras are chosen from a standard list) Personalised goods Perishable goods, and goods which by their nature cannot be returned (e.g. fresh cut flowers) Audio recordings, video recordings and computer software, but only if the consumer unseals them Newspapers, periodicals and magazines. Buyers Rights: Sale of Goods Act What can the buyer expect? The buyer is entitled to expect that goods are: as described of satisfactory quality fit for their purpose yours to sell 3
(e.g. not stolen, or subject to an HP agreement). What if the goods fail to meet these standards? If the goods fail to meet these standards when the customer receives them and inspect them, they can reject the goods. If the buyer is a business, however, they cannot reject goods if the breach is slight and rejection would be unreasonable. The buyer can claim a full refund, including a refund of postage costs, and you may also be able to claim compensation for any other losses which occur. For example, if you supply a faulty CD player and it scratches and destroys a CD, you would be liable for the cost of replacing the CD. If it would cost the buyer more to buy the same or equivalent goods without a fault elsewhere, they could claim the difference in price in addition to a refund. If the buyer delays in making a complaint, or if a fault or misdescription comes to light some time after delivery, the buyer may only be able to claim a repair, replacement goods or compensation. However, the buyer's rights against you, the seller, remain in force throughout the reasonable life of the goods. This is often longer than a manufacturer's guarantee period. What if the goods are damaged in transit? If you are selling to a consumer, you are responsible for the risk of loss or damage in transit, until the goods are delivered. If you wish to take out postal insurance, this is your responsibility, not the consumer's. Postal insurance should not be offered to consumers at an extra charge. If you are selling to a business, they are responsible for the risk of loss or damage to the goods when ownership passes to them. This normally happens when payment is made, so you may wish to offer postal insurance to your business customers, and you may wish to make an extra charge for this. If you do offer postal insurance, your customers will reasonably expect you to make any claim on their behalf when the goods are lost or damaged. What if the buyer is dissatisfied? If the buyer says that there is a problem with the goods, you should consider whether their claim is justified. If it is, you should aim to 4
resolve the matter promptly. If you believe that the claim is unjustified, contact the buyer and explain why. If the buyer is not satisfied with your response, or if you cannot agree a solution between yourselves, the buyer may be able to take advantage of a protection scheme offered by the auction site or by a payment processing company. If they have paid, or funded their payment, by debit card or credit card, they may be able to recover their money from you by processing a chargeback through their bank. Ultimately, a buyer might take action against you through your Trade Association, through an arbitration or ombudsman scheme (if you are a member of one), or in Court. In all cases, you should make sure that you retain any important evidence and that you are able to show that you have made a reasonable attempt to respond to the complaint (even if you believe it to be unjustified). Can I use contract terms to limit my liability? Where you sell to a consumer, you cannot use contract terms to limit your liability for supplying faulty or misdescribed goods. Any such terms in your contract will have no effect, and it is a criminal offence to display them. Where you sell to a business, you can use contract terms to limit your liability, but only if the exclusion is reasonable. Receiving Payments It is possible to use a variety of payment methods for internet auctions. Each method has its own advantages and disadvantages. If you charge for receiving payments, the fee must reflect the actual cost to your business. Cash When you receive cash, you have the great advantage of certainty. You can be sure that the payment will not be reversed. Cash will generally be sent at the buyer's risk. Cheque A cheque payment is not certain until it is cleared. You may wish to ask your bank to explain how long it takes for a cheque to be cleared, and how long after this the payment is guaranteed not to be reversed. Most 5
sellers choose not to send goods to a customer until a cheque payment has cleared. Bank transfer You may wish to provide bank account details to a seller to make a transfer. However, you may find it difficult to keep track of what payments are being received and from whom, particularly if customers fail to use a reference number when they make their transfer. Debit card If goods are not delivered, or are unsatisfactory, the buyer may be able to ask their bank to process a chargeback, and they may get their money back. The risk of being subject to a chargeback decreases over time, but they can still be processed several months after a transaction has been made. Good communication with your customer is likely to reduce the risk of chargeback, but this will still not avoid the small percentage of chargebacks which are made fraudulently. Credit card As with a debit card, the buyer can ask the card issuer to process a chargeback if there is a problem. In addition, the law makes the card issuer liable where you breach the contract, so long as the item is priced over 100 and so long as the buyer is a sole trader or partnership (and not a limited company) using a UK credit card. Money transfer You may wish to request payment via a money transfer service (e.g. Western Union, Moneygram). However, fraudulent traders will commonly make a request for this method of payment, as it is difficult to trace, and it does not require them to provide their postal address. If you insist that your buyer uses money transfer, you may well raise their level of suspicion about the entire transaction. Payment services Many items are now paid for using payment services, such as PayPal. These services usually offer buyers and sellers some protection against fraud, non-delivery and problems with goods. Users generally have to provide some evidence of identity and/or financial standing, so levels of 6
fraud can be expected to be lower. Nevertheless, protection levels may be limited or in some cases non-existent. Claims may be made against you through the service's own protection scheme or, if the payment was funded by debit or credit card, via chargeback. Other Trading Standards Law Internet auction sales are covered by the full range of trading standards law. These laws are mostly designed to protect the public as a whole, and not to provide redress to individual consumers. The rules include: False and misleading advertising It is a criminal offence to describe goods in a false or misleading way, and to sell misdescribed goods. Misleading advertising to consumers is prohibited by law. Counterfeit and copied goods It is a criminal offence to sell counterfeit goods and to sell unauthorised copies of copyright work (such as audio and video recordings or computer software and games). Misleading prices It is a criminal offence to display misleading prices to consumers. A price indication can be misleading if it does not include taxes or compulsory extras such as delivery costs. Product safety All goods must be safe, and some goods have to comply with special product-specific regulations. (This leaflet reproduced with thanks to Norfolk Trading Standards) 7
Where can I get further help? This leaflet is not an authoritative interpretation of the law and is intended only for guidance. Any legislation referred to, while still current, may have been amended from the form in which it was originally enacted. For further information, please contact Citizens Advice. The Citizens Advice consumer service provides free, confidential and impartial advice on consumer issues. Visit www.adviceguide.org.uk or call the Citizens Advice consumer helpline on 08454 04 05 06. If you are a business, contact us by any of the following methods: Derbyshire Trading Standards Service Chatsworth Hall Chesterfield Road Matlock Derbyshire DE4 3FW Telephone: Call Derbyshire 01629 533190 Fax: 01629 536197 Website: www.derbyshire.gov.uk/tradingstandards We want everyone to be able to understand us. On request, we will arrange: Language interpreters, including for sign language Translation of written materials into other languages Materials in large print, on tape or in Braille. To ensure that you are looking at the most up-to-date version of this leaflet, please visit our website at http://www.derbyshire.gov.uk/images/ca12_tcm44-8175.pdf or telephone us on 01629 536166. 8