Buying goods and services online: what will be changed in consumer protection

It is no secret that the consumer protection system is still imperfect in our country, unlike in Europe and the United States. Therefore, the government has recently approved a new version of the Law “On Consumer Protection”. The draft law is aimed at introducing European standards of consumer protection in Ukraine,  ensuring a level playing field for e-commerce and fair competition, as well as reducing the burden on business by repealing outdated rules.

“Information about products and services can be provided to consumers only if they agreed to receive such information”

“Current consumer protection legislation becomes irrelevant and does not meet present-day challenges. This leads to an increase in consumer rights violations. Actually, consumers find themselves alone in dealing with their problems. The adoption of the new draft law will allow improving the consumer protection, in particular, in the e-commerce sector and the warranty service on products, as well as eliminating the potential for unfair commercial activities,” Iryna Novikova, Deputy Minister of Economy of Ukraine, said.

However, ordinary Ukrainians are primarily interested in what rights the new law protects and how people can exercise their rights. Therefore, asked one of the drafters of the law — the Better Regulation Delivery Office (BRDO) — to explain the details. This is an independent analytical center funded by international donors, foremost by the European Union. Lyudmyla Lisina, a lawyer at the Better Regulation Delivery Office (BRDO) answered our questions.

— What innovations aimed at introducing European consumer protection standards in Ukraine are provided for by the draft law?

— First of all, from now on, our law will define the consumer protection principles similar to the European legislation, such as:

  • prioritizing consumer rights and interests over any other interests and goals of business entities;
  • making a decision in favor of a consumer if a statutory provision or any regulatory act allows ambiguous or multiple interpretations of rights and obligations of consumers or business entities, as well as if a contract between a consumer and a business entity contains vague or ambiguous provisions;
  • protecting economic interests of consumers from unfair and misleading or aggressive commercial practices;
  • ensuring availability of useful and clear information about the goods, services, and works offered, including information that provides the product identification and traceability of its origin.

The draft law also provides for the provisions on the relationship between buyers and sellers in e-commerce, as well as defines certain rules on the purchase and sale of digital products. This is all within the framework of European practices. It also takes into account other European approaches. For example, product information may be sent to a consumer email or phone only if they agreed to receive such information from a business entity.

“In case of failure to provide mandatory information, sellers will be punished by fines”

—  What information about products and sellers will be required to provide in e-commerce and what liability is prescribed by law for the lack of such information?

— For the conscious and informed choice of consumers about the necessity or expediency of purchasing products, a seller should provide consumers with the following product information regardless of whether the sales are made in a physical retail shop or on a seller’s website through e-commerce:

  • the product name, the product/service mark name or reproduction;
  • data on main consumer properties of goods or basic characteristics of works (services);
  • quantity of products in units of measurement established under the legislation on metrology and metrological activity, depending on the type of product;
  • information on the content of harmful substances, if any, as well as warnings on the use of certain products, if such warnings are stipulated by law;
  • the product price or the method of its calculation;
  • any special storage requirements and use conditions, as well as possible negative consequences of consumption (use), if specified by the manufacturer or envisaged by regulatory acts;
  • information about business entity’s warranty obligations;
  • the name, contact phone number, and location of the manufacturer (performer), as well as the name, number, and location of the business entity responsible for accepting and reviewing claims for warranty liabilities and commercial guarantees, or other consumer complaints, if such a business entity is not the manufacturer (performer);
  • date of manufacture and expiration date or service life. If the use of goods beyond the established lifetime may be hazardous to consumer life and health, and environment or may damage the property of consumers, information on the necessary actions after that period, as well as possible consequences of failure to perform such actions, should be specified.

In case of failure to provide such information, sellers will be punished by fines in the amount of 30 percent of the value of goods received for the sale, works performed (services provided), but not less than five non-taxable minimum incomes (UAH 85). If the business entity does not keep detailed accounts under the law, the fine will be five non-taxable minimum incomes (UAH 85).

The main e-commerce feature is that the law will require that the seller’s website contains true seller’s information sufficient to identify them (such as the legal entity’s name or the full name of a private entrepreneur, seller’s address or location, identification code under EDRPOU, the presence of a permit or license (if required by law), phone number, e-mail address if available or other means of communication, as well as the name and location of business entities responsible for accepting and reviewing warranty liabilities claims.

If the seller’s website does not contain this information, they will be punished by a fine in the amount of ten thousand non-taxable minimum incomes (UAH 170 thousand).

— How will the consumer’s rights change in case of providing low-quality goods or services?

— The law establishes that consumers have the right to receive quality goods and services. And if the consumer finds a shortage of goods through no fault of them during the warranty period specified in the law (not less than 2 years for new and not less than 1 year for used goods from the date of purchase), the seller should provide the warranty repair of goods, or, if they cannot be repaired, replace them for similar ones.   If it is impossible neither to repair, nor replace the goods, the consumer has the right to claim a reduction in the price of goods in proportion to the reduced value of the goods received as compared to the value of goods with no shortage. The reduction in the price of a defective product is determined by the seller upon agreement with the customer.

If it is impossible to implement any of these options, the consumer has the right to claim the avoidance of a contract, ie the repayment of funds paid for such low-quality goods, with the simultaneous return of the goods to the seller. The only legal requirement for the consumer is the need to provide a payment document (sale receipt) given by the seller when selling the goods.

“A new competence of the State Service on Food Safety and Consumer Protection is the right to apply to Internet service providers to restrict access to websites”

— The draft law proposes to extend the Law of Ukraine “On Consumer Protection” to cover food products in terms of the economic rights of consumers. What exactly is meant?

— Food safety and quality are regulated by the Law of Ukraine “On Basic Principles and Requirements for Food Safety and Quality”, and food information requirements are established by the Law of Ukraine “On Information for Consumers on Food Products”.

However, these laws do not specify what to do if a consumer buys a non-suitable for consumption or unsafe food product.

The new version of the Law “On Consumer Protection” stipulates that in this case the consumer has the right to claim the replacement of the non-suitable for consumption or unsafe food product for a food product that is suitable for consumption from the seller after providing a relevant payment document, or the customer has the right to cancel a contract and claim a refund.   The procedure for returning or replacing non-suitable for consumption or unsafe food products is determined by the Cabinet of Ministers of Ukraine.

— What are the changes in rights and responsibilities of the State Service on Food Safety and Consumer Protection and public consumer associations?

— The draft law stipulates that the State Service on Food Safety and Consumer Protection will be responsible for state supervision (control) over the compliance of requirements of the Law “On Consumer Protection” by business entities only by conducting unscheduled state supervision (control) measures. The law does not provide for scheduled measures, and this reduces administrative pressure on entrepreneurs.

Additionally, from now on the State Service on Food Safety and Consumer Protection can file lawsuits to protect consumer rights, in particular regarding an indefinite range of consumers, without paying court fees. This will allow this state agency to exercise the state function on the protection of violated rights of citizens.

Another new competence of the State Service on Food Safety and Consumer Protection is the right to apply to Internet service providers to restrict access to websites (parts of websites, some software) in respect of business entities that do not provide true information about their name and location on their websites as this makes it impossible to implement state supervision (control) measures under requirements of the Law of Ukraine “On Basic Principles of State Supervision (Control) in the Sphere of Economic Activity” to restore the violated rights of consumers.

Moreover, in this time of the spread of e-commerce, the State Service on Food Safety and Consumer Protection has new powers to maintain a register of declarations of e-commerce entities that intend to conduct electronic commerce in the manner prescribed by the Cabinet of Ministers of Ukraine. Such a register is open, and e-commerce entities will be able to enter information about themselves on a voluntary and free basis. This option will allow such business entities to gain certain competitive advantages through the openness of information about themselves.

The law is also aimed at strengthening the capacity of public consumer associations that currently do not have enough influence to fully protect violated consumer rights.

For example, the law stipulates that public consumer associations have the right to:

  • participate in the process of formation and implementation of state policy in the field of consumer protection;
  • inform the public about consumer rights, the results of their activities, as well as provide advice and organize consumer protection trainings;
  • study consumer properties of products, their demand, and conduct population surveys o identify public opinion about the quality and safety of products manufactured and sold;
  • conduct independently or apply to authorized state agencies for independent examination (research) and testing of products;
  • make proposals to restrict or prohibit the introduction or sale, withdrawal from circulation or recall of unsafe or counterfeit products or unauthorized goods with providing supporting documents or copies thereof;
  • file lawsuits to protect consumer rights, including regarding an indefinite range of consumers.

It should be noted that public consumer associations, as well as consumers, will not pay court fees in cases related to consumer protection,” Lyudmila Lisina summed up.

It deserves mentioning that the Verkhovna Rada adopted draft law #5091 “On Guaranteeing Property Rights to Real Estate to Be Constructed in the Future” in the first reading. The drafters of the law assure that its adoption will create effective legal mechanisms for the state to guarantee property rights to unfinished construction projects and future real estate. That is, real estate buyers will be much better protected and receive guarantees of protection of their rights in case of, for example, suspended construction.