As part of the European Union's drive to encourage the use of alternative dispute resolution (ADR) in consumer disputes, the European Commission has developed a new online dispute resolution (ODR) platform, which has been available for use by traders and consumers since February 15 2016.
The launch of the platform means that online traders – which include any consumer-facing franchise concept in which the franchisor or its franchisees transact with consumers online – must now comply with certain requirements contained in the EU Regulation on Consumer ODR.
The regulation follows other recent changes in EU consumer law, such as the entry into force of the Consumer Rights Directive in 2014 and the implementation of new rules on ADR in 2015.
Franchise businesses that have not reviewed their websites and general terms and conditions of sale or supply in light of these changes should consider a more detailed review of their compliance with consumer law.
The ODR platform allows consumers, online traders and ADR providers to file, respond to and handle disputes online. The platform can be used only if the consumer and trader are based in the European Union and the dispute relates to a product or service that the consumer has bought online. The trader and consumer need not be based within the same EU country. The primary purpose of the ODR platform is to facilitate the resolution of cross-border disputes; it even offers a translation function to assist with this.
The ODR platform accepts complaints from consumers via an electronic complaint form. When a consumer files a dispute through the ODR platform, the platform will identify one or more suitable ADR providers and notify the trader. If the trader and a relevant ADR provider agree to it, and the consumer is happy to proceed, then ADR will go ahead. In some cases the trader will have to accept ADR because of a legal requirement, trade association membership rule or contractual obligation. The ADR provider can refuse to handle a dispute only on certain limited grounds (eg, because the claim is frivolous or vexatious, or falls outside the minimum or maximum value of claim that the provider handles).
In some countries the ODR platform can also be used by traders that want to complain about a consumer over goods or services that the trader has sold online.
Are franchise businesses "online traders" under ODR regulation?
The answer to this question is most likely yes: any consumer-facing franchise concept in which the franchisor or its franchisees transact with consumers online will be caught by these requirements. An 'online trader' is defined very widely in the regulation as a trader that intends to enter into online sales contracts or online service contracts with consumers. This covers scenarios where traders offer goods or services on a website or by other electronic means and consumers can order those goods and services via such means. 'Other electronic means' include media such as telephone, email, social media and text message. The definition incorporates online traders selling products or services to consumers via retail websites and apps, including multi-channel businesses that operate both offline and online.
New rules for online traders
All online traders must now provide a link to the ODR platform and an email address on their websites.
The link to the ODR platform must be easily accessible for consumers – an ideal location might be alongside existing information on the trader's complaint-handling procedures.
Further requirements apply if a trader must use an approved ADR provider – whether by law, trade association membership or contract – in the event of a dispute with a consumer. In such cases the trader must inform consumers about the existence of the ODR platform and the possibility of using it to resolve disputes. This information must be provided in the general terms and conditions applicable to online sales and services contracts. Offers of products or services made to a consumer via email must also include a link to the ODR platform. Compliance with these information requirements should not result in the replacement of any information that traders are obligated to give (or voluntarily provide) about ADR providers they use. Rather, such information should be provided concurrently.
What should franchise businesses do?
Most franchisors and some franchisees will meet the definition of an 'online trader' and so should carefully check their websites, emails and general terms and conditions of sale or supply for compliance with the new ODR requirements and wider developments of EU consumer law.
This article was first published on International Law Office on 24 May 2016
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