Article 9 of Directive 2011/83/EU on consumer rights (Consumer Rights Directive, CRD) establishes the right of the consumer to withdraw from a distance contract within a period of 14 days and without giving any reason or incurring any penalty. The rationale behind such a right of withdrawal stems from the fact that under a distance contract the consumer cannot see the goods and assess their quality before concluding the contract as opposed to a consumer who is making a purchase at the premises of the trader. Thus, due to the nature of distance contracts we could observe heightened information asymmetry between the trader and the consumer that could be balanced through the right of withdrawal among other consumer protection tools. In a broader philosophical sense, the right of withdrawal could also be conceptualized as a protective measure related to the contemporary issue of impulse buying – a solution for an array of situations in the consumer society where no rational evaluations were performed prior to a purchase.
The withdrawal period
In the case of distance contracts for services, the 14 days’ period for withdrawal starts to run from the day when the contract was concluded. When it comes to distance contracts for sales of goods, the withdrawal period starts to run from the day when the consumer acquires physical possession of the goods. In case the consumer orders multiple goods with one order but they are delivered separately, the 14 days’ period starts to run from the day when the consumer acquires physical possession of the last good and in the case of delivery of a good which consists of multiple pieces, the period starts to run from the day when the consumer acquires physical possession of the last piece. Additionally, in the case of distance contracts for the supply of water, gas or electricity, where they are not put up for sale in a limited volume or set quantity, of district heating or of digital content which is not supplied on a tangible medium, the 14-day period will start to run from the day of conclusion of the contract.
When it comes to the calculation of the 14-day period, recital 41 of the Consumer Rights Directive points to Council Regulation (EEC, Euratom) No 1182/71 of 3 June 1971 determining the rules applicable to periods, dates and time limits which shall be applicable to the calculation of the periods contained in the CRD. According to this, where a period expressed in days is to be calculated from the moment at which an event occurs or an action takes place, the day during which that event occurs or that action takes place should not be considered as falling within the period in question – in other words the 14-day period shall start running after the day when the contract is concluded or after the day when the consumer has acquired physical possession of the goods.
If the trader does not provide the consumer with the information on the right of withdrawal, the conditions for its exercise and the time limit, then the negative consequence is that the withdrawal period gets extended significantly – it will expire 12 months after the end of the initial withdrawal period. Another avenue that the EU legislator could have pursued was to further strengthen consumer protection by making this extended term indefinite, however this would have been an extreme measure that goes contrary to the principle of legal certainty and the current approach of 12 months’ extension is a more balanced one, taking into account both the legitimate interests of traders and consumers.
Exceptions from the right of withdrawal
Certain contracts due to their specific nature are explicitly excluded from the scope of the right of withdrawal. These include the following:
- service contracts after the service has been fully performed if the performance has begun with the consumer’s prior express consent (and with the acknowledgement that he will lose his right of withdrawal once the contract has been fully performed by the trader)
- the supply of goods or services for which the price is dependent on fluctuations in the financial market which cannot be controlled by the trader and which may occur within the withdrawal period
- the supply of goods that are made to the consumer’s specifications or are clearly personalized
- the supply of goods which are liable to deteriorate or expire rapidly
- the supply of sealed goods which are not suitable for return due to health protection or hygiene reasons and were unsealed after delivery
- the supply of goods which are, after delivery, according to their nature, inseparably mixed with other items
- the supply of alcoholic beverages, the price of which has been agreed upon at the time of the conclusion of the sales contract, the delivery of which can only take place after 30 days and the actual value of which is dependent on fluctuations in the market which cannot be controlled by the trader
- contracts where the consumer has specifically requested a visit from the trader for the purpose of carrying out urgent repairs or maintenance
- the supply of sealed audio or sealed video recordings or sealed computer software which were unsealed after delivery
- the supply of a newspaper, periodical or magazine with the exception of subscription contracts for the supply of such publications
- contracts concluded at a public auction
- the provision of accommodation other than for residential purpose, transport of goods, car rental services, catering or services related to leisure activities if the contract provides for a specific date or period of performance
- the supply of digital content which is not supplied on a tangible medium if the performance has begun with the consumer’s prior express consent and his acknowledgment that he thereby loses his right of withdrawal
Exercise of the right of withdrawal and its effects
The consumer can exercise the right of withdrawal prior to the expiry of the withdrawal period – either the regular 14 days’ period or the extended 12 months’ period. In order to exercise the right of withdrawal the consumer can either use the model withdrawal form which is included in the Consumer Rights Directive as Annex I(B) or alternatively make any other unequivocal statement which sets out the decision to withdraw from the contract. In addition to those possibilities, the trader can also provide the consumer with an option to electronically fill in and submit either the model withdrawal form in Annex I(B) or any other unequivocal statement on the website of the trader. In such a scenario the trader will have to communicate to the consumer an acknowledgment of receipt of the withdrawal form in a timely manner and on a durable medium. It is important to note that the consumer will be deemed to have exercised the right of withdrawal within the period established by the Directive if the withdrawal is sent by him or her before the relevant period has expired. Therefore, it is likely that the trader will have to wait for at least several days after the expiry of the 14 days period in order to be certain that the distance contract is definitely binding. The burden of proof for exercising the right of withdrawal is placed on the consumer.
The legal effect produced by the exercise of the right of withdrawal by the consumer is that the obligations of the parties to perform the distance contract are terminated. Then comes the question what shall be the obligations of the parties in the event of withdrawal?
Obligations of the trader and the consumer in the event of withdrawal
The main obligation of the trader in the event of withdrawal is to reimburse the payments received from the consumer, including the cost of delivery, without undue delay and in any event not later than 14 days from the day when he or she is informed of the consumer’s decision to withdraw from the contract. However, when it comes to contracts for sales of goods, the trader is allowed to withhold the reimbursement until he has received the goods back from the consumer, or until the consumer has supplied evidence that the goods are sent back. The trader has to carry out the reimbursement using the same means of payment as were used by the consumer for the initial transaction, and ensure that the consumer will not incur any fees as a result of using the reimbursement mechanism.
The main obligation of the consumer in the event of withdrawal is to send back the goods or hand them over to the trader without undue delay and in any event not later than 14 days from the day on which he or she has communicated the decision to withdraw from the contract. It is established by the Directive that in order for this requirement to be satisfied the consumer should have sent back the goods before the expiry of the 14 days’ period irrespective of the fact if they arrive after that. When it comes to the cost of sending back the goods, the principle is that the consumer should generally bear the direct cost of returning the goods, unless the trader has agreed to bear those or has failed to inform the consumer that the consumer has to bear them. Importantly, the consumer will not be liable to the trader for the diminished value of the goods which results from the acts that are necessary in order to establish the nature, the characteristics and the functioning of the goods.
An interesting situation would materialize in case the consumer requests that the performance of the services under the distance contract starts during the withdrawal period and after that decides to exercise the right of withdrawal. In such a scenario, the consumer shall pay to the trader an amount which is proportional to what has been provided until the moment the consumer has informed the trader of the exercise of the right of withdrawal as opposed to the full coverage of the contract. The proportionate amount that is to be paid by the consumer will be calculated on the basis of the total price that was agreed in the contract.
A similar scenario to the one outlined above was brought up to the Court of Justice of the European Union (CJEU, the Court) in Case C-641/19. In the case at hand a consumer concluded a distant contract with a German dating website – Parship, that was operated by the company PE Digital. The consumer concluded a contract with PE Digital for a 12-month premium membership and was charged the price of EUR 523.95. That price was more than 2 times higher than what PE Digital charged some of its other users for a contract with the same duration concluded during the same year. In the case at hand, the consumer was informed of her right of withdrawal and she also confirmed that the service provider was to begin supplying the service before the expiry of the 14-day withdrawal period. However, 4 days later the consumer withdrew from the concluded contract and she was charged by PE Digital the amount of EUR 392.96 as a compensation for the amount of services that was already used. The national court addressed the following 4 questions to the CJEU:
- Questions 1 and 2: Whether in determining the proportionate amount to be paid by the consumer to the trader (in case that consumer has expressly requested that the performance of the contract begins during the withdrawal period and has withdrawn from that contract), it is appropriate to take account of the agreed price for the full coverage of the contract and to calculate the amount owed pro rata temporis, or whether it is appropriate to take account of the fact that one of the services covered by the contract was provided to the consumer in full before the withdrawal
- Question 3: What consequence is to be drawn, for the purpose of determining the amount to be paid by the consumer to the trader, from the fact that one of the services covered by the contract concerns the supply of digital content not delivered on a tangible medium, which cannot be the subject of a withdrawal under the CRD (the concerned service was the generation of a personality report by the dating website on the basis of a personality test carried out by the website)
- Question 4: Which criteria should be applied for the purpose of assessing whether the total price is excessive within the meaning of Article 14(3) of the CRD
The CJEU provided the following answers to the above questions:
On questions 1 and 2, the CJEU responded that the proportionate amount that must be paid by the consumer in accordance with Article 14(3) CRD should be calculated pro rata temporis by taking into account all services covered by the contract – both principal and ancillary services. Where the parties to the contract agree a price for the services provided, that price corresponds, in principle, to the value of all those services, both principal and ancillary. Only in case the contract explicitly provides that one or more of the services are to be provided separately and in full from the beginning of the performance of the contract, for a price which must be paid separately, the full price for such a service should also be taken into account in the calculation of the amount that is owed to the trader when the right of withdrawal is invoked. However, in the case at hand the contract did not provide for a separate price for any service that could be regarded as separable from the principal service.
In view of question 4, the position of the Court was that when assessing whether the total price is excessive, all circumstances relating to the market value of the provided service shall be relevant. These shall include a comparison with the price that is charged by that same trader to other consumers under the same conditions and also a comparison with the price of an equivalent service that is provided by other traders at the time of conclusion of the contract.
With regards to question 3, the position of the CJEU was that a service, such as that provided by the dating website, that allows the consumer to create, process, store or access data in digital form and allows the sharing of or any other interaction with data in digital form uploaded or created by the consumer or other users of that service, cannot be regarded as the supply of ‘digital content’ within the meaning of Article 16(m) CRD, read in conjunction with Article 2(11) CRD and also in light of recital 19. The same conclusion was reached by the CJEU also for the generation of a personality report by the dating website. Surprisingly, the CJEU did not provide any substantive reasoning for this reached conclusion. Moreover, the texts referred to by the CJEU are far from being explanatory as they provide for a broad notion of “digital content” and only give a non-exhaustive list of examples. Point 11 of Article 2 of the CRD defines ‘digital content’ as: ‘data which are produced and supplied in digital form’. Recital 19 of the CRD postulates that ‘digital content means data which are produced and supplied in digital form, such as computer programs, applications, games, music, videos or texts, irrespective of whether they are accessed through downloading or streaming, from a tangible medium or through any other means”. The lack of reasoning from the CJEU in view of its answer to question 3 is certainly a missed opportunity that at this point creates uncertainty as it acts to trigger more questions instead of properly answering the initial ones.