OFT analysis internet shopping providers

28 April 2008

Siobhan McManus

In March 2008, the Office of Fair Trading undertook an analysis of retail websites, to check whether their websites comply with various consumer regulations. Although the analysis suggests that most online retailers are complying with the relevant laws, there are some areas, and particular sectors, where further work is needed to ensure compliance.

In June 2007, the Office of Fair Trading published its market study on internet shopping. This study found that most consumers had little awareness of their rights when shopping online and found that most businesses also had a low awareness of online shoppers’ rights and that as a result, some were not complying with the relevant regulations.

After the study was published in 2007, the OFT began a programme to improve awareness amongst consumers of their rights when shopping online. This information awareness programme also involved the OFT engaging in a number of initiatives with online retailers in an attempt to raise awareness of the regulations within the online business community and to assist them in complying with the regulations.

The web sweep analysis published by the OFT in March 2008, is the final part of a series of follow-up actions undertaken by the OFT following the study and details the results of a joint exercise between the OFT and officers in 90 Local Authority Trading Standards Services to look at compliance with the regulations at the top retail websites selling to UK consumers. The aim of the Analysis was to further increase business awareness of online shoppers’ rights.

Summary of findings

The Analysis suggested that most online retailers (particularly large organisations) are complying with relevant regulations. However, the Analysis also identified that there was room for improvement in some areas particularly around the provision of information given to consumers on cancellations, refunds, contact details and transparency. In summary the Analysis found that:

  • 14% of businesses failed to comply with the regulations in respect of providing consumers with a proper address for communication. In such cases, businesses either failed to provide a physical address or only provided a PO Box number for consumers to contact;
  • 15% of sites failed to provide sufficient information to shoppers on their right to cancel their order within 7 working days. The Analysis found that smaller retailers were more prone to breaches of this requirement particularly those retailers in the DIY, sports, toys and hobbies sector;
  • 31% of the sites surveyed appeared not to comply with the requirement to refund the full cost of the goods and, of these, 56% excluded the cost of original delivery from refunds; and
  • 40% of sites did not indicate that compulsory additional charges would be added to the price first shown and that these additional charges would only be shown at the ‘checkout’ stage of the transaction. The most common charge added at the checkout was a delivery charge which in most cases, was not apparent until the consumer was about the pay for the goods.

The Analysis also found that the lack of transparency about additional charges was a common feature of online shopping and affected both large and small online retailers. The OFT commented in its Analysis that it believed consumers had a right to expect traders to inform them of the full price they will have to pay (including delivery and other charges) before they commit to buying; and not to make false or misleading statements, or create misleading impressions.

However, the OFT did not say that it thought the retailers in breach of this requirement were deliberately misleading consumers but felt that a case-by-case analysis had to be undertaken to establish why this information had not been provided to consumers. By way of reducing the risk of misleading consumers in terms of charges on websites, the OFT made reference to the new “Consumer Protection from Unfair Trading Regulations” which come into force on 26 May 2008 as a means of reducing the risk of consumers being misled as to the charges they finally pay for goods. The new regulations provide that commercial websites that let consumers place orders will need to meet the ‘Invitation to Purchase’ information requirements introduced by the regulations.

The OFT also surveyed non-EU sites and found the results to be broadly comparable to sites surveyed in the UK. Overall the OFT estimated that of all the companies surveyed as part of the Analysis, only 17% were fully compliant with the relevant regulations.

As part of its follow-up action, the OFT has stated that it intends to pass on the details of non-compliant companies to the relevant home authority.

The message to online retailers from the Analysis

The message from the Analysis to online retailers is that the OFT is regularly tracking business’ compliance of the relevant regulations as part of its ongoing information awareness programme to both consumers and online retailers. As a result, businesses need to regularly review their websites to ensure compliance with the regulations particularly in relation to the provision of information regarding cancellations, refunds and contact details. Breach of these requirements may lead to a business being investigated by the local trading standards office. This is particularly the case for small retailers and those in the DIY, electrical and home-wares retail markets who seemed to be the categories of business who were identified as being the most likely to be in possible breach of the regulations.