Legal requirements for selling online

Are you aware of the legal requirements for selling online? This guide has all the facts and lists all the applicable legislation for merchants selling online in the UK.

General information

The facts presented in this guide are correct to the best of our knowledge when published. This guide is not meant to be taken as definitive legal advice. If you are in any doubt about trading online you should seek legal advice from a professional.

In addition to the legislation that all sellers must comply with (e.g. the Sale of Goods Act 1979, the Consumer Protection Act 1987 and the Data Protection Acts 1984 and 1998) businesses with websites also have to abide by the Electronic Commerce (EC Directive) Regulations 2002 (known as the E-Commerce Regulations) and possibly the Consumer Protection (Distance Selling) Regulations 2000 (known as the Distance Selling Regulations).

The e-commerce regulations

If a business sets up a website to promote its goods or services, the E-Commerce Regulations require the business to provide customers or potential customers (whether they are consumers or business clients) with certain information. For example, the website should state the name of the business, the geographical address and the e-mail address.

If the website mentions the price of goods, it should also state whether the price includes tax and delivery costs. This information must be provided 'easily, directly and permanently'. A business will therefore be in breach of the Regulations if the information is difficult to find or if the website is not easily navigable.

Transactional websites i.e. those that allow customers to actually order goods via the website, must contain additional information e.g. the technical steps that the customer must follow to place an order. This is normally fulfilled by using a shopping cart / shopping basket system. Furthermore, the business has a duty to acknowledge receipt of any orders that are made.

The distance selling regulations

If the customer is a consumer (i.e. a person buying goods for personal rather than business use) and the customer orders goods on-line, further requirements are imposed on the supplier by the Distance Selling Regulations.

These regulations are far more onerous than businesses imagine. They apply to businesses that sell goods such as clothes, toys, electrical goods etc. but do not apply to auction sites, contracts for the sale of land, contracts for financial services or contracts for services that will be provided on a specific date e.g. purchasing a train ticket.

Under the Distance Selling Regulations a business is obliged to provide the customer with certain information 'in good time prior to the conclusion of the contract'. As the contract will be concluded over the internet, the information must be contained on the website as there is no opportunity for the supplier to provide the information in any other way before the order is placed. The customer must be informed of the name and address of the supplier, a description of the goods, arrangements for payment, delivery and performance, the price of the goods (including the period for which the price remains valid and whether the price includes tax and delivery charges), any additional charges for ordering goods on-line and delivery costs. The customer must also be informed of the right to cancel the contract. This information must also be provided in writing or other durable medium (e.g. e-mail) at the latest, when the goods are delivered or when the service is being provided.

The right to cancel a contract

The Distance Selling Regulations state that a consumer is entitled to cancel a contract concluded on-line by giving notice in writing or other durable medium to the supplier. In the case of contracts for the supply of goods, the consumer has seven working days (beginning on the day after the goods were received) to give notice to cancel. In the case of contracts for the provision of service, the seven day cancellation period starts on the day that the contract is concluded. Businesses thus need to be aware that certain customers have the right to simply change their mind when buying goods on line. The supplier is entitled to charge for the direct cost of recovering the goods, but has to return all other monies paid.

In contrast if a customer buys goods in a high street store, the buyer only has the right to return the goods if they are faulty or do not match their description (Sale of Goods Act 1979). The right to cancel that is provided under the Distance Selling Regulations applies to most contracts e.g. purchasing clothes, toys and electrical equipment. However certain contracts cannot be cancelled unless both parties agree e.g. contracts for the purchase of perishable goods and contracts for the purchase of audio-visual equipment or software if they are unsealed by the customer.

The consequences of breaching the law

If a business does not comply with the E-Commerce Regulations or the Distance Selling Regulations, action can be taken by the Department of Trade and Industry, the Office of Fair Trading and local Trading Standards Departments. Usually a business will be informed that it is in breach of the regulations and will be required to make an undertaking that it will comply with the law in the future.

If the business continues to breach the law (or in urgent cases where an undertaking would be inappropriate) the enforcement agencies can apply to the court for a 'Stop Now' order. If the business does not comply with the stop now order it can be prosecuted for contempt of court which is punishable by a fine or imprisonment.

In addition, customers that have suffered financial losses as a result of a breach can sue the business in question. It is also likely that a business that does not comply with the legislation will lose customers. For example, research has demonstrated that customers will refuse to purchase goods from websites that are not easily navigable and do not clearly provide the information that they require.