Ipsos-London Economics-Deloitte consortium December 2015

Justice and Consumers

Consumer market study on the functioning of legal and

commercial guarantees for consumers in the EU

ANNEX

Final report

2

EUROPEAN COMMISSION

Produced by Consumers, Health, Agriculture and Food Executive Agency (Chafea) on behalf of:

Directorate-General for Justice and Consumers Directorate E — Consumers Unit E.1 Consumer markets

Contact: Marilena Di Stasi

E-mail: JUST-CONSULT-E1@ec.europa.eu

European Commission B-1049 Brussels

EUROPEAN COMMISSION

Directorate-General for Justice and Consumers EU Consumer Programme (2014-2020)

2015 EN

Consumer market study on the functioning of legal and

commercial guarantees for consumers in the EU

ANNEX

Final report

4

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Consumer market study on the functioning of legal and commercial guarantees for consumers in the EU

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CONTENTS

ANNEX 1 MORE INFORMATION ABOUT THE LEGAL GUARANTEES REGULATORY ENVIRONMENT IN THE EU .................................................................. 8

A1.1 Terminology around guarantees ..................................................................... 8

A1.2 The applicable EU legislation ......................................................................... 11

A1.3 State of play of the implementation of the legislation ....................................... 17

ANNEX 2 THE LEGAL GUARANTEE FOR SECOND HAND GOODS ....................................... 33

A2.1 Buying second hand goods ........................................................................... 33

A2.2 Informing consumers about the legal guarantee for second hand goods and its length .................................................................................................... 33

ANNEX 3 VALUATION OF THE LEGAL AND COMMERCIAL GUARANTEE MARKET ................. 36

A3.1 Valuation of the paid-for commercial guarantee market ................................... 36

A3.2 Valuation of the integral commercial guarantees market .................................. 41

A3.3 Valuation of the legal guarantee market ......................................................... 41

ANNEX 4 BEHAVIOURAL EXPERIMENT REGRESSION ANALYSIS ...................................... 45

ANNEX 5 REFERENCES .............................................................................................. 58

ANNEX 6 METHODOLOGY ........................................................................................... 63

A6.1 Literature review and stakeholder consultation ................................................ 63

A6.2 Price collection ............................................................................................ 68

A6.3 Consumer survey ........................................................................................ 73

A6.4 Mystery shopping exercise ............................................................................ 79

A6.5 Behavioural experiment design ..................................................................... 84

Consumer market study on the functioning of legal and commercial guarantees for consumers in the EU

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FIGURES

Figure 1: Second hand goods bought in the past two years ................................................. 33

Figure 2: Information received from the seller: second hand good covered by a legal guarantee ............................................................................................................................ 34

Figure 3: Information received from the seller: second hand good covered by a legal guarantee,

by country ............................................................................................................. 34

Figure 4: Information received about the length of the legal guarantee period ....................... 35

Figure 5: Step-by-step approach for data gathering ........................................................... 68

Figure 6: Sample split by treatment ................................................................................. 90

Figure 7: Routing of respondents in choice experiment ....................................................... 94

Figure 8: Guarantee choices for mobile phones in Round 1 (graphical display) ....................... 97

Figure 9: Guarantee choices for mobile phones in Round 2 (graphical display) – respondent

chose ‘No Guarantee’ in Round 1 ............................................................................. 98

Figure 10: Guarantee choices for mobile phones in Round 1 (text display) ............................ 99

Figure 11: Guarantee choices for mobile phones in Round 2 (text display) – respondent chose ‘Guarantee Pink’ in Round 1 ................................................................................... 100

Figure 12: Guarantee choices for washing machines in Round 1 (graphical display) .............. 101

Figure 13: Guarantee choices for washing machines in Round 2 (graphical display) – respondent chose ‘Guarantee Pink’ in Round 1 .......................................................................... 102

Figure 14: Guarantee choices for washing machines in Round 1 (text display) ..................... 103

Figure 15: Guarantee choices for washing machines in Round 2 (text display) – respondent chose ‘Guarantee Purple’ in Round 1 ....................................................................... 104

Figure 16: Sample splitting ........................................................................................... 110

Figure 17: WTP intervals ............................................................................................... 117

Figure 18: Mock manufacturer’s guarantee A ................................................................... 121

Figure 19: Mock legal guarantees for burden of proof test ................................................. 122

Figure 20: Respondent choices ...................................................................................... 126

Consumer market study on the functioning of legal and commercial guarantees for consumers in the EU

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TABLES

Table 1: Burden of proof ................................................................................................. 18

Table 2: Time limits on remedies ..................................................................................... 20

Table 3: Time limits on rights .......................................................................................... 22

Table 4: Freezing/reset of guarantee duration ................................................................... 23

Table 5: Deviations from the Directive in the treatment of minor defects .............................. 24

Table 6: Hierarchy of remedies ........................................................................................ 28

Table 7: Sellers in the distribution chain whom the consumer has recourse to for a remedy .... 30

Table 8: Estimated value of paid-for guarantees for brown, white and grey goods .................. 38

Table 9: Estimated value of paid-for guarantees for cars ..................................................... 40

Table 10: Estimated value of 'realised value' for legal guarantees in €m ............................... 44

Table 11: Impact of information treatment on choice experiment performance ...................... 46

Table 12: Impact of guarantee presentation treatment on choice experiment performance ..... 48

Table 13: Impact of guarantee complexity treatment on choice experiment performance ........ 50

Table 14: Impact of guarantee set on choice experiment performance .................................. 52

Table 15: Impact of primary product price treatment on willingness to pay measures ............. 54

Table 16: Impact of commercial guarantee duration treatment on willingness to pay measures ............................................................................................................................ 55

Table 17: Regression results: WTP measures against reasons for purchasing commercial guarantees: responses to Q14a ................................................................................ 56

Table 18: Regression results: WTP measures against reasons for not purchasing commercial guarantees: responses to Q14b ................................................................................ 57

Table 19: Choice of products and overview of selection criteria ............................................ 63

Table 20: Products grouped under Brown, White and Grey Goods and Cars ........................... 68

Table 21: Data collected and instructions addressed to the native researchers ....................... 70

Table 22: Total prices recorded by market agent and country .............................................. 72

Table 23: Average survey time ........................................................................................ 73

Table 24: County and language ....................................................................................... 74

Table 25: IIS and external panels .................................................................................... 75

Table 26: Sample size .................................................................................................... 77

Table 27: Price range & products for mystery shopping exercise .......................................... 82

Table 28: Product specific features for mobile phones ......................................................... 87

Table 29: Product specific features for washing machines ................................................... 88

Table 30: Commercial guarantee features ......................................................................... 90

Table 31: Choice modelling and contingent valuation ........................................................ 106

Table 32: Contingent valuation methods ......................................................................... 108

Table 33: Price intervals shown to respondents in willingness to pay: washing machines ...... 112

Table 34: Price intervals shown to respondents in willingness to pay: mobile phones ............ 114

Table 35: Price distribution............................................................................................ 116

Table 36:Price sets, mobile phones, breakdown cover (monthly)........................................ 118

Table 37: Price sets, washing machines, breakdown cover (annualised) .............................. 119

Table 38: Respondent characteristics.............................................................................. 124

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Annex 1 More information about the legal guarantees

regulatory environment in the EU

A1.1 Terminology around guarantees

In this section, the terminology around guarantees, followed by the relevant EU

legislation, is explored. The key legal instrument applicable to consumer sales and

related guarantees in the EU is the Directive 1999/44/EC of the European Parliament

and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods

and associated guarantees (hereafter the Consumer Sales Directive).1 This Directive

does not contain the notion “legal guarantee” (it refers instead to the seller’s obligation

to “deliver the goods to the consumer which are in conformity with the contract of

sale”)2, and it only uses the term “guarantee” with reference to commercial

guarantees.3 The notions “legal guarantee of conformity for goods” and “commercial

guarantees” are, however, used by the Commission’s 2007 Report on the application of

the Consumer Sales Directive,4 as well as by Directive 2011/83/EU of the European

Parliament and of the Council of 25 October 2011 on consumer rights (hereafter the

Consumer Rights Directive)5 in the context of information requirements for contracts

other than distance and off-premises contracts, as well as for distance and off-premises

contracts.6

The definitions of legal and commercial guarantees in this document follow the spirit of

the Consumer Sales Directive and the other legal instruments mentioned below. The

definition of “legal guarantee” contains the general obligation of conformity of

consumer goods with the contract, and the definition of “commercial guarantee” simply

follows the one in the Consumer Sales Directive.7 Practically, however, the concept of

commercial guarantee can also be subdivided, as explained below.

Legal guarantee

Also referred to as a “statutory guarantee”, the legal guarantee is a legally established

obligation for sellers to deliver goods which comply with the contract of sale, resulting

in a set of consumer remedies in cases of lack of conformity.

1 Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees - Available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999L0044:en:HTML 2 Ibid., Article 2.1. 3 This was done in order to prevent confusion in legal systems where the concept of a statutory or legal guarantee is unknown (See the Proposal for the Directive, COM (1995) 520 final). 4 The Commission’s report on the application of the Consumer Sales Directive (2007) (Communication from the Commission to the Council and the European Parliament on the implementation of Directive 1999/44/EEC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees including analysis of the case for introducing direct producers’ liability, COM (2007) 210 final (Commission Report 2007) refers to ‘legal guarantees’ when describing the consumer rights in cases of non-conformity with the contracts. 5 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council – Available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:304:0064:0088:en:PDF 6 Ibid., Article 5.1.e (contracts other than distance and off-premises contracts); Article 6.1.l-m (for distance and off-premises contracts). 7 Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, O.J. L 171/12, Article 1.2.e.

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999L0044:en:HTMLhttp://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31999L0044:en:HTML

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Commercial guarantee without extra charge

A commercial guarantee can be defined as an undertaking by a seller or producer to the

consumer, given without extra charge8, to reimburse the price paid or to replace, repair

or handle consumer goods in any way if they do not meet the specifications set out in

the guarantee statement or in the relevant advertising. It supplements the legal

guarantee with additional services covered in case of product defect, but it cannot in

any case diminish the coverage set by the legal guarantee.

Both legal and commercial guarantees can be understood as integral guarantees, as the

guarantee is inseparable from the product being sold.

Other commercial guarantees, not of the above categories (paid-for

guarantees)

Although the Consumer Rights Directive covers all guarantees, none of the Directives

define the concept of a “paid-for” guarantee which the consumer can voluntarily

purchase in addition to those they receive by legal right or which the producer or

manufacturer offers voluntarily (although they are captured under the stipulations of

the Directives). There is also a confusing array of concepts and terms related to these

guarantees (e.g. extended warranties, service contracts, care plans etc.), and new

terms are introduced by firms on a regular basis. These products often resemble each

other, but typically differ depending on whether the product is insurance-based or not.

The issue of whether or not a commercial guarantee is insurance-backed has very real

implications.9 The rules on commercial guarantees in the Consumer Sales Directive give

a great discretional margin to the seller and the manufacturer, while the market on

insurance policy is, on the contrary, heavily regulated, thus reducing the seller’s degree

of freedom to specify the terms of the contract in the ways afforded with respect to

commercial guarantees.10

For the purposes of this study, the term “paid-for commercial guarantee” is used to

reflect the fact that such guarantees are sold almost entirely in addition to singular

products (i.e. the underlying product which is being guaranteed). This category is

further divided into two sub-categories, being insurance and non-insurance based

paid-for guarantees.

The term paid-for guarantee is not mentioned in any of the literature cited. However,

all references in this document to products such as extended warranties, care plans,

service plans, extended service contracts etc. should always be read as meaning a

paid-for guarantee for which the consumer has paid, rather than a legal or free

commercial guarantee.

8 This stipulation of a guarantee being given without extra charge is in the Consumer Sales Directive but not the Consumer Rights Directive. 9 This will be examined via the stakeholder consultation with Insurance Regulators. 10 Ishida, C., Kaufman, P., Langrehr, F.W. and Pope, N. (2013). Extended Warranties and Insurance: Consumer Awareness and Perception. A white paper issued by The Katie School of Insurance and Financial Services. To give some idea of the additional regulation and oversight which can be incurred, consider the regulatory framework in the UK for extended warranties for Brown, Grey and White goods according to the Association of British Insurers. National regulatory conditions for the sale of such warranties are laid down in the Domestic Electrical Goods Order 2005. However, the following additional five guidance and regulations from the UK financial regulatory authorities (previously the Financial Services Authority, now Financial Conduct Authority and Prudential Regulation Authority) also apply: FSA Perimeter Guidance Manual (PERG), FSA Treating Customers Fairly (TCF) Initiative, the Insurance Conduct of Business Sourcebook (ICOBS), Senior Management Arrangements, Systems and Controls (SYSC), Dispute Resolution: Complaints (DISP). See Annex A of ABI (February 2011), Insured and Non-Insured Extended Warranties and Service Contracts, A Voluntary Good Practice Guide for Providers.

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However, unless otherwise stated, the term “commercial guarantee” as a generic term

should be read as encompassing any guarantee beyond the legal guarantee, regardless

of whether it is a free commercial guarantee or a paid-for commercial guarantee.

Terminology from other applicable legislation

Although paid-for commercial guarantees (whether insurance-based or not) are

covered by the Consumer Sales Directive, they are not specifically identified. Instead,

the Directive refers to guarantees as undertakings given without extra charge.11

However, as the Directive is a minimum harmonization measure, more protection and

elaboration may be offered at the Member State level.12 Furthermore, in common with

guarantees given without extra charge, paid-for commercial guarantees cannot in any

way diminish consumer rights deriving from the legal guarantee.13

Besides the Consumer Sales Directive, the Consumer Rights Directive14 also defines a

commercial guarantee. This Directive includes the definition of commercial guarantees

under the Consumer Sales Directive, but adds the following:

”Any undertaking by the trader or a producer (the guarantor) to the consumer, in

addition to his legal obligation relating to the guarantee of conformity, to reimburse the

price paid or to replace, repair or service goods in any way if they do not meet the

specifications or any other requirements not related to conformity set out in the

guarantee statement or in the relevant advertising available at the time of, or before

the conclusion of the contract”.15

In addition, the Consumer Rights Directive also stipulates that the consumer should be

made aware of the legal guarantee and the existence and conditions of commercial

guarantees, whether paid-for or not.

“In addition to a reminder of the existence of a legal guarantee of conformity for goods,

the existence and the conditions of after-sales services and commercial guarantees,

where applicable”.16

Other EU Directives than the aforementioned ones apply to all business-to-consumer

contracts, therefore to all guarantees. These are the Directive 2005/29/EC of the

European Parliament and of the Council of 11 May 2005 concerning unfair business-to-

consumer commercial practices in the internal market (hereafter Unfair Commercial

Practices Directive)17 and the Council Directive 93/13/EEC of 5 April 1993 on unfair

terms in consumer contracts (hereafter the Unfair Contract Terms Directive).18 All these

applicable EU measures are commented on in the following sections.

11 Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, O.J. L 171/12, Article 1.1.e. 12 See directly below on the minimum harmonisation nature of the Directive. 13 Article 7.1 of the Consumer Sales Directive provides that ‘any contractual terms or agreements concluded with the seller before the lack of conformity is brought to the seller's attention which directly or indirectly waive or restrict the rights resulting from this Directive shall, as provided for by national law, not be binding on the consumer.’ 14 Op. cit., Directive 2011/83/EU on consumer rights. 15 Ibid., Article 2.14. 16 Ibid., Article 5.1 (e) 17 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council. 18 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts, OJ L 95/29.

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A1.2 The applicable EU legislation

A1.2.1 Consumer Sales Directive

The Consumer Sales Directive19 is a minimum harmonisation measure – thus allowing

Member States to introduce more stringent rules for protecting consumers.20 It covers

contracts for sale of consumer goods as well as supply contracts for consumer goods to

be manufactured or produced.21 It is a contract law instrument: only final sellers are

liable to consumers and persons higher in the distribution chain, such as wholesalers or

manufacturers, are not liable under the Directive as they are not parties to the contract

of sale with the consumer. However, the Directive also requires that redress is to be

available to the final seller in case non-conformity was caused by another supplier

higher in the supply chain or the producer.22 Direct liability of producers has been

mentioned in the Directive as a possibility for the future and examined in the

Commission’s report on the implementation of the Directive, but has not been

introduced so far.23

Consumer goods can be new or second hand goods. They are defined as all tangible

movable items, excluding: goods sold by way of execution or otherwise by authority of

law, water and gas which are not put up for sale in a limited volume or set quantity,

and electricity.24 It is also possible for Member States to exclude from the scope of

application of the relevant provisions all second hand goods sold at public auction

where consumers had the opportunity of attending the sale in person.25

As mentioned above, the Directive regulates two types of guarantees with regard to

sales of consumer goods: legal guarantees and commercial guarantees.

19 Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, O.J. L 171/12. 20 Ibid., Article 8.2. Now amended by the Consumer Rights Directive which inserted Article 8a into the Consumer Sales Directive providing an additional obligation for traders requiring Member States which do decide to adopt more stringent provisions concerning: time limits for sellers’ liability (Article 5.1), presumption of non-conformity at the time of delivery if it became apparent within 6 months (Article 5.3), and the possibility for parties to agree to a shorter limitation period for sellers’ liability in case of second hand goods (not shorter than 1 year – Article 7.1), to alert the Commission to this fact and to any future changes.

For a detailed analysis of how Member States implemented the various provisions of the Directive, see Op. cit. Schulte-Nolke, H., Twigg-Flesner, C., Ebers, M. (2008), and Commission (2007) Green Paper on the Review of the Consumer Acquis of 8 February 2007, COM (2006) 744 final. 21 Ibid., Article 1.4. 22 Ibid., Article 4. Some Member States provide for liability of others in the supply chain and/or the producer (see the Commission Report 2007 – footnote below, at pp. 10-11). 23 Ibid., Article 12. The Commission ought to present a report on the application of the Directive to the Council and the Parliament, including, inter alia, the case for introducing the producer's direct liability. The Report was submitted in 2007. No proposal for introducing direct producers’ liability has been adopted as yet. 24 With regard to electricity: Directives 2009/72/EC and 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market of electricity and gas and repealing Directives 2003/54/EC and 2003/55/EC apply (Annex) (OJ L 211/55 and L 211/94). 25 Op. cit., Directive 1999/44/EC, Article 1.3. This exclusion does not extend upon Internet auctions: Micklitz, H.W., Reich, N. (2014). Sale of Consumer Goods, in Reich, N., Micklitz, H.W., Rott, P., and Tonner, K. (2014). European Consumer Law, 2nd Edition, Intersentia, pp. 173.

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Legal guarantee

Meaning and scope of the seller’s liability:

The seller must deliver to the consumer goods which are in conformity with the contract

of sale.26 The Directive established a presumption of conformity where the following

conditions are cumulatively present:

(a) The goods comply with the description given by the seller and possess the qualities

of the goods which the seller has held out to the consumer as a sample or model;

(b) They are fit for any particular purpose for which the consumer requires them and

which he made known to the seller at the time of conclusion of the contract and which

the seller has accepted;

(c) They are fit for the purposes for which goods of the same type are normally used;

(d) They show the quality and performance which are normal in goods of the same type

and which the consumer can reasonably expect, given the nature of the goods and

taking into account any public statements on the specific characteristics of the goods

made about them by the seller, the producer or his representative, particularly in

advertising or on labelling.27

Further, “any lack of conformity resulting from incorrect installation of the consumer

goods shall be deemed to be equivalent to lack of conformity of the goods if installation

forms part of the contract of sale of the goods and the goods were installed by the

seller or under his responsibility. This shall apply equally if the product, intended to be

installed by the consumer, is installed by the consumer and the incorrect installation is

due to a shortcoming in the installation instructions”.28

The Directive contains an exception from the seller’s liability if, at the time the contract

was concluded, the consumer was aware or could not reasonably have been unaware of

the problem or if the problem was caused by materials supplied by the consumer.29

Consumer remedies

The Directive contains a catalogue of remedies for consumers if the goods do not

conform to the contract as specified in Article 2. These are: repair30, replacement31,

reduction in price, and rescission of contract. Instead of offering consumers free choice

of remedy, however, it offers a two-tier system.32 First of all, the consumer is entitled

to repair or replacement free of charge33, within reasonable time34 and without a

26 Ibid., Article 2.1. 27 Ibid., Article 2.2. The seller will not, however, be liable for these public statements if he demonstrates that at the time of concluding the contract he was not aware, and could not reasonably have been aware of the statement, or at that time the statement was corrected, or the consumer’s choice to purchase the goods could not have been influenced by the statement (the latter is an objective criterion, and thus it is irrelevant whether the consumer was in fact influenced by the statement or not) (Article 2.4). 28 Ibid., Article 2.5. The second sentence is the so-called ‘IKEA clause’. 29 Ibid., Article 2.3. 30 Ibid., Article 1.2.f. Defined as ‘bringing consumer goods into conformity with the contract of sale’. Article 3.2, 3.3 and 3.4 explain when repair and replacement are available. 31 Ibid. Recital 16. According to Recital 16, replacement will normally be impossible for second hand goods. 32 Not all Member States implemented this two-tier system. Some offer consumers a completely free choice of remedy: Greece, Lithuania, Portugal and Slovenia – Commission’s Report 2007, at p. 7. 33 This notion concerns the costs of postage, labour and materials. The CJEU (Court of Justice of the EU) also held in Quelle that the consumer should not be required to reimburse the seller for the use of the goods since

13

significant inconvenience to the consumer, unless these remedies are impossible or

disproportionate (the latter requires taking into account the value of the goods, how

significant the lack of conformity is, and whether an alternative remedy can be offered

without significant inconvenience to the consumer).35 In Weber and Putz, the Court of

Justice of the European Union (CJEU) held that one of the aspects of the seller’s

obligation to deliver goods conforming to the contract is the duty to reimburse any

additional costs to the consumer for replacing a defective product and installing one

without a defect.36

If the consumer is not entitled to a repair or replacement, if the seller did not complete

one of these remedies within reasonable time, or if he did not complete it without

significant inconvenience to the consumer, the latter can ask for the price to be reduced

or the contract to be rescinded.37 The hierarchy of remedies does not need to be

implemented by the Member States – in line with the minimum harmonisation of the

Directive the consumer may be given the right to choose from all four remedies at the

same time.

Time limits

The seller is liable for non-conformity which became apparent within two years from

delivery of the goods.38 The Directive provides Member States the option to require the

consumer to notify the seller of non-conformity within a period of no less than two

months after discovering this lack of conformity, in order not to lose their rights.39

Presumption of non-conformity

Any lack of conformity which became apparent within six months from delivery is

presumed to have existed in the goods at the time of delivery, unless such presumption

is contrary to the nature of the goods or the nature of the non-conformity40 This

presumption is important because normally the burden of proof that the goods did not

conform to the contract at the time of delivery rest with the consumer.

Binding effect and consumer information

The rights provided by the Directive cannot be excluded or limited by law or by a

contractual arrangement (or by opting for the law of a third country).41 The parties

may, however, agree on other types of remedies or conditions after the non-conformity

they were delivered until they were replaced – C-404/06 Quelle AG v. Bundesverband der Verbraucherzentralen [2008] ECR I-2685.

34 The Directive does not define what ‘reasonable time’ means which can be problematic. The notion received various interpretations on the national level. 35 Op. cit., Directive 1999/44/EC, Article 3.3.

36 Joined cases C-65/09 and C-87/09 Gebr. Weber et al. v J. Wittmer et al. [2011] ECR I-5257. 37 Op. cit., Directive 1999/44/EC, Article 3.5. The contract cannot be rescinded if lack of conformity is minor – Article 3.6 (not all Member States implemented the latter exception: for instance Czech Republic, Estonia and the UK – see Commission’s Report 2007, at p. 8. Portugal has also not implemented this exception). If the consumer’s claim for rescission is rejected because the lack of conformity is minor, Member State laws cannot prevent the consumer from claiming price reduction instead (C-33/12 Soledad Duarte Hueros v. Atoiciba et al. [2013]). 38 Ibid., Article 5.1. 39 Ibid., Article 5.2. The Commission’s Report 2007 provides that 16 Member States used this option or a variation of it. Communication from the Commission to the Council and the European Parliament on the implementation of Directive 1999 / 44 / EC of the Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees including analysis of the case for introducing direct producer’s liability, Brussels, 24.4.2007, COM(2007) 210 final, p.9

40 Op cit. Directive 1999/44/EC, Article 5.3. 41 Op cit., Directive 1999/44/EC, Article 5.3. Article 7.1 and 7.2.

14

was brought to the seller’s attention.42 Member States can also provide that, in the

case of second hand goods, the seller and consumer may agree contractual terms or

agreements which have a shorter time period for the liability of the seller than that set

down in Article 5(1) (no less than one year).43

The Directive establishes an obligation for Member States to inform the consumers of

the national law transposing this Directive and to encourage, where appropriate,

professional organisations to inform consumers of their rights.44 This obligation was

implemented in different ways, for instance in Poland the text of the applicable law had

to be displayed in every shop.

Commercial guarantees

There is no obligation for sellers to provide consumers with additional guarantees, but

the Directive does introduce requirements for such guarantees once they are provided.

Article 6.1 makes it clear that suppliers are bound by the guarantee statement as well

as the advertising concerning the guarantee. The rest of the provision contains

requirements concerning the contents of the guarantee: it should provide information

on the existing legal rights for consumers and on the fact that the guarantee does not

affect these rights; it should “set out in plain intelligible language the contents of the

guarantee and the essential particulars necessary for making claims under the

guarantee, notably the duration and territorial scope of the guarantee as well as the

name and address of the guarantor”; and at the consumer’s request it should be

available in writing or on another durable medium available and accessible to him.45

Member States may also introduce language requirements for guarantee documents.46

While the Directive provides that, in cases of breaches of requirements, the guarantee

is still binding and can be used by the consumer, it establishes no other remedy for

consumers.

A1.2.2 The Consumer Rights Directive

The Consumer Rights Directive47 enhances the protective effect of the requirements

contained in the Consumer Sales Directive. It contains information requirements both

for contracts which are not distance or off-premises contracts (so called on-premises

contracts), and for distance and off-premises contracts. Its scope of application is wider

than in the Consumer Sales Directive. It covers goods (defined as all tangible, movable

items excluding those sold by way of execution or otherwise by authority of law and

water, gas and electricity unless they are put up for sale in limited volumes or set

quantities)48 and services. It also applies to digital content, which is defined as data

produced and supplied in digital form.49

42 Micklitz, H.W. and Reich, N. (2014), ‘Sale of Consumer Goods’, in N. Reich, H.W. Micklitz, P. Rott and K. Tonner, ‘European Consumer Law’, 2nd Edition, Intersentia, p. 189. 43 Op cit., Directive 1999/44/EC, Article 5.3. Article 7.1. See Commission Report 2007 on the list of countries that adopted this exception (at p. 10). 44 Ibid., Article 9. 45 Ibid., Article 6.2 and 6.3. 46 Ibid., Article 6.4. 47 Directive 2011/83/EU of the European Parliament and of the Council on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council, OJ L 304/64. 48 Ibid., Article 2.3. 49 Ibid., Article 2.11.

15

The Consumer Rights Directive also provides consumers with the right to withdraw,

without giving reasons for doing so, from distance and off-premises contracts.50

Consumers can withdraw (by using a withdrawal form provided in Annex I(B) of the

Directive or by making another unequivocal statement setting out their decision to

withdraw) within 14 days from the conclusion of contract (in the case of service

contracts) or from the day when the consumer or a third party indicated by the

consumer acquires possession of goods (in the case of contracts of sale). The

withdrawal should not cause any costs for the consumers, apart from those provided

for article 13.2 and 14 of the Directive51. Accordingly, Article 14 provides that the

consumer will have to bear the direct costs of returning the goods to the trader unless

the trader has agreed to bear them or unless he has failed to inform the consumer that

these costs are to be paid by the latter.

Thus, in some cases it might be more straightforward and faster for the consumer to

withdraw from the contract (as long as it was a distance or an off-premises one) using

the Consumer Rights Directive, instead of utilising his guarantee rights. However, the

consumer might need to bear the direct costs of returning the goods.

For contracts other than distance or off-premises contracts, article 5 states that the

trader must provide in a clear and comprehensible manner to the consumer, before the

contract or offer become binding, information concerning (among other issues) the

main characteristics of the goods or services, the identity of the trader (name,

geographical address and phone number), as well as a reminder of the existence of a

legal guarantee of conformity for goods and information on the existence and

conditions of any after-sales service or commercial guarantees.52

Article 6 contains information requirements for distance and off-premises contracts. The

information must also be provided in a clear and comprehensible manner before the

consumer is bound by the contract or offer, and must concern (among other issues):

the main characteristics of the goods and services, the identity of the trader (name,

geographical address, telephone numbers, fax numbers and email addresses), the

reminder of the existence of a legal guarantee of conformity for goods and information

on the existence and conditions of any after-sales service or commercial guarantees.53

These information requirements enhance consumer protection in the context of legal

and commercial guarantees: they entail the need for clarity with regard to what exactly

the characteristics of the goods are (to facilitate establishing what the “contract” entails

for the purposes of ascertaining conformity of the goods with it). They ensure that clear

information about the trader (where to address complaints) is provided. They also

reiterate the duty to inform of the existence of a legal guarantee of conformity, and

introduce the duty to inform about the existence and conditions of other guarantees.

50 Ibid., Chapter III, Consumer Information and right of withdrawal for distance and off-premises contracts: Articles 9-16 51 Ibid., Chapter III, Article 9.1 52 Ibid., Article 5.1.a, 5.1.b, and 5.1.e. 53 Ibid., Article 6.1.a-d, 6.1.l, 6.1.m.

16

A1.2.3 The Unfair Commercial Practices Directive

The Directive on Unfair Commercial Practices54 sets uniform rules across the EU and

introduces a prohibition of commercial practices which are contrary to the requirements

of professional diligence and are capable of distorting the economic behaviour of

consumers. It offers a definition of an unfair practice,55 and deals in detail with two of

its most prevalent examples: a misleading actions and an aggressive commercial

practice.56

The Directive applies to business-to-consumer commercial practices taking place

before, during and after a commercial transaction relating to a product. It can apply in

the context of legal and commercial guarantees, to direct communications with traders

as well as to the content and form of advertising: practices enticing consumers to

purchase goods, misleading them as to the characteristics of those goods and other

important elements of the contractual arrangements, or as to the contents of guarantee

obligations of the seller or producer. In fact, Article 6.1.g concerning misleading actions

expressly refers to misleading information concerning consumer rights, including the

right to replacement or reimbursement under the Consumer Sales Directive.

The Directive also introduces information duties which enhance the position of a

consumer before concluding a transaction: Article 7.4 (in conjunction with Article 7.1)

requires all material information to be provided in invitations to purchase: including the

main characteristics of the product and the identity and address of the trader.

Annex I contains practices that have been blacklisted as always unfair. Two of these

refer directly to guarantees and warranties: (8) undertaking to provide after-sales

service to consumers with whom the trader has communicated prior to a transaction in

a language which is not an official language of the Member State where the trader is

located, and then making such service available only in another language without

clearly disclosing this to the consumer before the consumer is committed to the

transaction, and (23) creating the false impression that after-sales service in relation to

a product is available in a Member State other than the one in which the product is

sold.

The Directive also may find application in the after-sales stages, where consumers are

attempting to realise one of the remedies provided by the Consumer Sales Directive or

where they are seeking to enforce guarantee promises.

A1.2.4 The Unfair Contract Terms Directive

The Directive on Unfair Contract Terms57 provides minimum protection rules against

significantly unbalanced contract terms. It applies to terms which are not individually

negotiated58 in contracts between sellers or suppliers and consumers. Terms which are

unfair cannot bind consumers.59 The Annex contains a grey list of terms which may be

presumed as unfair60. The Directive finds application in the context of guarantees. It

54 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council. Available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:149:0022:0039:en:PDF 55 Ibid., Article 5.2. (a) and (b) 56 Ibid., Articles 6-9. 57 Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts. 58 Ibid., Article 3.2. 59 Ibid., Article 3.1 defines an unfair term. Article 6 – lack of binding effect of unfair terms. 60 Annex "Terms referred to in Article 3 (3)".

17

enables an assessment of contractual terms, also those concerning consumer rights

and the obligations of sellers (including rights and duties with regard to conformity of

goods with the contract, remedies for non-conformity, and any guarantee obligations).

The Annex lists the following clauses which may be unfair (and which can be applicable

to both legal and commercial guarantees): (b) inappropriately excluding or limiting the

legal rights of the consumer vis-à-vis the seller or supplier or another party in the event

of total or partial non-performance or inadequate performance by the seller or supplier

of any of the contractual obligations, (m) giving the seller or supplier the right to

determine whether the goods or services supplied are in conformity with the contract,

(p) giving the seller or supplier the possibility of transferring his rights and obligations

under the contract, where this may serve to reduce the guarantees for the consumer,

without the latter's agreement, and (q) excluding or hindering the consumer's right to

take legal action or exercise any other legal remedy, particularly by requiring the

consumer to take disputes exclusively to arbitration not covered by legal provisions,

unduly restricting the evidence available to him or imposing on him a burden of proof

which, according to the applicable law, should lie with another party to the contract61.

A1.3 State of play of the implementation of the legislation

In this section, the state of play of the legislation is highlighted, in relation to:

The burden of proof;

Time limits on remedies;

Time limits on rights;

Freezing/reset of guarantees;

Defect severity;

Conformity;

Hierarchy of remedies;

Seller liability;

Additional rights.

A1.3.1 Burden of proof

The concept of the burden of proof with respect to the legal guarantee specifies who

must prove that the good was defective or non-conforming. This is an important point

because the party who is responsible for proving the defect or non-conformity may face

the cost of hiring (potentially expensive) expert opinion to support their position within

an ADR mechanism or court.

61 Op.cit. Annex "Terms referred to in Article 3 (3)".

18

Table 1: Burden of proof

Burden of proof on seller

Third Party can assist? Third party assessment recognised legally?

1. Austria First 6 months At consumer’s discretion Not necessarily

2. Belgium First 6 months At consumer’s discretion Not necessarily

3. Bulgaria First 6 months At consumer’s discretion Not necessarily

4. Croatia First 6 months At consumer’s discretion Not necessarily

5. Cyprus First 6 months At consumer’s discretion Not necessarily

6. Czech

Republic

First 6 months Ministry of Justice has a list of experts whom

the consumer can pay

Yes, consumer may be able to claim costs back

7. Denmark First 6 months Many Danish ADRs can request an opinion

from their own list of experts

Yes, by ADR

8. Estonia First 6 months At consumer’s discretion. There are specialist

bureaus that can provide opinion.

Not necessarily

9. Finland First 6 months At consumer’s discretion Not necessarily

10. France 2 years as of

March 2016

At consumer’s discretion Not necessarily

11. Germany First 6 months At consumer’s discretion Not necessarily

12. Greece First 6 months At consumer’s discretion Not necessarily

13. Hungary First 6 months Ministry of Justice has a list of experts whom

consumer can pay

Yes

14. Iceland First 6 months At consumer’s discretion Not necessarily

15. Ireland First 6 months At consumer’s discretion Not necessarily

16. Italy First 6 months At consumer’s discretion Not necessarily

17. Latvia First 6 months Latvian Consumer Rights Protection Centre

has a list of experts whom the consumer can

pay

If the expert confirms the defect, the trader

must reimburse the expert cost along with the

claim.

18. Lithuania First 6 months The Inspectorate for Non-Food products can

assist. Other experts at consumer’s discretion.

Not necessarily

19. Luxembourg First 6 months At consumer’s discretion Not necessarily

20. Malta First 6 months Independent expert opinion is mandatory and

an expert can be appointed by the Consumer

Claims Tribunal

Yes, by ADR

21. Netherlands First 6 months At consumer’s discretion Not necessarily

22. Norway First 6 months At consumer’s discretion Not necessarily

23. Poland 1 year Regional trade inspectorates and courts have

lists of experts. Other experts at consumer’s

discretion.

Yes

24. Portugal 2 years At consumer’s discretion Not necessarily

25. Romania First 6 months At consumer’s discretion Not necessarily

26. Slovakia First 6 months At consumer’s discretion Not necessarily

27. Slovenia First 6 months The Ministry of Justice has an official list of

experts.

Yes

28. Spain First 6 months At consumer’s discretion Not necessarily

29. Sweden First 6 months At consumer’s discretion Not necessarily

30. UK First 6 months At consumer’s discretion Not necessarily

19

Regarding the state of play across the EU28, plus Norway and Iceland, only three

countries have deviated from the minimum six month burden of proof reversal (i.e. for

the first six months the burden is on the seller, while thereafter the burden is on the

consumer). These countries are:

Poland – which has a one year burden of proof

Portugal – which has a two-year burden of proof

France – which is introducing a two-year burden of proof as of March 2016

In relation to providing “proof” that a good is (not) defective, most countries have not

provided any specific mechanism in terms of sourcing expert opinion. In all countries, a

consumer is freely able to source expert opinion at their own discretion and cost, but in

no country is the consumer’s or seller’s choice of expert automatically accepted either

by an ADR or formal court process. The evidence provided may or may not be accepted

by the ADR or court in question, depending on its disposition.

However, in eight of the countries covered, there are either experts who are recognised

as independent or there is a state body which can be approached62. Additionally, in

Malta, expert opinion is mandatory for the ADR mechanism and the expert will be

appointed by the ADR.

A1.3.2 Time limits on remedies

Time limits on remedies can be construed as both the limitations on the notification of

the defect (as failure to abide by this will lead to loss of the guarantee rights) as well as

the time limit to enact the remedy.

As can be seen from the next table, there is great ambiguity across the 30 countries in

this regard. Although many countries have adopted the approach of two months, many

others have used the concept of ‘within a reasonable period’. For many other countries

there is no practical limit other than that of the term of the legal guarantee in that

jurisdiction. This represents an outward strengthening of the consumers legal rights.

However, there is often also no actual deadline for the seller to implement a solution, or

the same concept of ‘within a reasonable period’.

Presumably, each country or claim relies on a benchmark practice which is not defined

in legislation but which is considered reasonable. One factor which may complicate the

time limit for remedies is whether the country has introduced the legal guarantee to

cover immovable property. While most remedies (repair, replace or refund) for basic

retail transactions could be expected to enacted quickly, immovable property may

involve real estate transactions, in which case a 30-day limit may not be feasible (for

example, if major reconstruction work was to be carried out).

In certain countries (Belgium and Germany), it is recommended the parties fix a

deadline and to move to a refund solution if the deadline is not met. In Lithuania a 15

day limit for refund is applied, if repair or replacement is not achieved.

62 These member States are: Czech Republic, Denmark, Estonia, Hungary, Latvia, Lithuania, Malta, Poland and Slovenia.

20

Table 2: Time limits on remedies

Notification to seller Deadline on implementation

1. Austria 2 years from delivery of the good No deadline for implementing a solution

2. Belgium Within 2 months of noticing defect No deadline for implementing a solution63

3. Bulgaria Within 2 months of noticing defect One month

4. Croatia Within 2 months of noticing defect No deadline for implementing a solution

5. Cyprus Within 2 months of noticing defect No deadline for implementing a solution

6. Czech Republic 3 years from delivery of good 30 days

7. Denmark Within a reasonable period Within a reasonable period

8. Estonia Within 2 months of noticing defect No deadline for implementing a solution

9. Finland Within a reasonable period No deadline for implementing a solution

10. France 2 years from delivery of the good No deadline for implementing a solution

11. Germany 2 years from delivery of the good Can vary, but should be fixed between the parties

12. Greece 2 years from delivery of the good Within a reasonable period

13. Hungary Within 2 months of noticing defect 15 days

14. Iceland 2 years from delivery of the good No deadline for implementing a solution

15. Ireland 6 years from delivery of the good No deadline for implementing a solution

16. Italy Within 2 months of noticing defect No deadline for implementing a solution

17. Latvia Within 2 months of noticing defect 30 days

18. Lithuania 2 years from delivery of the good Reasonable time frame or 15 days for refunds

19. Luxembourg 2 years from delivery of the good One month

20. Malta Within 2 months of noticing defect Within a reasonable period

21. Netherlands Within a reasonable period (e.g. 2 months) No deadline for implementing a solution

22. Norway Within a reasonable period (e.g. 2 months) No deadline for implementing a solution

23. Poland 2 years from delivery of the good No deadline for implementing a solution

24. Portugal Within 2 months of noticing defect 30 days

25. Romania Within 2 months of noticing defect 15 days

26. Slovakia 2 years from delivery of the good 30 days

27. Slovenia Within 2 months of noticing defect 8 days

28. Spain Within 2 months of noticing defect No deadline for implementing a solution

29. Sweden 3 years from delivery of good Within a reasonable period

30. UK 6 years from delivery of the good (5 in Scotland) No deadline for implementing a solution

A1.3.3 Time limits on rights

In terms of the legal guarantee duration, there are three defining groups overall:

Countries which have a minimum time limit on new goods greater than stipulated by the Directive;

Countries which have a minimum time limit on second hand goods greater than stipulated by the Directive;

Countries which have exceeded the minimum time limit on deadlines to take the matter to court.

Seven countries have a legal guarantee which exceeds that of the minimum

established by the Directive: Finland, Iceland, Ireland, the Netherlands, Norway,

Sweden and the UK. However, the underlying rationale for these greater lengths of

protection are different. In the case of the UK and Ireland, it comes from the treatment

of the guarantee as a matter of contract law which pre-dated the Directive. In the case

of Iceland, Norway and the Netherlands, there is a more explicit linkage of the

guarantee with the expected lifespan of the product.

63 But it is recommended to agree a deadline, see ECC-Net county fiche for Belgium, available at:

http://www.europe-consommateurs.eu/fileadmin/user_upload/eu-consommateurs/PDFs/PDF_EN/REPORT-_GUARANTEE/country_fact_sheets/Country_fiche_BE.pdf

21

Romania has adopted the same concept, but in reverse. Instead of lengthening the

guarantee, it has shortened it on the basis that some products may not be expected to

last two years. This is a reasonable deviation considering that it could be applied to

perishable food products (which strictly speaking, are captured by the Directive, but in

practice are ignored).

Far more countries have maintained the two-year minimum guarantee for second

hand goods (the Directive gave the option to reduce this to one year). There are 16

countries which have chosen to do this, including: Bulgaria, Denmark, Estonia, Finland,

France, Greece, Iceland, Ireland, Latvia, Lithuania, Malta, the Netherlands, Norway,

Spain, Sweden and the UK. This appears to be a direct application of the legal

guarantee to second hand goods in the same way as it is applied to new goods (i.e.

both categories treated equally).

However, when considering the deadline in which to take disputes to court (i.e.

assuming a failure of the ADR process) there is a lot of variation. Only eight countries

of the 30 maintain a limitation which is based on the overall guarantee duration (i.e.

the time limit to escalate the process to court is the same as the legal guarantee itself).

For the other countries, the consumer’s rights are more expansive. Rather than limiting

the duration of time from the date of the purchase of the good, the time limit for

escalating to the court process may be linked to:

Delivery of the good;

Discovery of the defect;

Notification of the defect to the seller;

When the claim is made;

A statutory right (i.e. one that is not linked directly to the guarantee).

Sometimes these approaches only offer a slight advantage to the consumer. The

difference between purchase and delivery may only be a matter of days or weeks for

most purchases (though it could be much longer). However, when it is linked to

discovery of the defect, notification to the seller or the claim, then there is a significant

time advantage for the consumer, as these actions may occur in the final period of the

legal guarantee (even on the final day). Although there may be other stipulations for

the defect to be notified to the seller within a reasonable period of its appearance, in

reality there may not be any proof of this other than the consumer’s own word on the

matter.

After the initiating action in the claim process (claim, notification etc.), the time limit to

take the matter to court ranges from two extra months (Italy, which offers 26 months

from delivery of the good) to 10 years (Sweden, which offers 10 years from the

delivery of the good). However, the most common extended duration is 3 years (from

delivery, discovery of defect or from claim).

22

Table 3: Time limits on rights

New goods Second hand goods (actual or mutually

agreed)

Deadline to take matter to court (excluding any suspension of statutory limitation)

1. Austria 2 years 1 year 2 years for new goods, 1 year for second hand

2. Belgium 2 years 1 year 2 years for new goods, 1 year for second hand

3. Bulgaria 2 years 2 years 2 years

4. Croatia 2 years 1 year 2 years for new goods, 1 year for second hand

5. Cyprus 2 years 1 year 2 years for new goods, 1 year for second hand

6. Czech

Republic

2 years 1 year 3 years from when claim is made

7. Denmark 2 years 1 years 3 years from when claim is made

8. Estonia 2 years 2 years 3 years from delivery of the good

9. Finland Expected

lifespan

Expected

lifespan

3 years from discovery of defect

10. France 2 years 2 years 2 years from delivery of good

11. Germany 2 years 1 year 2 years for new goods, 1 year for second hand

12. Greece 2 years 2 years 2 years from delivery of good

13. Hungary 2 years 1 year 2 years from delivery of good

14. Iceland 2 years, 5

years if

longer

lifespan

2 years, 5

years if longer

lifespan

-

15. Ireland 6 years 6 years 6 years from delivery of goods

16. Italy 2 years 1 year 26 months from the delivery of the good

17. Latvia 2 years 2 years 2 years

18. Lithuania 2 years 2 years 2 years

19. Luxembourg 2 years 1 year 2 years for new goods, 1 year for second hand

20. Malta 2 years 2 years 2 years from delivery of the good

21. Netherlands Expected

lifespan

Expected

lifespan

2 years from the date the seller was notified of the defect

22. Norway 2 years, 5

years if

longer

lifespan

2 years, 5

years if longer

lifespan

3 or 5 years from the delivery of the good

23. Poland 2 years 1 year 2 years, or 1 year from the date the consumer becomes aware of the defect (

which could amount to 3 years).

24. Portugal 2 years 1 year 2 years for movable goods, 3 years for immovable goods

25. Romania 2 years,

shorter if

lower

lifespan

1 year 3 years from discovery of the defect

26. Slovakia 2 years 1 year 3 years from date the seller is notified of the defect

27. Slovenia 2 years 1 year 2 years from date the seller is notified of the defect

28. Spain 2 years 1 year 3 years from delivery of the good

29. Sweden 3 years 1 years 10 years from the delivery of the good64

30. UK 6 years (5 in

Scotland)

6 years (5 in

Scotland)

6 years (5 in Scotland)

64Source: ECC-Net fact sheet for Sweden (undated), available at: http://www.europe-consommateurs.eu/fileadmin/user_upload/eu-consommateurs/PDFs/PDF_EN/REPORT-_GUARANTEE/country_fact_sheets/Country_fiche_SE.pdf

23

A1.3.4 Freezing/reset of guarantee duration

Regarding the freezing or reset of guarantee duration, the practice appears to fall

mainly into two approaches:

Where the guarantee is renewed for either a repair, replacement or both.

Where the guarantee is not renewed, but the time spent in the execution of the remedy or claim process is added to the legal guarantee period.

These approaches appear to be mostly mutually exclusive (which is intuitive,

considering that one approach confers a significantly large legal guarantee period to

consumers, so adding additional time for the remedy process may be considered

unnecessary), except in the case of Spain. There are a number of countries where it is

unclear whether the remedy execution process is added to the guarantee duration or

not. For some other countries, there is no explicit rule on whether the repaired or

replaced product is covered by a new guarantee or not.

The gap between both approaches is of course highly significant to the overall balance

between consumer or seller obligations. A remedy execution period may be relatively

short, and in some countries this is stipulated specifically (see time limits on remedies

above). However, if a repaired or replaced product receives a new guarantee, this

clearly is to the advantage of the consumer as it gives a minimum of two years of new

coverage.

Some countries have restricted the new guarantee to replacement only (Hungary and

Germany, the latter of which only guarantees the replaced components and not the

overall good).

Table 4: Freezing/reset of guarantee duration

Guarantee duration suspended for remedy process?

Repaired or replaced product covered by new guarantee?

1. Austria No, the repaired/replaced item has a 2-year guarantee

Yes

2. Belgium Yes, extension by the time spent executing the remedy

No

3. Bulgaria Yes, extension by the time spent executing the remedy

No

4. Croatia No, the repaired/replaced item has a 2-year guarantee

Yes

5. Cyprus Yes, extension by the time spent executing the remedy

No

6. Czech Republic Not explicit/not specified No

7. Denmark No, the replaced item has a 2-year guarantee; the repaired item a 3-year guarantee for the same defect

Yes

8. Estonia No, the repaired/replaced item has a new 2-year guarantee

Yes

9. Finland Unknown No explicit rule

10. France Yes, if immobilisation longer than 7 days No explicit rule

11. Germany Unknown Although the law does not define this practice explicitly, it

appears that after a replacement, the consumer can claim

legal guarantee rights for 2 years. In the case of a repair,

the legal guarantee is only extended with regard to the

repaired or exchanged parts.

12. Greece No, the repaired/replaced item has a 2-year guarantee

Yes

13. Hungary Yes, for repair. For replacement (good or spare part), it starts a 2-year guarantee

Yes, but only for replacement

14. Iceland No, the repaired/replaced item has a 2-year guarantee

Yes

15. Ireland Unknown No

24

Table 4: Freezing/reset of guarantee duration

16. Italy Yes, extension by the time spent executing the remedy

However, if the products is repaired/replaced after the

expiry of the guarantee, then the product enjoys a new

guarantee (this could occur for example if a claim is

underway, for example in court, where there is a 26 month

limit to bring a claim following delivery of the good).

17. Latvia Yes, extension by the time spent executing the remedy

No

18. Lithuania Yes, extension by the time spent executing the remedy

No

19. Luxembourg Yes, extension by the time spent executing the remedy

No

20. Malta Yes, extension by the time spent executing the remedy

No

21. Netherlands Yes, extension by the time spent executing the remedy

No

22. Norway Yes, extension by the time spent executing the remedy

No

23. Poland Unknown for repair. For replacement, it starts a 2-year guarantee

Yes

24. Portugal Yes, for repair. For replacement, it starts a 2-year guarantee

Yes

25. Romania Unknown No

26. Slovakia Unknown for repair. For replacement, it starts a 2-year guarantee

Yes

27. Slovenia Unknown for repair. For replacement (good or spare part), it starts a 2-year guarantee

Yes

28. Spain Yes, extension by the time spent executing the repair

Yes, but only for replacement

29. Sweden Unknown No explicit rule

30. UK Yes, extension by the time spent executing the remedy

No explicit rule

A1.3.5 Defect severity

The Directive gives the seller the right not to respond to minor defects. In the main,

most countries in the scope of this study have followed suit, and only a few expand on

the consumer’s rights in this regard.

The table below lists seven countries which have referred to the concept of a minor

defect either in their legislation or in practice. Four of these countries have a formal

approach, i.e. a specific approach to dealing with minor defects is elaborated.

Table 5: Deviations from the Directive in the treatment of minor defects

Formal approach? Method

1. Czech Republic Yes In case the defect is minor, the consumer may only ask for repair or replacement

2. Germany Yes According to a court case, the defect is not considered minor if the remedy for the

defect would cost in excess of 5% of the purchase price.

3. Ireland Yes In case the defect is minor, the consumer may only ask for repair or replacement

4. Portugal No The concept of minor defect has not been transposed.

5. Sweden No The consumer may cancel the purchase (and be refunded if having already paid) if the

defect is of significant importance to the consumer.

6. UK No Consumer Rights Act 2015 Part 1 Chapter 2 Section 19(1) has a phrase “freedom from

minor defects” when considering product quality, however it is unclear to what extent

this is applied as a valid defect, or what constitutes minor.

In two countries (the Czech Republic and Ireland), a straightforward approach is used –

the consumer may request only repair or replacement in the event of a minor defect

and refund is not an option.

25

In Germany, the fourth country to have a formal approach to minor defects, a relevant

court judgement has established that a defect is not minor if the remedy to this defect

would cost more than 5% of the purchase price of the good.

In Portugal, Sweden and the UK, the concept of minor defect and the relevant remedy

is quite varied.

In Portugal, the concept of minor defect has not been transposed, which theoretically means the consumer could request a remedy on any defect (it is

unclear if there are established practices which mitigate this more expansive

regime).

In Sweden, the consumer has broad discretion with respect to minor defects. According to Swedish legislation, the consumer may decide whether a defect

has a significant importance to himself, which effectively means any defect

can be considered to be a major defect.

In the UK, with additional reference to the satisfactory quality of a good, the term “quality” is defined in Part 1, Chapter 2, Section 9 of the Consumer

Rights Act 2015 in ways that mirror the Directive’s provision but going

somewhat further with Section 9(3) which asserts that the “quality” of a good

includes its “state and condition”. This section goes on to provide a (non-

exhaustive) list of aspects of goods which must be taken into account when

assessing goods’ quality, including “freedom from minor defects”.

A1.3.6 Conformity

In Article 2 Directive 1999/44/EC states that consumer goods are presumed to be in

conformity with the contract if they:

(a) comply with the description given by the seller and possess the qualities of the

goods which the seller has held out to the consumer as a sample or model;

(b) are fit for any particular purpose for which the consumer requires them and which

he made known to the seller at the time of conclusion of the contract and which the

seller has accepted;

(c) are fit for the purposes for which goods of the same type are normally used;

(d) show the quality and performance which are normal in goods of the same type and

which the consumer can reasonably expect, given the nature of the goods and taking

into account any public statements on the specific characteristics of the goods made

about them by the seller, the producer or his representative, particularly in advertising

or on labelling.

These can be interpreted as four basic principles:

The integrity of the advertising or presentation (a and d);

Fitness for purpose based on the consumer’s expressed need (b);

Fitness for purpose benchmarked against similar good categories (c);

Quality and performance benchmarked against similar good categories (d);

Some countries have chosen to expand on these principles to some extent, for example

by making reference to specific measures of quality, explicitly linking their regulations

to other regulations on health and safety or encompassing components of the product.

Cyprus is an example of a country which has decided to expand the concept of quality

to cover all of these examples. The quality of goods, under the article 4(3) of Law N.

7(I)/2000, therefore includes the following:

26

Availability of spare parts, accessories and specialized techniques, where required;

Safety of goods, as defined in Article 2 of Security on Consumer Products Laws of 1994-1998 and Regulations issued thereunder, 74 (I) of 1994 99 (I)

of 1997 107 (I) 1998;

Reasonable durability and use;

Appearance and finishing, and;

Absence of defects.

In the Czech Republic, quality is linked to both durability and performance. The

definition of “guarantee” is transposed in § 2113 NCC as a guarantee of the seller for

the quality of the product, i.e. that it will be eligible for a certain period of time to be

used for the usual purpose or that it will maintain its normal properties.

Similarly, Finland also specifies that the good is to be packaged properly in order to

preserve its content, and introduces the idea that the good is to comply with the

general perception of duration for such a good. Goods are furthermore to comply with

requirements put forth in law, regulation or decisions by public authority, unless the

intent of the consumer is to use the good in such a way that the requirements are

irrelevant. Norway and Sweden also make reference to packaging. Norway makes

reference to packaging in its Consumer Sales Act (LOV-2002-06-21-34) § 15 where it

was written that: “The good shall be in accordance with the requirements of the nature,

quantity, quality, other properties and packaging following the agreement.” Sweden

takes a similar approach in its Consumer Sales Act (1990:932) §16 where it is written

that “The good is to, in terms of type, quantity, quality, other attributes and packaging,

conform with what is stated in the contract”. In another addition, the Norwegian

legislation also states that the goods be free from a third party’s rights in the goods,

such as ownership or pawn rights.

Latvia and Lithuania also make an explicit link between the quality of consumer goods

and other regulations. In the Latvian Consumer Rights Protection Law, Art. 14.1/ CC:

Art. 6.363.2 it is stated that the consumer goods should be in the conformity not only

with the contract, but also with additional regulations. In the Lithuanian Law on

Consumer Protection (Art. 14 (1)) it is stated that “the quality and safety of consumer

goods and services are regulated by the Civil Code, the Law on Products Safety, the

Law on Food and other laws”.

A slight deviation from the Directive 1999/44/EC is where countries have used a

negative rather than positive conformity measure. While the Directive has a

presumption of conformity if the good conforms to the principles in Article 2 (i.e. goods

shall be deemed in conformity if they fulfil these principles), some countries have

simply reversed this formulation. Poland and Estonia consider good not to be in

conformity if they fail to align with these principles. In Poland for example, the Polish

Civil Code, Art. 556(1) §1 lists four scenarios where the goods sold are deemed not to

be in conformity with the contact. These are:

When the goods do not have the qualities that the consumer was informed of by the seller;

When the goods cannot be used for the purpose communicated by the consumer to the seller;

When the goods do not have the qualities that goods of such type should have; and

When the goods are incomplete.

In Slovenia the Minister of Economy defines a list of goods for which the conformity

guarantee (i.e. a guarantee for flawless operation of purchased goods, for which both

27

the seller and producer are liable) is to be issued. The most recent list of goods was

defined in the legislation as of 10 March 2012.65

Article 2 stipulates that conformity guarantee shall be issued for at least one year for

the following types of goods:

Products for household and similar use,

Products in the automotive and similar industries,

Machinery and equipment for agriculture,

Information technology products,

Sports equipment and props,

Products in the area of radio communications, audio and video techniques and devices connected to them,

Electro-medical devices intended for personal use,

Devices for protection against fire,

Wastewater treatment plants.

Article 3 stipulates that conformity guarantee shall be issued for a minimum period of

one month for the following types of goods:

motorized road vehicles,

trailers,

vehicles with auxiliary motor.

These articles appear to go against the concept of the legal guarantee, which specifies

a guarantee of not less than two years. However, as the two-year duration is specified

in Slovenian legislation, it appears that the above articles are redundant in that respect.

A1.3.7 Hierarchy of remedies

Most countries under the scope of the study have chosen to implement a hierarchy of

remedies which follows the following formula:

Repair or replacement of the good in the first instance;

followed by

Reduction of price or refund.

Typically these remedies are accompanied by a stipulation that the remedy be

accomplished within a reasonable time, although this is often not defined in legislation

(see Section A1.3.2 above). In other cases, there may be no time limit for

implementation of the remedy.

However a number of countries stand out as exceptions. These are:

Greece and Portugal, which have no hierarchy of remedies, and where consumers may request any of the four remedies as they wish.

Latvia, which does not apply a hierarchy of remedies for the first six months, and thereafter repair or replacement.

Norway, which only offers repair in the first instance, but thereafter reduction of price, replacement or refund.

Sweden, where the consumer may request a refund if they consider the defect significant.

65 Available at: http://www.pisrs.si/Pis.web/pregledPredpisa?id=PRAV10954

http://www.pisrs.si/Pis.web/pregledPredpisa?id=PRAV10954

28

The UK, which has recently implemented a “short-term” right to reject, but this applies to goods which may perish in that timeframe. Otherwise the

more conventional approach applies.

Table 6: Hierarchy of remedies

Hierarchy? First choice of remedy Subsequent remedy

1. Austria Yes Repair or replacement Reduction of price or refund

2. Belgium Yes Repair or replacement Reduction of price or refund

3. Bulgaria Yes Repair or replacement Reduction of price, or refund if the guarantee is not

applied within one month.

4. Croatia Yes Repair or replacement Reduction of price or refund

5. Cyprus Yes Repair or replacement Reduction of price or refund

6. Czech

Republic

Yes Repair or replacement Reduction of price, or refund if the guarantee is not

applied within 30 days 7. Denmark Yes Repair or replacement Reduction of price or refund

8. Estonia Yes Repair or replacement Reduction of price or refund

9. Finland Yes Repair or replacement Reduction of price or refund

10. France Yes Repair or replacement Reduction of price or refund if first remedy not applied

within one month

11. Germany Yes Repair or replacement Reduction of price or refund

12. Greece No Repair, replacement, reduction of price or

repair

13. Hungary Yes Repair or replacement Reduction of price or refund

14. Iceland Yes Repair or replacement Reduction of price or refund

15. Ireland Yes Refund Repair or replacement

16. Italy Yes Repair or replacement Reduction of price or refund

17. Latvia Yes Repair, replacement, reduction of price or

repair in the first six months

After six months, repair or replacement

18. Lithuania Yes Repair or replacement Reduction of price or refund

19. Luxembourg Yes Repair or replacement Reduction of price or refund if first remedy not applied

within one month

20. Malta Yes Repair or replacement Reduction of price or refund

21. Netherlands Yes Repair or replacement Reduction of price or refund

22. Norway Yes Repair or replacement Reduction of price or refund

23. Poland Yes Repair or replacement Reduction of price or refund

24. Portugal No Repair, replacement, reduction of price or

repair, to be applied within 30 days

25. Romania Yes Repair or replacement. Remedy to be

applied within 15 days, otherwise refund

applies.

Reduction of price or refund

26. Slovakia Yes Repair or replacement Reduction of price or refund

27. Slovenia No Repair, replacement, reduction of price or

repair, to be applied within 8 days

28. Spain Yes Repair or replacement Reduction of price or refund

29. Sweden Yes Repair or replacement (refund if the

consumer considers the defect

significant)

Reduction of price or refund

30. UK Yes Full refund under a “short-term right to

reject” (30 days), repair or replacement

Reduction of price or refund

29

A1.3.8 Seller liability

In the context of the legal guarantee only66, the vast majority of EU Member States

have not given the consumer the right to pursue a claim along the distribution chain. A

small number of countries, including non-EU members Norway and Iceland, have given

the consumer the right to claim against others in the distribution chain. There are two

approaches to this:

A full right to pursue a claim against an intermediary;

A partial right to pursue a claim against an intermediary, whether based on specific conditions or other existing laws.

Countries in the first category include:

Hungary (where the consumer is entitled to seek a repair or replacement);

Latvia; and

the Netherlands.

Countries in the second category include:

Finland, which allows the consumer to claim against an intermediary who supplied the good for resale.

France, Romania and Spain, which give the consumer the right to pursue an intermediary under the “hidden defect” (“latent defect” in Romania) concept.

However, this typically involves the consumer assuming the burden of proof if

they wish to rely on this right.

Iceland, where if the seller can claim against another intermediary, the consumer is also given this right.

In Slovenia, the Minister of Economy defines a list of goods for which the conformity guarantee (i.e. a guarantee for flawless operation of purchased

goods, for which both the seller and producer are liable) is to be issued.

Goods purchased under this guarantee offer the consumer the right to pursue

intermediaries further up the distribution chain (this is not a right for

Slovenian consumers under the legal guarantee).

Sweden, where the consumer can pursue another intermediary if the seller is insolvent, has ceased trading or cannot be located.

66 However, this does not diminish the rights that consumer may hav