What was the case about?
EU law requires companies who sell directly to consumers to provide certain pre-contractual information. This is to ensure that consumers are treated fairly and understand when they are about to enter into a binding contract which requires them to pay. The relevant EU legislation is the EU Consumer Rights Directive 2011/83. As this is a directive (rather than an EU regulation) each member state is required to implement these rules into local law. However, member states have some discretion on exactly how to do this.
The German legislation implementing Article 8(2) of Directive 2011/83 states that the button “must be labelled with nothing but the words ‘order with obligation to pay’ or equivalent wording”.
The German court found that the Dash button, which simply shows the relevant brand logo and has no wording on it, breached this requirement and failed to provide mandatory pre-contractual information.
How does this compare with other EU member states?
As noted above, Member States have discretion on how they implement the Consumer Rights Directive. As a consequence, the exact wording of the obligation varies and this potentially has consequences for how significant the ruling will be in different Member States. To illustrate this point, we have compared the position in the UK and the Netherlands.
In the UK, legislation implementing the Directive (the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013) requires that “the button is labelled in an easily legible manner only with the words ‘order with obligation to pay’ or a corresponding unambiguous formulation indicating that placing the order entails an obligation to pay the trader.”
This drafting arguably allows slightly more leeway to provide alternative wording on buttons than the German legislation. For example, “buy now” and other similar wording is generally considered compliant in the UK. However, it is clear that the absence of any wording implying an obligation to pay would breach UK law.
In addition, in the UK, a button such as this may also potentially breach the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 in other ways, as it is not clear how the other requirements to provide pre-contractual information, such as price and the main characteristics of the goods or services, are provided to the consumer in the immediate vicinity of the purchase button. Further, it is possible that such a button may also fail to meet the requirement to communicate all material information in a timely manner under the Consumer Protection from Unfair Trading Regulations 2008
The German ruling is not a binding precedent for the UK courts. However, since there is little UK case law on this matter and it relates to the same underlying EU directive, any UK court would likely find the German decision persuasive. In addition to the risk of court action, the Competition and Markets Authority (CMA) is empowered to enforce consumer protection law and could take the opportunity to sanction similar violations of consumer legislation, by Amazon and/or other companies with similar products.
The position in the Netherlands is slightly different. The exact wording is rather like the position in the UK, in that the Dutch implementation of the Directive allows for a little more leeway than in Germany to provide alternative wording. For example, “Koop nu” (“buy now”) and other similar wording is generally considered compliant in the Netherlands as well. However, contrary to the position in Germany and the UK, the Dutch legislator has decided not to apply this Directive to goods or services sold off-premises that don’t exceed a monetary value of EUR 50 (Article 6:230h (2) (a) Dutch Civil Code). The rationale of the Dutch legislator is that the Directive would result in an unnecessary administrative burden on traders for small purchases.
Therefore, ultimately the absence of a “buy now” button may not be an issue in The Netherlands, assuming that the goods ordered via the button don’t exceed EUR 50. However, this does not mean that companies do not have to comply with any information requirements. The rules on unfair trade practices still apply, which require companies to provide pre-contractual information, such as price and the main characteristics of the goods or services, are provided to the consumer.
It is unclear how the button would be able to comply with these requirements. Perhaps this information could be incorporated by adding a QR code to the button that could be scanned by users, or sending a regular notification to users with information on the weekly offer.
In light of these implications, companies developing new convenient payment methods should review compliance with EU consumer protection law to make sure that convenience does not result in a solution which is unlawful. Although the legislation is based on an EU Directive, the judgment shows that the different implementations of the Directive in Member States can lead to varying results. When rolling out products across Europe, companies should still be aware of local deviations. In this case, the Dutch law can be seen as more business-friendly, whereas other Member States have sided more strongly with consumers.
More generally, this judgment sets down an interesting marker for the future. Connected, smart appliances have the potential to bring increasing simplicity and ease – we might never run out of key household products if our sensor-equipped appliances registered that something was running low and automatically reordered for us. The Dash judgment is a reminder that convenience cannot trump consumer law. The CMA’s recent report expressing its dislike for “loyalty penalties“, is a further recent marker, highlighting the issues with automatic contract renewals and offering a clear statement of what it considers to be “fair” consumer pricing practices. Innovation in retailing will not be able to sidestep the requirements of consumer law.
Read the full judgment (in German) here.