Are you trading with consumers? Complying with the new ADR Regulations (part 1)

On 1 October 2015, new far reaching regulations come into force that (subject to limited exceptions) will affect all businesses in the UK which sell goods, services or digital content to consumers. This will include many traders in the construction industry.

The regulations are contained in the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015, as amended by the Alternative Dispute Resolution for Consumer Disputes (Amendment) Regulations 2015 (which I will collectively call the Regulations).

This post looks at a number of issues, including who needs to comply with the Regulations, what traders (and consumers) need to do and the type of ADR envisaged by the Regulations.

It is mandatory for traders to comply with the Regulations. Non-compliance, according to the Department for Business, Innovation and Skills’ Guidance for Business (BIS Guidance), means:

  • You could be liable to Trading Standards’ civil enforcement action.
  • This could result in a court order for you to comply with the Regulations.
  • Failure to comply with such a court order could result in an unlimited fine or up to two years in prison.

Who needs to comply with the Regulations?

The Regulations apply to traders providing goods or services to consumers. Regulation 5 defines:

  • Trader as a person acting for purposes relating to that person’s trade, business, craft or profession, whether personally or through another person acting in the trader’s name or on the trader’s behalf.
  • Consumer as an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.

The BIS Guidance states that the Regulations do not apply to:

  • Business to business or consumer to consumer transactions.
  • Public sector providers of services, unless the consumer is paying the public sector directly for those services.
  • Contracts for the sale of property and tenancy agreements.

In addition, the BIS Guidance states that the Regulations:

  • Relate to a consumer’s complaints (such as problems with delivery, faulty goods, poor service).
  • Do not cover disputes unrelated to terms in a contract (such as abusive behaviour or discrimination).

A trader’s complaints about the consumer’s conduct are not therefore covered.

As a result, the Regulations apply (for example) to consumer complaints about an electrician who has installed a new light or a plumber who has put in a new shower, but do not bite if (for example) a consumer has not paid an invoice.

What do you need to do if you are a trader?

What a trader needs to do depends on whether the trader is already obliged by legislation or its trade association to use an ADR scheme (such as those in the financial services, energy and telecoms sectors). If so, then ADR will already be mandatory for that trader. In that case, Regulation 19(1) sets out the information that the trader must provide to consumers, namely the name and website address of the ADR entity or EU listed body:

  • On the trader’s website, if the trader has a website.
  • In the trader’s general terms and conditions of sales contracts or service contracts, where such general terms and conditions exist.

For all other traders (that is, those who are not subject to mandatory ADR), Regulation 19(2) requires a trader who has exhausted its internal complaint handling procedure when considering a consumer’s complaint relating to a sales or a service contract to inform the consumer:

  • That the trader cannot settle the complaint with the consumer.
  • Of the name and website address of an ADR entity or EU listed body that would be competent to deal with the complaint.
  • Whether the trader is obliged, or prepared, to submit to an ADR resolution procedure operated by an ADR entity or EU listed body.

All traders must point their customer (the consumer) to an appropriate certified ADR provider and tell the consumer whether or not they intend to use that provider. The Regulations refer to telling the consumer by “durable medium” (as defined by Regulation 5), which includes communicating by email or on paper.

Are traders trading with consumers now obliged to participate in ADR?

No. Crucially, where no obligation on the trader already exists (as explained above), the Regulations do not create any new obligation on the trader to use ADR at all (see paragraphs 10 and 11 of the BIS Guidance).

The purpose of the Regulations is only to require traders to provide certain information to consumers. However, even if traders never intend to use ADR, they must still comply with the information requirements in Regulation 19(2) (also explained above).

Are consumers required to use ADR?

No. The BIS Guidance states that consumers are not required to use ADR.

What kind of ADR would traders be agreeing to?

Surprisingly, ADR is not a defined term in the Regulations. However, it is given a wide definition by paragraph 8 of the BIS Guidance which, notably, does not restrict it to just mediation. Instead ADR is said to be:

“a process that enables disputes between a consumer and business to be settled via an independent and impartial mechanism outside the court system.”

Mediation, conciliation, adjudication and arbitration are all mentioned.

Paragraph 9 of the BIS Guidance states the Regulations do not mandate the form of ADR that a trader must use.

Next time

Next time, I will look at other issues, including the nature of ADR, whether the process is binding, what happens if one party does not want to use ADR, time limits under the Regulations and limitation periods.

Keating Chambers Elizabeth Repper

One thought on “Are you trading with consumers? Complying with the new ADR Regulations (part 1)

  1. Keep us posted on the next stage Liz. There’s no easy parallel between this and family breakdown short of making mediation compulsory. It sounds like a fascinating development… This and ODR are certainly democratising the dispute resolution environment.

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