Distance Selling

Introduction

In past, when people lived in small, rural communities their needs were very less and simple by comparison with today’s urbanized society. There were very few goods and services available to them to select from. The products needed were uncomplicated and manufactured locally. The vendor and the customer dealt with each other based on relative equality and good faith.

After the eighteenth century industrial revolution, there has been a mass industrial production with a large powerful manufactures. The modern technology has changed that idyllic society and transactions have become more complicated. People have become more occupied their lives. Therefore, there is less time for shopping. They more desire to buy goods or services at a distance for instance by mail order, over the internet, by phone, etc. An increasing range of goods and services are available to consumers shopping in these ways as mentioned above.

What is distance selling?

There are contracts where the supplier and the consumer are not dealing face to face which have exclusive use of distance communication. Therefore, this sort of contracts is called distance selling. Distance communication would include web pages; unaddressed or addressed printed matter (this could include leaflets dropped through letter boxes); letters; press advertising with order forms; catalogues; telephone with or without human intervention; email; fax; and television (teleshopping). Having many types of distance methods encourage consumers to do shopping easy and quickly.

Any sort of contract (direct or distance) compromises four elements. All elements should need to be present for the contract to be legally binding and enforceable: [1]

Offer: one party must contract with the other, for example, offer to buy goods;

Acceptance: the other party must expressly accept the offer;

Intention to create legal relations: both parties to the contract must intend the contract to be legally binding;

Consideration: there should be some consideration being exchanged between the parties, for example, money paid for goods.

The Methods of Distance Selling

There so many methods, which distance communication can be made. For instance, it includes web pages; leaflets (dropped through letterboxes); letters; press advertising with order forms; catalogues; telephone with or without human intervention; email; television (teleshopping).

Mail order

Mail order is a method, which refers to many different methods of soliciting or selling good products and outstanding services at a distance where the customer is not physically present at a store or other location to make a purchase or to place an order. The potential customer gets to know about item and its description through one or more types of media, either print or electronic, including catalogue, electronic catalogue, email, television, radio, magazine, newspaper, etc.

A very important characteristic of mail order advertising or promotion is that the marketing produces a measurable response and at the same time captures important customer information that can be used to further expand sales opportunities. [2]   Another key characteristic of mail order is that the order is placed remotely. The seller may receive the order from a customer through mail, fax, telephone, or email. The methods of reply or the ordering do not really matter; the single characteristic of all mail orders is that the customer is not physically present when placing the order. Finally, fulfilment of goods ordered via mail order is done by delivery through a common carrier such as the Post Office, Parcel Services such as DHL, FedEx, TNT, etc. [3]

Telemarketing

Telemarketing is yet another method of selling good or services using all all telephony technologies such as Mobile phones, landlines, satellite phones and voice over Internet protocol (VoIP). A significant characteristic of using telemarketing is that a business that operates from a single location can reach large numbers of potential customers who are geographically widely spread. It can be done so relatively cheaply and easily. Telemarketing may be done from a company office or from call centre or even from home. For instance, while the mother company being in New York, the call centre is located in India. The consumer will get a call from India about a product, which is in United States.

Telemarketing can be done either manually or automatically. In manual method, the salesperson the prospective customers and persuades them to buy by highlighting the features of the product. The automated method is use of pre recorded sales message, which plays over Telephone. [4] The telemarketers should make a proper disclosure of the products to the customers. The telemarketers can only proceed with the contract only if the consent proceeds only if he gets consent in explicit terms from the client. New Zealand Organisations involved in telemarketing must comply with Consumer Protection Laws. The primary legislation to be aware of is the Consumer Guarantees Act 1993, Fair Trading Act 1986, Door to Door Sales Act 1967, which all include consumer rights provisions. [5]

Internet Auctions

Auction is yet another selling method, which runs in the same way that has been conducted throughout history. However, the typical auction process has changed into more technically advanced selling method through the internet. Instead of conducting an auction ‘in person’, an online auction venue uses a website to sell goods on behalf of a seller. Therefore, it is an electronic market place where sellers and buyers come to trade their goods and it has grasped the attention of public. [6]

Although theses online auctions carry a certain amount of risk for consumers, the popularity of online auctions is growing up across the world day by day. The websites do not involve the transactions between buyer and seller. They only act as a venue in the auction. [7]

There are many forms of auctions which the business running the website offers their own products for sale such as low bid auctions (the lowest unique bid received);high bid auctions: (the highest unique bid received) ; beat the clock auctions: (each new bid increases the auction duration, with the highest bidder at the end of the auction winning) reverse auctions: the role of the buyer and seller are reversed and the sellers compete for your business. [8]

Internet Web Store

Browsing an online catalogue can be faster than browsing the aisles of retail store. It is more convenient for the busy consumers. Online stores are usually available 24 hours a day. Many consumers have Internet access at work as well as at home. The action of buying can take place just with a click of the mouse while consumer sitting comfort in the home. A visit to a physical retail store requires travel and must take place during business hours. [9] Generally, online stores provide supplementary product information such as such as instructions, safety procedures, demonstrations, or manufacturer specifications. In addition to that, some online stores assist free advises to help the consumer to decide which product to buy. Some stores even allow customers to comment or rate their items. The consumers can easily make the payment by making use of safe online payment modes without handling cash. The internet web store is a global marketplace gathering the people from different countries in closer proximity.

Pros and Cons of Distance Selling

The methods of distance selling are tools for the sellers to break down the geographical barriers and reach the global community of buyers. It is not necessary to establish branches, companies or other entities in their target countries. It can be done by a single point-of-contact. It makes making things time-efficient and simple. There is no mediatory party (example broker, wholesale retailer) involved between the buyer and the seller. It is convenient of finding products and time spent on shopping. Consumers are free to spend time as much as they want deciding the right product before they buy. Further, with less effort, consumers can compare product features, prices to make a better decision. Consumers can buy goods and service from their home without the hassle of finding a parking space.

However, there is lack of human interaction. Buying from a local retailer gives purchasers a certain confidence. Consumer knows the brand, the shop and the staff. When a person enters a store and can ask for advice, gain information, and interact with a human being. Enjoyment of doing shopping with others and making social connections will be lost when doing distance shopping. There is less reliability. Some people will not trust the distance shopping because transaction does not happen face to face. Moreover, there is a significant delay in receiving the ordered goods. This is not suitable for perishable commodities like food items. Consumers prefer to shop in the conventional way for purchasing food products.  However, in case if the customer is not satisfied with the ordered product, returning the product and getting a refund can be even more trouble and time consuming than purchasing the product. Moreover, there might be hidden fees in methods of distance selling, and can be dishonestly priced and overinflated.

Consumer Protection v Distance Selling

Distance selling methods are speedy becoming a significant feature of the single market. As it does promote products or services and seek the consumer’s consent to conclude the contract, the consumers are exposed to many risks due to the lack of direct face-to-face contact between the seller and the buyer. Further consumers are not in a position to examine the nature of the product or services offered before making a decision due to the lack of information given. Difficulties may arise in establishing with whom the consumer is contracting and what evidences the contract in occurrence of a dispute. Therefore, protection is also needed to safeguard the consumers.

Consumer protection laws in every jurisdiction are designed to prevent unfair practices and frauds incurred in a business transaction and ensure a good relationship between the consumer and the buyer. The aim of having consumer law is to ensure that consumers have rights, which are clearly mentioned, and that companies which sell products and services are clearly aware of their responsibilities under the law.

Generally, the seller of distance selling should provide customers with specified information before the order is made, for example written information on how to cancel, a contact address and details of any warranties. The Seller should send customer an order confirmation beforehand the delivery of goods or services. Consumers must be given a chance (time period) to withdraw the contract. In the event that goods supplied are faulty i.e a refund or replacement will be made upon the return of the faulty goods.

Different legal jurisdictions have different laws concerning consumer protection. Civil and criminal penalties are available in most legislation and consumers can take their disputes to dispute tribunals as well as to courts. Some countries, such as the United Kingdom, Australia and Europe Union have agencies that operate to protect consumers. [10]

In the United Kingdom, consumers are protected by the Office of Fair Trading. It is there to ensure consumers’ safety and clarify pricing indications. Complaints may be brought before the Magistrates court or the Secretary of State. In Australia, consumer complaints are addressed by Australian Competition and Consumer Commission (ACCC). The Trade Practices Act1974 serves to protect consumers from fraudulent practices. In New Zealand, the Ministry of Consumer affairs deals the matters of consumers. There are much legislation relating to consumer protections such as Consumer Trading Act 1993, Fair trading Act 1986, Layby Sales Act 1971, Door to Door Sale Act 1967, etc.

In addition, Europe Union covers nearly twenty-seven countries from its regulations. European Consumer Centres Network (ECC-Net) provides information, legal and practical advice and support to the consumers in member states. National cases will be forwarded to national consumer organisations or otherwise advice consumers to use the European Small Claims Procedure or other legal action. [11]

Approaches of Different Jurisdictions

United Kingdom

In United Kingdom, The Office of Fair Trading brought into force a set of Regulations for distance selling called Consumer Protection (Distance Selling) Regulations 2000(Amendment Regulations 2005). It provides advice for consumers and businesses on their rights and responsibilities under the regulations. These Regulations do not apply to certain contracts such as for the sale of land, for financial services and contracts concluded at auction.

The designated enforcement authorities for these regulations are The Office of Fair Trading, Trading Standard Departments of local authorities in England, Scotland and Wales [12]  and the Department of Enterprise, Trade & Investment in Northern Ireland [13] .

The key features of the regulations are the seller must give consumers clear information including details of the goods or services offered delivery arrangements and payment, the supplier’s details and the consumer’s cancellation right before they buy. Further information provided must be in written form. Goods must be delivered within thirty days unless otherwise agreed. The consumer has a cancellation period (cooling-off period) of seven days, the period ends when the service starts. Consumer can withdraw from the contract for any reason during that cooling-off period. The trader must inform the customer of the cancellation period in writing before the contract is agreed if there is a cancellation period in the contract. Otherwise, trader need not provide such information. [14]

Europe Union

The aim of enforcing Europe Union (hereafter EU) legislation in the field of distance selling is to provide a greater protection for he consumer Europe-wide, and so encourage increased cross-border selling among the nations. EU Parliament enacted the Directive 97/7/EC in 1997 amended by COM/2006/0514.

The important features are that prior to conclusion of any distance contract, the trader should provide clear and comprehensible information to the customer with the intention of good faith. The right to cancellation varies from member state to member state. For instance most common being seven working days whereas the French cooling off period is calculated in “jours francs (exact meaning must be clarified with the French authorities). In addition to that, the supplier is obliged to repay amounts paid by the consumer within thirty days i.e. the supplier has thirty days in which to perform the contract. If the supplier fails to do so, the consumer must be informed and any sums paid refunded. Supplying unsolicited goods is regarded as an unfair commercial practice and prohibited by Directive 2005/29/EC. [15] Besides that, distance communication techniques can be used only where there is no clear objection from the consumer. For instance, the prior consent of the consumer is required to use automated calling devices by the seller. Europe Union Member States must ensure the availability of judicial or administrative reliefs for consumers when there is a situation occurred where the law of a non-member country is applicable.

New Zealand

In distance selling methods, consumers have less bargaining power. Parliament has recognized internet shopping, mail orders, telemarketing, and online auctions where consumers are particularly vulnerable and need of special legal protection. The Consumer Guarantees Act1993 (as amended in2009), Fair Trading Act1986 (amended in 2009) were enacted in order to strengthen the position of consumers in these types of sales.

The Fair Trading Act requires that all trading activities be based on accurate and honest information. This will enable consumers to make informed choices about goods and services. [16] This Acts often deals with regulations for pre-sale periods.

The Consumer Guarantee Act creates statutory guarantee when a consumer purchase a product or service from a supplier in trade. This provides for rights of redress against suppliers and manufactures for any failure of those goods or services to comply with guarantees, which apply. This provides consumer protection in the post sale period. Here online auctions are not covered by the Act. Online auctions must comply with the fare trading Acts. This Act prohibits people in trade from misleading the public about the goods and services for sale, or making false representations about those goods and services. The laws that apply to direct selling also apply to internet sales under Consumer Guarantee Act and Fair Trading Act. If the consumer buys goods or services from overseas, consumer have opportunity to file an online complain in econsumer.gov website [17] . New Zealand is a member of Econsumer.gov. It is a joint venture of the International Consumer Protection and Enforcement Network to combat cross border fraud and promote consumer protection around the world.

Conclusion

Considering the above information, it can be seen that there is lack of legislation enacted in New Zealand for distance selling. Unlike in United Kingdom or Europe union, the New Zealand law for distance selling is bit and pieces every Statute relating to consumer protection. There should be a particular statute or regulations for distance contracts protecting consumers. Because, distance selling is low friction and low cost. It will gain the confidence of consumers to go with the globalization and reach the world.