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Online retailers cannot deduct delivery fee when making refunds

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Online shopping customers who send back goods straight away must not be charged for their delivery, Europe's top court has said. Consumers can be required to pay the cost of returning the goods but should be refunded every other cost, it said.

The Court of Justice of the European Union (CJEU) said that Germany should not have a law allowing online and postal retailers to refuse to refund delivery costs when a consumer exercises their right of withdrawal.

EU rules on distance selling give consumers an extra right that shop customers do not have, which is the right to return goods for a full refund within seven days of receiving them. This is called the right to withdraw from the contract.

The UK's Distance Selling Regulations govern this right and consumer regulator the Office of Fair Trading has previously ruled that refunds must include the cost of postage or delivery of goods.

The CJEU ruled, though, in a case involving a €4.95 delivery charge by German retailer Heinrich Heine. A consumer rights group brought the case, which was referred to the CJEU.

Heinrich Heine argued that German law does not grant the consumer the right to a refund of the delivery charges, but the German Federal Court said that if German law does say that then it may be in conflict with EU law and would have to be changed.

The Distance Selling Directive says that "the supplier shall be obliged to reimburse the sums paid by the consumer free of charge. The only charge that may be made to the consumer because of the exercise of his right of withdrawal is the direct cost of returning the goods".

"The wording of [the Directive] imposes on the supplier, in the event of the consumer’s withdrawal, a general obligation to reimburse which covers all of the sums paid by the consumer under the contract, regardless of the reason for their payment," said the CJEU's ruling. "Contrary to what the German Government submits, it is not apparent from the wording of Article 6 of [the Directive] or from the general scheme thereof that the terms ‘sums paid’ must be interpreted as referring solely to the price paid by the consumer, excluding the costs borne by him."

The German Government claimed that the Directive's demand that sellers reimburse all costs only applied to those incurred in the actual process of withdrawing from the contract.

The CJEU rejected that view, saying that the costs referred to were all those associated with the whole contract.

"The directive authorise[s] suppliers to charge consumers, in the event of their withdrawal, only the direct cost of returning the goods," the ruling said. "If consumers also had to pay the delivery costs, such a charge, which would necessarily dissuade consumers from exercising their right of withdrawal, would run counter to the very objective of Article 6 of the directive."

"In addition, charging them in that way would compromise a balanced sharing of the risks between parties to distance contracts, by making consumers liable to bear all the costs related to transporting the goods." It said. "Furthermore, the fact that the consumer has been informed of the amount of the delivery costs prior to concluding the contract cannot neutralise the dissuasive effect which the charging of those costs to the consumer would have on his exercise of his right of withdrawal."

"[The Directive] must be interpreted as precluding national legislation which allows the supplier under a distance contract to charge the costs of delivering the goods to the consumer where the latter exercises his right of withdrawal," it said.

Copyright © 2010, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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