The dangers of long-distance shopping

Irish Takeover Panel widens its net

Employment law update

New competition law regime on the way?

Food for thought

Shopping just isn't what it used to be. Consumers are increasingly buying a wide range of products over the Internet, from catalogues, or directly in response to television or radio adverts. In doing this, they may never meet the supplier face-to-face, cannot examine the product they ordered, and may have to rely on descriptions, photographs or testimonials. Often, the subsequent contract does not fully set out the consumer's rights, and there may be hidden costs in the small print.

The EU has now moved to try to regulate this form of marketing through the European Communities (Protection of Customers in respect of Contracts made by means of Distance Communications) Regulations, 2001. The regulations specify the information a customer must be given before concluding a contract, require written confirmation of the contract and allow a cooling-off period. The customer's rights are also strengthened by a prohibition on charging cancellation costs, by specifying the time in which money paid must be refunded, and by making it an offence if the supplier fails to comply with the regulations.

The new regulations are intended to protect members of the public, so they don't apply to trade or business contracts. In addition, a number of other types of contract are excluded, such as contracts for financial services.

The regulations aim to ensure that a customer makes an informed choice about a proposed distance contract, so suppliers are obliged to advise customers of all the material terms and conditions before the contract is concluded. They also require that the customer receives, in good time, written notice of all the details necessary for the proper performance of the contract. These include:

• The supplier's name and address (in the case of pre-payment contracts)
• A description of the goods or services
• Details about the price and any delivery costs
• The customer's rights of cancellation
• The duration of the offer and the minimum duration of the contract.

Full written details of the agreement must be given to the customer, at the latest by the time of delivery of any goods, or in 'good time' during the performance of the contract.

If a supplier telephones a customer, he has to explain 'explicitly' and 'clearly' the purpose of the call and the nature of the transaction, and must ensure that consent is not sought from individuals (such as minors) who are legally unable to conclude a contract. Failure to comply with these obligations will result in criminal sanctions against the supplier and, importantly, makes the contract unenforceable.

Cancelling a distance contract

The regulations give customers a seven-day cooling-off period in which they can cancel the contract without having to give any reason. No cancellation charges or penalties can be levied against the customer, except for the direct cost of returning the goods to the supplier. The conditions and procedures for exercising a right of cancellation must be set out and explained to the customer. Conditions for cancelling a contract that exceeds one year, or is of unspecified duration, must also be provided. Failure to comply with these obligations amounts to an offence.

In the absence of an express agreement, a customer may not cancel the contract if:

• The provision of services has already begun (before the end of the cancellation period), with the consent of the customer
• The supply of goods or services which are dependent on fluctuations in the financial market beyond the control of the supplier
• The goods are made to the customer's specifications, or are personalised, or because of their nature are liable rapidly to deteriorate
• The goods are audio and video recordings or computer software and the wrapping has been unsealed by the customer
• The goods are newspapers, periodicals, magazines
• The contract is for gambling and lottery services.

If a customer validly exercises his right of cancellation, the supplier must reimburse any sums paid within 30 days, deducting only any direct cost for returning the goods. If the supplier has provided credit facilities for the customer, then the credit agreement will simultaneously be cancelled with the distance contract. Failure to comply with these provisions amounts to an offence.

Performance of the contract

Distance contracts often say very little about when they will actually be carried out, so the EU regulations require suppliers to fulfil such contracts within 30 days from the day after they receive the customer's order (unless expressly otherwise agreed with the customer). If the goods or services required are not available, the customer must be told as soon as possible and be advised that he is entitled to a refund of any monies paid (within the next 30 days).

Director of Consumer Affairs

The regulations give the Director of Consumer Affairs (and various other consumer protection bodies) the right to go to the High Court to enforce the provisions contained in the regulations. Additionally, the Director may appoint officers to enter into the premises of any trade, business or profession involving distance contracts or the supply of services to search and inspect the premises and any records for evidence of breach of the regulations. Obstructing the authorised officer amounts to an offence. Anyone committing an offence under the new regulations is liable to a fine of £3,000. Given the increased use of distance communication to market products or services, these regulations will have a wide impact on commercial activities. They represent a significant development for customer protection rights. However, it remains to be seen whether consumer protection groups will have the resources to prosecute cases through the High Court.

For further information please contact Emmet Scully.

The Irish Takeover Panel is the body responsible under the Irish Takeover Panel Act, 1997 for monitoring and supervising takeovers and other relevant transactions in relation to securities in companies which are subject to its jurisdiction. Until recently, under the Irish Takeover Panel Act, 1997 (Takeover) Rules, the panel regulated only those companies which had securities listed on the Irish Stock Exchange or which had been dealt in up to five years before the proposed takeover.

However, under new regulations, Irish companies whose securities are traded on the London Stock Exchange, the New York Stock Exchange, the Nasdaq, the EASDAQ and the Neuer Markt have been prescribed as 'relevant companies' for the purposes of the 1997 Act. The net effect is that such companies will now be regulated by the panel under the 1997 Act. This represents a significant increase in the number of companies that fall within the panel's remit.

Some Irish PLCs have elected to by-pass the Irish Stock Exchange and obtain a listing on either the Nasdaq or the Neuer Markt, coupled in some instances with a listing on the London Stock Exchange. These companies are now subject to the 1997 Act and the rules. In addition, with effect from 1 July 2001, the rules have been substantially revised and replaced by the Irish Takeover Panel Act, 1997 (Takeover Rules) 2001. A number of significant changes, too detailed to include here, have been made to the existing rules.

For further information, contact Emmet Scully.

Over the last few months, there have been a number of legislative changes which impact on the employment relationship. For example, under the European Communities (Safeguarding of Employees' Rights on Transfer of Undertakings) (Amendment) Regulations 2000, if employee representatives are not properly consulted and informed in good time before the transfer of a business (i) in relation to the reasons for the transfer, (ii) the legal, economic and social implications of the transfer for the employees, and (iii) the measures envisaged in relation to the employees, the employee representatives may make a complaint to a Rights Commissioner. The Rights Commissioner may require the employer to comply with the regulations by taking a specified course of action and/or pay up to four weeks' salary in compensation. The Rights Commissioner's decision becomes a liability of the transferee in a case where ownership changes after the contravention to which the complaint relates. The penalties for failing to comply with the European Communities (Safeguarding of Employee Rights on Transfer of Undertakings) Regulations 1980 have also been increased and the employer may now also be fined between £1,000 and £1,500 for breaching the regulations.

Collective redundancies

Under the European Communities (Protection of Employment) Regulations 2000, employers who do not consult and provide specific information to employees or their representatives at the earliest opportunity in a collective redundancy situation (at least five redundancies in an organisation employing 20 people) may incur serious penalties. Once again, the employee may make a complaint to the Rights Commissioner. The Rights Commissioner may require the employer to take a specified course of action or require the employer to pay to the employees compensation of up to four weeks' salary. The penalties for employers failing to comply with the Protection of Employment Act, 1977 (as amended) have now been increased and employers may also be fined between £1,500 and £3,000 for failing to comply with the Act's provisions in relation to notification to the Minister. The Protection of Employees (Part-Time Work) Bill, which is due to be enacted later this year, provides that the penalty under the Protection of Employment Act, 1977 be increased from £3,000 to £10,000.

Redundancy payments

As a result of the Redundancy Payments (Lump Sum) Regulations 2001, the statutory ceiling (used in calculating redundancy lump-sum payments) has increased from £300 a week to £400 a week with effect from 1 April.

Industrial relations

Another important change for both employers and employees was introduced in the Industrial Relations (Amendment) Act, 2001, which came into operation on 31 May. From now on, employers who fail to observe any codes of practice on voluntary dispute resolution or who do not engage in collective bargaining negotiations should note that Labour Court determinations in relation to terms and conditions of employment, dispute resolutions and disciplinary procedures may now be legally enforceable if the determination of the Labour Court is not implemented within one year from the date on which it was made.

For further information please contact Hugh Garvey, Aoife Bradley or Jennifer O'Neill.

Ireland's competition regime faces a major overhaul, following the recent publication of new outline legislation by the government. The Department of Enterprise, Trade and Employment has issued a 'Heads of Bill' that will form the basis of a new Competition Act designed to replace the Competition Acts, 1991-1996 and the Mergers, Takeovers and Monopolies (Control) Act, 1978.

The proposed new legislation aims to implement some of the recommendations of the Competition and Merger Review Group report published in May last year. It also contains a number of features, which, if enacted, will mark a significant departure from the existing competition law regime in Ireland. Some of these key features are summarised below.

Criminal offences

With regard to the criminal regime for competition law offences, the Heads of Bill provides for the introduction of two categories of restrictive agreements, decisions and concerted practices which are referred to as 'hardcore' offences and 'non-hardcore offences'.

Hardcore offence are agreements, decisions or concerted practices which:

• Directly of indirectly fix purchase or selling prices or any other trading conditions
• Limit or control production, markets, technical development or investment Share markets or sources of supply, and
• Fall within the equivalent provisions in article 81(1) of the EC Treaty.

Non-hardcore offences are those that are caught by the prohibition but do not fall within the category of agreements, decision or concerted practices giving rise to hardcore offences.

A number of significant changes are proposed for hardcore offences. First, there will be a presumption that an agreement, decision or practice has as its object the prevention, restriction or distortion of competition in trade in goods or services. Second, the 'ignorance' defence which currently exists under the Competition Acts will be removed for hardcore offences and will be retained only for non-hardcore offences. In other words, it will no longer be enough to prove that the defendant did not know (nor could reasonably be expected to know) that an agreement, decision or practice would result in the prevention, restriction or distortion of competition in trade. Third, the Heads of Bill increases the possible jail term for hardcore offences from two years to five years for convictions on indictment. This means that under certain circumstances the Gardaí will be able to arrest a suspect without a warrant and hold that person for six hours (which can be extended for a further period of six hours). The explanatory notes to the Heads of Bill say that these 'strong penalties' are warranted by the fact that both the Department of Enterprise, Trade and Employment and the Competition Authority regard these offences as analogous to serious fraud.

The Heads of Bill remove the provisions allowing for the imposition of jail sentences for non-hardcore offences.

New powers for The Competition Authority

Like the Competition Acts, the proposed new legislation would give the Competition Authority extensive powers of investigation, including the power to make dawn raids. Significantly, it also gives the Competition Authority the additional power to enter any premises - including the homes of directors, managers and other members of staff - if it suspects that business records are being kept there.

Protection for whistleblowers

The Heads of Bill provides protection for certain categories of whistleblowers. This protection applies to employees or sub-contractors and specifies that an employer cannot penalise such a person who in good faith makes a complaint or gives information to the Competition Authority.

Merger control

The Heads of Bill also makes significant changes to the Irish system of merger control:

• The substantive test for examining a merger or acquisition would be whether or not 'the result of the merger or acquisition will be to substantially lessen competition in markets for goods or services in the state'. The Department of Enterprise, Trade and Employment has chosen the US test of 'substantially lessening competition' as opposed to the EU test, which is whether or not the merger will create or strengthen a dominant position which significantly impedes competition in the common market.
• The thresholds for notifying a merger have also been changed. Under the existing system, a merger or takeover is notifiable if in the most recent financial year each of at least two of the enterprises involved in the proposal has a turnover of not less than IR£20,000,000 or gross assets of not less than IR£10,000,000. Under the new legislation, the threshold would be that in the most recent financial year the worldwide turnover of each of at least two of the undertakings involved must not be less than ¤40,000,000 and the turnover in Ireland of at least one of the undertakings involved must not be less than IR£40,000,000. The asset-based test would be dropped.
• The Competition Authority will have one month to decide whether to approve the merger or to carry out a full investigation. This investigation must be completed within a period four months from the date notification was received. A practical downside of this is that the Competition Authority will have one month within which to make a decision on the most straightforward of cases. At present, the Minister is obliged to respond in such cases 'as soon as practicable', which often means a period of between one and two weeks.
• The notification must be lodged to the Competition Authority as opposed to the Minister for Enterprise, Trade and Employment, and it is the Competition Authority that will effectively become the competent body regarding mergers. It should be noted that under the Heads of Bill, the Minister would retain jurisdiction in relation to 'media mergers'.

For further information please contact Marco Hickey.

The food sector has been the focus of a great deal of attention in recent years, much of it triggered by the BSE crisis and a number of further health scares, including dioxin contamination and the foot-and-mouth epidemic. Growing concerns over consumer protection and the need to increase confidence in the European food industry has led to increased regulation. LK Shields, Solicitors has recently set up a Food Law Unit in response to client demand for advice in this area. The unit will offer advice on a number of issues relating to food law, including:

• Labelling requirements and claims in relation to products
• Hygiene legislation
• Packaging (including contaminants)
• Genetically-modified foods
• Product liability
• Obligations in relation to product safety, and
• Enforcement powers of the Food Safety Authority.

Food law is being updated rapidly. Following the publication of the European Commission's White Paper on food safety in January of last year, a number of proposals for new regulations and directives have been formulated. One notable proposal includes a draft regulation laying down the general principles and requirements of food law, establishing a new European food authority and setting out procedures in relation to food safety.

The draft regulation adopts a number of general principles on which food law will be based, including the principle of traceability (which already exists in some areas of food law, such as hygiene legislation). The principle of traceability of food, feed, food-producing animals or any other substance intended to be incorporated into food or feed is to be established at all stages of production and distribution.

Food and feed operators will be required to be able to identify any person who has supplied them with food, feed, a food-producing animal or any substance intended to be incorporated into a food or feed. Operators will be obliged to have in place systems or procedures which will allow them to have this information and they will be obliged to make this information available on demand to competent authorities.

The draft regulation also includes requirements for food businesses at the primary level of production. Primary responsibility for food safety will rest with food businesses in all areas of food legislation. The regulation requires food businesses to inform the competent authorities in EU member states where food is suspected of being unsafe and to provide those competent authorities with all assistance to ensure that consumer health is protected.

For more information please contact Hugh Garvey.