FAQs - for our fashion clients setting up online

March 11, 2008

Foreign Laws - if I sell my clothes to a country outside the UK, am I responsible under foreign laws?

If your site is set up to sell clothes to citizens based in a country outside the UK, then you are likely to be responsible under that country’s laws for the clothes you sell.  In contrast you are unlikely to be responsible under another country’s laws merely because your website is accessible in that country. Generally, you would need to be targeting a particular market, such as the US market. This may involve you quoting prices of your garments in US dollars and, perhaps, also using the US sizes when describing the item of clothing or even US terminology such “pants” instead of “trousers”. The key test is whether you are actively soliciting and fulfilling orders to US citizens. In this scenario, you should be complying with US law.

The global dimension of the web is both an incredible opportunity but also presents new risks and challenges. If you are selling garments and related items outside your home jurisdiction, then you need to be aware that national laws differ considerably. You need to give thought to how you manage this. There are also issues concerning conflicting national laws. For example, it is possible that English law requires you to do one thing and US law another. Also, the fashion brand that you’ve been using in the UK may well conflict with another brand in the new country where you are now trading over the Internet. What do you do? Rock and a hard place springs to mind as there is no easy answer or solution.

Luckily, there are though measures that you can take to address this issue and it will depend on the size of your business what approach is appropriate for you.

For the truly large multinational business, one solution is to have separate country specific websites which reflect the country you are targeting. www.easyjet.co.uk has approximately 15 different sites. For most businesses, this is not commercially viable.

The approach adopted for the majority of online businesses is to make it clear which countries your web site is targeting. This reduces the risk of you being legally responsible in a country in which your website is merely accessible. Your site should state clearly what countries you will and will not sell to and this should be reflected in your back-office systems. They must be capable of rejecting orders from individuals in excluded jurisdictions. The starting point should be to limit your markets to the countries you are comfortable trading within. If you have a registered EU trade mark, you may be comfortable trading in the EU without fear of infringing someone else’s trade mark in the US, for example.

Your terms and conditions play an important part in managing this risk. Your terms should contain relevant information about your chosen markets. The terms should also provide for a fairly detailed complaints procedure. The idea being to stop people suing, or making complaints to trade bodies, in their national jurisdictions.

Data Protection - do I need to comply with the Data Protection Act? If so, what does this involve?

In the UK, the Data Protection Act 1998 (“DPA”) regulates the use of personal information. If you collect personal data through your website such as customer names, addresses and other contact details, then you need to comply with the DPA. Generally, if you are selling clothes online you will collect some form of personal information such as the individual’s name and delivery address.
There are a number of aspects to complying with the DPA. Firstly, you will need to register with the UK Information Commissioner. This is called “notification”. The notification needs to set out the details of the way you will use information. It is a criminal offence to process data without being included on the register maintained by the Commissioner.

Secondly, you need to use the personal information you collect in accordance with the eight principles of good information handling which are set out in the DPA. These principles can be onerous to comply with. An important aspect of compliance is to prepare a privacy policy which sets out how you use the customer data you collect through your site. Having a poorly drafted policy or not having one at all, can be fatal to your ability to comply with the DPA. There is also a customer expectation that websites will have a privacy policy. This makes the site look professional.

Lastly, individuals have certain rights under the DPA that must be respected. In particular, there is a right under the DPA to get a copy of the information held about them subject to certain exceptions. Individuals also have a right to prevent the use of their personal data for direct marketing purposes.

Cancellation Right - what is a “cancellation right” and how does it affect me?

Customers who purchase items of clothing or other related items through your website have a right to cancel an order and return the goods for any reason. To do this, the customer must inform the retailer within seven working days after the day following delivery of the goods. This cancellation period may be extended where the retailer fails to provide certain information as required by the Distance Selling Regulations. The retailer is then under an obligation to refund the customer as soon as possible after cancellation and in any case within 30 days at the latest.

The rationale behind the cancellation right is to allow the customer the opportunity to try the clothes or accessories as one would be able to in a shop. However, there are particular issues with garments where the customer not only tries on the garment but wears it to the office party and then seeks to return it. Retailers are understandably concerned about reselling items which have been worn or which may raise issues about hygiene.

There are some exceptions to the right to cancel which may assist fashion retailers such as where the garments are bespoke, made to the customer’s specification. This exception will apply for example to bespoke or made to measure suits, but will not apply simply where there has been a selection based on standard options, such as colour or size.

Another possible exception to the right of cancellation is in respect of “goods … which by reason of their nature cannot be returned …”. This could apply where returning the goods is a physical impossibility or where they cannot be restored in the same physical state as they were supplied no matter how they are cared for. So, the exception may apply to items such as latex or viscose clothing which could become distorted once worn.

The cancellation right is burdensome to comply with. However, retailers can offset some of the downside by putting in place an appropriate returns policy and terms and conditions to deal with the issues raised by the cancellation right. For example, customers are not obliged to return clothes in a saleable condition but are required to take reasonable care of the goods. This is something that should be reflected in the returns policy and terms and conditions.

Ownership - my site is being developed by a web developer. Who owns my site and can I use content and images I’ve found on the web?

A website is usually made up of software, content and images. A person “owns” a website by owning the intellectual property ("IP") in this software, content and images that comprise the site.

Where a retailer commissions a site to be developed by an independent contractor the retailer is likely to believe that, as it is paying for the development, it should own all components of the work done. However, the fact that the retailer has commissioned and paid for the work does not inevitably mean that the IP in it legally belongs to the retailer. It will only do so if the IP has been transferred to the retailer. This would need to be included in the web development agreement.

Whilst ownership may be desirable, it is not essential. In order to publish the site, the retailer must either own the IP or have a licence to use it. There are no formal requirements for a licence, but it is in both sides’ interest to have clear terms set out in writing. You need to make sure that any licence you get allows you to use your website as you intend. For example, you should make sure that your licence is on a world-wide basis if you are intending to sell clothes internationally.

Generally, a web developer will not wish to give away software coding which he can reuse in other website developments; he would regard these as his stock in trade. On the other hand, he may be happy to transfer ownership in components which have been specifically designed for the retailer. This may be important to the retailer, particularly where this gives a distinct competitive advantage.
Usually, a website will comprise IP that you own, for example, IP in content that you upload to the site and IP (e.g. in software) owned by a third party, such as the developer. You may also want to use images and content that you have sourced from the web and elsewhere. But, if you do not have permission to use these images and content, you should not be displaying them on your website.
This is important where you are displaying brands and logos of designers and fashion labels. You need to make sure that you have permission to use and display the logo and brand from the brand owner. The same rules apply where you are displaying an image or a photo of a model or celebrity, perhaps because they are wearing your label or clothes. Even though an image or photo is freely available on the web does not necessarily give you the right to use it for your own purposes. If you are using materials, photos or images without permission, then the owner may be entitled to claim damages from you.

Posted Content - am I responsible for the comments of users posted on my site?

The short answer is yes. But you may be entitled to defences under the Defamation Act or the Ecommerce Regulations. It is possible that retailers could be liable for content posted by their users where, for example, you operate a fashion blog encouraging comment or run an online forum designed to allow users to air their views on the latest fashion or trends.

In respect of content liability, there are two main scenarios; a libellous comment or the use of IP which belongs to a third party. An example of a libellous comment could be where a user posts a statement saying that a famous brand uses child labour to make their clothes (when this is not the case). Unauthorised posting of a photo would be an example of IP infringement.

In relation to libellous statements, websites may have the benefit of the “innocent dissemination defence” where they are not the authors or publishers of the statement. Whether the defence is available will depend on a number of factors such as whether the operator exerts some kind of editorial control over the posting. In relation to IP infringement claims, the websites operator may have a defence under copyright laws. Both of these specific defences are quite narrow and may be difficult to apply in practice.

The Ecommerce Regulations contain more general defences that are designed to protect website operators. Under these regulations websites have a defence for hosting unlawful content where they:

• do not have actual knowledge of the unlawful information;

• are not aware of facts and circumstances from which it would have been apparent to a service provider that the information was unlawful; or

• upon obtaining such knowledge, act quickly in removing it.

Again, this defence is not easy to apply in practice and there are a number of issues that arise. Should the website moderate content? If content is moderated before being published and unlawful content slips through, then the operator will potentially be seen as a publisher of that content and could be liable for it. There are also issues of censorship and freedom of expression which could be seen to be contrary to the user’s expectation. Depending on the system of moderation, this could also be a considerable logistical undertaking.

If websites do not moderate content, they need to put in place effective notice and take down procedures. This approach is not without risk either. Firstly, the website has to make an assessment as to whether content is unlawful. If this assessment is wrong and content is not taken down, then the defence will be lost and the website could be liable for the content.

Secondly, if the website is over-zealous in removing content, then it could be open to allegations of censorship and having an adverse effect on the user experience. Operating an effective notice and takedown procedure requires clear polices to be put in place. This should be prepared carefully and would need to interact appropriately with your terms and conditions and the way in which the website is designed.

Other Laws - are there any other laws I need to be aware of when selling online?

Fashion retailers trading online face a complex array of legislation with which to comply and face dealing with a number of UK and EU regulators that are keen to protect online shoppers. Briefly, the main laws you should be aware of are as follows.

Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCR”)

Under the UTCCR, terms in standard terms and conditions are subject to a test of “fairness”. An “unfair” term is not binding on the consumer which means a businesses can lose the protections it has included within the consumer contract. The UTCCR apply to all kinds of standard terms of business that are used with consumers including website terms of sale.

The UTCCR also require that contract terms are written in plain, intelligible language. If there is doubt about the meaning of a written term, the interpretation which is most favourable to the consumer is preferred. Intelligibility depends not just on vocabulary but also on how contracts are presented. The online contracting process needs to be carefully designed to ensure that terms are presented fairly and are brought to the consumers’ attention.

The Consumer Protection (Distance Selling) Regulations 2000 (“DSR”)

Online consumer sales are “distance contracts” which fall under the DSR. Compliance with the DSR requires that consumers be given certain information about the clothes or other goods on offer and the contractual process for purchasing such items. Under the DSR, consumers also have a cancellation right exercisable during a limited period where they can reject the items they have purchased via the web for any reason (which is discussed in more detail above). Compliance with the DSR should be engineered into the website and back-office development.

The DSR are designed to protect the consumers and can be burdensome for the retailer. This can be offset to some extent in terms and conditions of business.

The Electronic Commerce (EC Directive) Regulations 2002

The Ecommerce Regulations require you to include certain information about your business and your online contractual process on your website. This is usually provided in your website terms and conditions. The Ecommerce Regulations also contain rules concerning the form of unsolicited email communications with your customers and may provide you with a defence from legal actions arising from displaying illegal content (which is discussed in more detail above). This is important where you are allowing your users to post content and comments.

Privacy and Electronic Communications Regulations 2003

The Privacy Regulations establish rules for the sending of electronic marketing communications such as emails and texts. Essentially, unless you have an “existing business relationship” with a person, then you must have a person’s explicit consent before sending them any form of electronic marketing communication. You can obtain consent through the appropriate use of tick boxes on your website. The Privacy Regulations also require you to tell users if you use “cookies” and how a user may disable the use of cookies. This is something that is usually covered in your privacy policy. 

Related pages:

Online regulation and terms & conditions more

Technology, Media & Digital more

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