The Law on Alternative Dispute Resolution for Consumer Disputes (“Consumer dispute resolution Act” – VSBG)
What legal consequences are imposed by VSBG on businesses selling products or services?
In February 2016 German Parliament passed the law on alternative dispute resolution for consumer disputes (“Consumer dispute resolution Act” – VSBG). The law serves the implementation of Directive 2013/11/EU on alternative dispute resolution for consumer disputes (“ADR”) and of Regulation (EU) No 524/2013 on online dispute resolution for consumer disputes (“ODR”). Many sections of VSBG already entered into force on 01 April 2016.
The VSBG provides rules for establishing (state or state-recognized) out-of-court arbitration bodies for disputes between consumers and businesses arising from a sales or a service contract. This should allow the respective parties to resolve their disputes outside civil court proceedings in an easy, fast and inexpensive way.
The regulation focuses on different aspects of requirements and procedure for dispute resolution bodies, the access opportunities and information requirements of such bodies, as well as the designation of the Federal Office of Justice as contact point for the ODR platform operated by the European Commission concerning cross border disputes arising from contracts concluded online. The participation of businesses in dispute resolution procedures is in principle voluntary. The participation will remain an obligation for certain businesses who are already legally obliged to take part in resolving disputes, such as businesses in the energy, aviation and insurance sector as well as for financial institutions.
As from 01 February 2017, the VSBG imposes new information duties on businesses employing more than ten persons. When maintaining a website or applying general terms and conditions the consumer has to be informed if that particular branch of business is committed to or obliged to use entities to resolve disputes with consumers. This information includes the address and website of the relevant ADR entity/entities in a clear, comprehensible and easily accessible way on the business’ website, and, if, applicable, in the general terms and conditions of sales or service contracts with a consumer.
After a dispute between the parties has arisen, the information must be provided on paper or on another durable medium such as emails.
The law on general terms and conditions has also been adapted to the new rules of the VSBG. With immediate effect, businesses are not allowed to use a term obliging a consumer to reach an ADR resolution first, before bringing matters to a civil court. The consumer may not be forced to take part in an alternative dispute resolution.
Infringements of the general information duties may lead to claims of damages due to the violation of pre-contractual and contractual obligations. In practice, it will not be easy for the consumer to produce evidence of incurred damage. If information obligations in relation to the website are being violated, prohibitory injunctions can be enforced by consumer associations under section 2 UKlaG (= Unfair Terms and Conditions Act) in conjunction with Article 7 No 1 VSBG. Regarding infringements of information obligations concerning the use of general terms and conditions, the usual prohibitory injunctions or rights to demand revocation of particular terms remain in place (section 1 UKlaG). To provide independent regulations on sanctions is currently not taken into consideration by legislation. However, claims concerning unfair competition may still arise.
It is therefore advisable for businesses to examine at this stage – and not only in February 2017 – whether there are good reasons or even an obligation to participate in alternative dispute resolutions and, if so, which ADR entities are responsible for the particular business branch.
Furthermore, businesses should point out on their websites and, if applicable, in their general terms and conditions, whether they make use of the ADR bodies. If this is the case, the consumer has to be provided with the address and website of the relevant entity.
Of course we support you and your business when putting the above rules into practice.