Exclusionary clauses in the Digital Market Space
September 24, 2021
The COVID-19 crisis has led to significant shift in the retail of goods and services from brick-and-mortar stores to online stores. Hence most businesses are transforming their business processes and utilising digital platforms to advertise and retail their products. In addition to the digital apps and websites specially dedicated to offer products and services online, many businesses are also utilizing social media platforms such as Facebook and Instagram to market, receive orders and payments for their products.
Whilst it is encouraging to see businesses are digitizing their services and providing customers with access to a significant variety of products from the convenience and safety of their homes, the prevalence of exclusionary clauses in online advertisements has caused concern for the for the Consumer Council of Fiji.
What are exclusionary clauses?
The exclusionary clause is a term which seeks to exclude or limit the liability of a business on the product or service they retail to consumers. Such clauses state that a party or a business has no liability if a product is faulty or has any other issues and limits the range of remedies or redress available to a consumer. It also limits the time in which these remedies or redress can be claimed by consumers.
Exclusionary clauses exist in many consumer spheres. However, it has been particularly on rife in the digital market sphere. Continuous online market monitoring by the Consumer Council of Fiji revealed a total of 41 cases of businesses displaying exclusionary clauses between 8 June to 16 August 2021.
Seru was browsing on Instagram when he came across an advertisement for bluetooth speakers. However, he noticed that the advertisement stated the company retailing the product has a no refund and returns policy. Being an assertive and vigilant consumer, Seru raised the matter with the Council. The Council liaised with the online retailer after which the advertisement was amended to omit the exclusionary clause.
Why are exclusionary clauses or notices illegal?
Displaying or implementing exclusionary clauses breach Section 77 (1) (k) of the Fijian Competition and Consumer Commission Act. The provision states: “A person shall not, in trade or commerce in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services make representation concerning the existence, exclusion or effect of any condition, warranty, guarantee, and right or remedy that person does not have.” The maximum penalty for the the FCCC Act 2010 is $100,000 for companies. The clause or notice basically prevents consumers from seeking redress from faulty items.
This means that it is illegal for a trader to impose a condition that prevents consumers from seeking redress if products purchased are not of merchantable quality or develops any other issues.
Given the high number of exclusionary clauses in online advertisements and its potency to infringe on consumer rights, bother businesses and consumers need to better understand their roles and responsibilities on this topic. To do this, let’s look at some frequently asked questions in regards to exclusionary clauses.
Frequently Asked Questions
Q: What is the legal basis of the prohibition on “No Return, No Exchange” Policy of business establishments?
A: Pursuant to the Section 77 (1) (k) of the FCCC Act (2010) the words “No Return, No Exchange”, or words to such effect shall not be written into the contract of sale, receipt or sales transaction, in any document evidencing such sale or anywhere in the store or business establishment.
Q: What is the rationale for this provision?
A: The prohibition is aimed to correct the misconception of a lot of consumers that they do not have the right to return shoddy or defective goods or demand for remedies in case of defective or imperfect service because of the “No Return, No Exchange” notice in the receipts or anywhere in the business establishment – including online.
Q: Why is the presence of a “No Return, No Exchange” notice considered deceptive?
A: Such statement is considered deceptive because consumers may return or exchange the goods or seek other remedies in case of hidden faults or defects, or any charge not known to the buyer. By provision of law, sellers are also obliged to honour their implied warranties and grant corresponding remedies to consumers.
Q: Is there a time limit within which a consumer may return defective products?
A: There is no hard-and-fast rule on the period within which a consumer may return the products he/she purchased. A rule of reason should, however, be observed, taking into consideration the nature of the item purchased and the express/implied warranties mandated by law or provisioned via supplier’s warranty.
Q: Can a store impose the condition that merchandise can only be exchanged once?
A: No, because merchandise can be exchanged as many times as these are defective as long as the consumer chooses the option of replacement.
Q: What should a consumer do in case they come across a trader violating the prohibition on “No Return, No Exchange” policy?
A: He/She can file a complaint with the Consumer Council of Fiji with the following information;
• their names, address and contact details;
• the name and address of the trader/entity displaying exclusionary clauses;
• the acts or omissions constituting the offense including the approximate date, place and time of its commission.
Consumers can lodge their complaints with the information above via the toll-free number 155 or email firstname.lastname@example.org. Alternatively, consumers can lodge complaints via the Consumer Council of Fiji Mobile App.