12/20/2012 06:36 pm ET Updated Feb 19, 2013

The Darker Side of Online Shopping

The general consensus among consumers is that online shopping is more convenient and cost-effective, as e-stores continue to slash prices in a bid to drive more and more traffic their way. The fact that you can click from the comfort of your own home without braving the Christmas crowds is another plus in an already strong arsenal of positives, which has seen e-commerce figures rising year on year.

Of course, not everything in life is quite that simple. Unfortunately, many websites are not fully complying with consumer protection laws, meaning that the "click and deliver" promise of our leading websites may not be quite as straightforward as we have been led to believe.

A recent report by the Office of Fair Trading has identified that major online retailers are failing to comply with strict UK consumer protection laws. As one of the team of Media and IP lawyers at Capital Law, one of my principal areas of concern is e-commerce and compliance, something that tends to hit the headlines at this time of year as some consumers shop online to avoid the Christmas throng.

The OFT report outlined the fact that it had written to 62 top online retailers ahead of the busy Christmas period after a sweep of 156 websites established that many may not be complying with strict consumer protection laws.

The sweep looked for potential breaches of the Distance Selling Regulations (DSRs), E-Commerce Regulations and other consumer protection legislation. These laws have been implemented over the last decade to ensure consumers can shop confidently online, and the sweep is part of an ongoing campaign by the OFT to protect online shoppers, particularly during the busy Christmas period.

One of the principal areas of concern that the OFT report identified includes unreasonable restrictions or conditions on customers' rights to cancel a transaction or obtain a refund. The most common infringement was the stipulation that products must be returned in their original packaging, in the original "resalable" condition, or unused. This undoubtedly compromises consumers' rights to reasonably inspect and assess their purchases.

Furthermore, under the DSRs organizations are required to provide full details about their physical address, as well as providing an email contact address. Of the sites involved in the sweep, 83 percent had provided a full geographic address, however 12 percent had only displayed a PO Box address and in 5 percent of cases no physical address was provided at all.

In terms of e-contact details, 60 percent of sites provided a web contact form rather than the email address stipulated in the DSRs, and a worrying 2 percent provided no electronic contact details at all, quite a concern considering the online nature of the industry. In total, just 74 percent of sites had provided the full physical details required by the DSRs.

Other failings included not providing a cooling off period or cancellation rights, an absence of privacy policies, failing to comply with data protection legislation, as well as a failure to obtain consent, whether informed or implied, to place cookies on website users' devices (thousands of websites remain in breach of European laws, which came into force on May 26th 2012, that define what details sites can record in text files called cookies).

Clearly, most online retailers want to be fair to their customers and are complying with the law, and so fortunately for the industry the news isn't all bad. The OFT sweep also found that the majority of sites were compliant in providing other essential information. For example, 99 percent of sites provided details on when the service would start and goods would be delivered (both of key concern to the consumer), and 95 percent provided a full geographical address when payment was required in advance.

It is vital to remember that e-commerce laws are constantly evolving and, if they wish to be a major player in the e-commerce industry, online retailers need to ensure that they keep up-to-date with the latest developments so that they continue to provide a service which consumers can trust and also comply with the law. There is no excuse for ignorance.

With this in mind the OFT has written to the online retailers identified in the report and ordered them to rectify the deficiencies before Christmas. They risk formal enforcement action from the OFT if they fail to comply.

Nevertheless, despite the obvious shortcomings of dozens of our top e-stores, it's clear that e-tail is continuing its relentless march forward in its bid to take over from retail as one of the country's major past times.

And never is this trend highlighted more than at Christmas. Online analyst Experian predicted UK consumers would make 115 million visits to retail websites on this year's Cyber Monday (the first Monday in December), an increase of 36 percent on last year. It would be fair to assume that their estimation will not be too far off the mark in lieu of the availability of the official stats.