Free online services may be exempt from the Consumer Protection Act

Consumer Protection Act compliance is not a simple or cheap exercise and one question which may have arisen for some online services is whether they must go through the exercise and incur the cost of ensuring compliance for free online services. While some “free” services are not really free (many “free” services are provided in return for something of value which may not be money), there are many online services that are truly free and requiring them to comply with the Consumer Protection Act may be overly onerous on them.

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The Consumer Protection Act applies to all “transactions” save for those which exclude consumers generally speaking (for example, the Consumer Protection Act does not cover “transactions” involving companies above a certain size in terms of asset value or annual turnover; government departments and where the agreement falls under the National Credit Act). As for the term “transaction”, the Consumer Protection Act defines this key term as follows:

“transaction”, in respect of a person in the ordinary course of business, means –

  • agreement between that person and one or more other persons for the supply or potential supply of goods or services in exchange for consideration;
  • supply of any goods to or at direction of a consumer for consideration;
  • performance by, or at the direction of, that person of any services for or at the direction of a consumer for consideration.

The term “consideration” is also an important one and the Consumer Protection Act defines it as follows:

“consideration” means anything of value given and accepted in exchange for goods or services, including—

  • money, property, a cheque or other negotiable instrument, a token, a ticket, electronic credit, credit, debit or electronic chip or similar object;
  • labour, barter or other goods or services;
  • loyalty credit or award, coupon or other right to assert a claim; or
  • any other thing, undertaking, promise, agreement or assurance, irrespective of its apparent or intrinsic value, or whether it is transferred directly or indirectly, or involves only the supplier and consumer or other parties in addition to the supplier and consumer.

Website terms and conditions appear to qualify as a “transaction” under the Consumer Protection Act given that website terms and conditions are agreements between the website proprietor and visitors to the websites concerned. Website terms and conditions frequently take the form of an agreement and govern access to those sites and the services those sites provide. What remains to be determined is whether seemingly “free” websites’ terms and conditions meet the “consideration” test bring those websites under the Consumer Protection Act’s scope.

The “consideration” test asks whether visitors to these free websites offer anything “of value given and accepted in exchange for goods and services”? I mentioned at the beginning of this post that some “free” services are not really free. Take large examples like Facebook and a number of Google services for example. While its often not explicit, there is a trade involved: access to a service without the need to pay for it in exchange for personal information which, in the case of Google services and Facebook, enable the companies concerned to present more relevant ads so they can earn advertising revenue. In the absence of a trade of this sort, these sites would quickly go out of business due to the massive cost of keeping those services running. These online services would appear to be subject to the Consumer Protection Act and would be required to ensure they comply with the Act’s requirements, largely on the basis of this trade and the value required to gain access to the services.

On the other hand there are truly free resources available online which may present helpful information or provide some other free service. These services may be funded by donations or grants and users are not required to make any form of contribution that could be said to have the sort of value the “consideration” test contemplates. Those sorts of sites may well be exempt from the Consumer Protection Act and its costly demands for compliance.


Image credit: Free Hugs by drinksmachine, licensed CC BY NC ND 2.0

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