Position of a merchant in Serbia according to the new Consumer Protection Act
The Law on Protection of Consumers (effective as of 1 January 2011) has raised the level of consumer protection in Serbia. One of the main goals of the new law is to eliminate unfair and unconscientious business behavior by defining more precisely the codes of conduct and obligations of merchants. At the same time, the new law completely complies with the European Union law, having in mind implementation of the fifteen key EU Directives on consumer protection.
The new law regulates rights and obligations of parties to consumer contract which include any contract executed between a merchant and a consumer. In addition, the term “merchant” denotes an individual or a legal entity which transacts in the market in the course of its business activities or for other commercial purposes. The law specifically regulates the duties of a merchant - in distance contracts and contracts concluded outside of business premises (which includes e-commerce), contracts for the sale of goods, service contracts (including services of general economic interest), contracts on tourist travel and contracts on time shared use of real property (time shares). The important thing is that in each of these contracts, the consumer is entitled to unilaterally terminate the contract under certain conditions.
The new law also prohibits direct marketing by merchants without prior consent of the consumer. Merchants are no longer permitted to directly advertise by phone, fax or e-mail and any other means of distant communication. Merchants are also not allowed to send goods or provide services, accompanied by a request for payment, without an order request from the customer.
Before any contracts for the sale of goods or services can be concluded, merchants have an obligation to provide the consumer, in a clear and understandable manner, with information on all aspects of the transaction at hand. This implies all information about the goods or services being sold (main characteristics thereof), price, payment method, manner and time of delivery, contractual guarantees, possible rights of consumers to unilaterally terminate the contracts, as well as any other additional costs for which the consumer could be liable. If a merchant fails to comply with this obligation, regardless of its intention, the consumer may request a cancellation of the contract within one (1) year from the date of its conclusion, and the merchant carries the burden of proof that it fulfilled its obligation to provide the consumer with the required purchase information.
One of the most important aspects of the new legislation is the introduction of statutory (compulsory) guarantee by the merchant that the goods conform with the contract, regardless whether the merchant was aware of the lack of conformity or not, and indepedent of any possible contractual guarantees. In fact, the merchant is responsible for everything that it places on the market, in terms of quality and functionality. The guarantee is valid for a period of two (2) years from delivery of goods to the consumer and the manufacturer appears as surety for the merchant in respect to such obligations. In addition, if any defects are apparent within the first 6 months, it will be assumed that they had existed at the time of sale. Then, the merchant shall bear the burden of proving that the defect was caused by the consumer or as a result of external influences for which the merchant cannot be deemed responsible. For this reason, it is important for merchant to inform consumers through product labels and information about the purpose of and proper use of goods.
In case of lack of conformity, the merchants are required to answer consumer complaints within 15 days and to address concerns related to defects, repairs or replacements. In such cases, it is possible to agree on a price reduction or complete refund if the consumer requests a termination of the contract. In addition, the merchant is obligated to compensate the consumer for any possible damages related to the lack of conformity of goods with the contract.
To ensure conscientious business behavior, the law has introduced new restrictions and defined standards of conduct. These include unfair business practices, deceptive business practices, invasive operations and unfair contract terms, for which appropriate misdemeanor penalties are provided. New is that the law provides special measures of prohibition of unfair contractual terms and unfair business practices, which may be imposed after the execution of appropriate procedure, prescribed in accordance with European directives.
In fact, the law provides for a separate court procedure to rule on unfair contractual terms, unfair business practices or to confiscate any benefits illegally gained by the merchant The value of such claims may be up to RSD 500,000.00 (approximately EUR 5,000.00 at the time of writing this article). If the value of the claim exceeds this amount, at most up to RSD 1 million (approximately EUR 10,000.00 at the time of writing this article), a regular consumer dispute can only be conducted - either through formal litigation or outside or disputes outside the judicial process (arbitration or mediation).
Another newly introduced measure to the law involves ''collective disputes'' for violations of consumer collective interests. The association or alliance for consumer protection has explicit legal authority - based on the law -- to represent the collective interests of consumers (''litigation for another's right''). In this sense, such alliance or association appears as a party in the proceeding (plaintiff), with statutory standing, so such claims will be considered admissible from the point of view of the Code on Civil Procedure.
If the court finds the claim justified, the court may declare any unfair term of a contract void and determine that a particular business practice is unfair from the point of view of this law. The merchant may be ordered to: immediately cease the use of unfair contractual terms in its business activities; to correct, at its own expense, parts of advertisements that amount to an unfair business practice; or to activate media announcements informing consumers or the general public about its unfair contractual terms or unfair business practicies as well as the penalities imposed by the court decision.
If the merchant does not comply to the court decision in a timely manner, the request for imposing a measure of confiscation of illegally gained benefits can be submitted to the Court, as an obligation to pay a certain amount of money (in favor of the budget of the Republic) in cases in which unfair contract terms and unfair business practices have been established, up to 5% of the total annual income of the merchant.
To provide consumer protection, the law (in accordance with EU Directives) foresees making available via publications and the internet, court decisions on consumer protection cases.
Although at first glance, the law might seem to introduce drastic obligations for merchants, the new measures are only advancing the general principle of good faith, and the obligation to comply with contractual provisions (in accordance with the Law of Contracts and Torts, as well as other laws and regulations). In this regard, the merchantshave never been allowed to act fraudulently, to conclude contracts with unfair terms, to fail to fulfill their contractual obligations, supply goods which lack conformity, or to violate the privacy rights of consumers. These rules permeate the entire legislation of Serbia, and the newly introduced Law on Protection of Consumers, has only adjusted the existing consumer protection regulations to the level required by the EU. Although sanctions are more severe now than before, such legislation should contribute to the development of competition and improvements in the compliance with rules of ethics in business, particularly because the law encourages the merchants to unite and to regulate the rules of market conduct through adoption of appropriate codes of conduct, which will they then have to abide by.
Our law firm will be pleased to assist you should you wish to learn more about this subject.
The article is also available for download as a pdf-file here.
Specht Belgrade Team, October 2011
E mail:
