New Obligations for Companies due to Consumer Dispute Resolution Law

As of 1 April 2016, the new Consumer Dispute Resolution Law is in effect. The objective of the law is to create a comprehensive system of extrajudicial dispute resolution authorities for private (not labour-related) disputes between consumers and companies. Companies may participate herein voluntarily; however, the new law creates numerous obligations to inform.

Additional obligations to inform as of 1 February 2017

As of 1 February 2017, new obligations to inform shall apply to all companies that operate a website/online shop aimed towards consumers. These obligations also apply to companies that use general terms and conditions in their business relations with customers, and therefore nearly all companies in the B2C field are affected. Such companies must indicate on their website as well as in connection with their general terms and conditions whether they participate in dispute resolution through consumer arbitration. Participation in arbitration of this kind is mandatory for only a few companies from certain sectors (for example, energy companies, airlines and railway companies). All other companies are free to decide whether they want to participate in arbitration and they may also change their decision at any time. If the company decides to participate in arbitration, it must indicate the address and website of the consumer arbitrator responsible for handling its disputes. Smaller companies with less than eleven employees at the end of the preceding year, are exempted from this obligation to inform in advance of any dispute; the number of employees is based on actual workers and not the number of working hours.

In the meantime, all companies (regardless of the number of employees) already involved in non-resolved extrajudicial disputes with a consumer must refer the consumer in written form (e.g., by e-mail) to an arbitrator who is responsible for handling the dispute, stating the arbitrator’s address and website. They must also indicate whether they are obligated or willing to participate in dispute resolution proceedings.

Process and implications of dispute resolution proceedings

Consumers can currently already file a request for arbitration with local and specialised arbitrators. The dispute mediator shall then present a proposal for arbitration within 90 days. The dispute resolution proceedings end with the announcement of the outcome which, unlike a court ruling, is not published and in the event of a settlement is also not enforceable. Either side can discontinue the arbitration at any time. The costs of the arbitration proceedings (excluding attorney’s fees), excluding cases of abuse, are generally borne by the company. These costs amount to 50-600 EUR depending on the amount in dispute.

In a state like Baden-Württemburg, for example, which no longer has a law on arbitration, disputes over claims of up to 750 EUR can always be resolved in local courts. It is, however, not allowed that companies use a previous extrajudicial dispute resolution as the basis for filing a claim in court.

Recommendation for companies

To avoid costly penalties under competition law, the affected companies should indicate on their website and in their general terms and conditions no later than February 2017 whether they are obligated or willing to participate in consumer dispute resolution and they should state the website and address of the relevant arbitrator. The requirements for the online sector should also be fulfilled in an easily accessible place, combined with the reference requirement from the EU Regulation on online dispute resolution in consumer affairs (see here), for example, in the site's imprint or on a separate page for consumer information.