Legal Aspects of Gift Cards Explained for Online Businesses – Contracts and Commercial Law

To print this article, all you need to do is be registered or log in to Mondaq.com.

Offering gift cards to your consumers can be a great money-making strategy. However, if your business sells gift cards to consumers based in the European Union (EU), you must follow some specific rules. So, to help you better understand this burgeoning market and seize the opportunities for your business while reducing the risks, we’ve compiled the key questions surrounding online business implementation of gift cards and summarized the key steps. which you should follow to ensure your practices comply with EU law.

What is a gift card?

Gift cards (also called gift certificates) are nothing more than vouchers or coupons that customers can purchase and/or use to pay for goods and services. These cards are used as an alternative to cash and hold a specific amount of prepaid money available for purchases. Gift cards can frequently be redeemed across both online and in-store sales channels and come in the form of a simple paper receipt, plastic card, or even a code.

Is there European legislation applicable to gift cards?

Currently, the EU does not have specific legislation regulating gift cards. However, this does not mean that the practice is unregulated. The provision of gift cards is considered a commercial practice and as such falls within the scope of the Unfair Commercial Practices Directive (the “UCPD“), which means that consumers are protected against unfair and misleading practices when buying or using gift cards. The purchase of a gift card is also covered by the Consumer Rights Directive (the “CRD“). When consumers purchase a gift card, they are entering into a contract with the merchant and, therefore, gift card agreements are subject to the CRD.

Additionally, if your business targets consumers in certain EU countries, the laws of the respective EU member state will apply. Before initiating the voucher program, you should carefully review applicable laws as they may contain specific provisions related to gift cards (for example, as is the case for Ireland and Germany) .

Do I need to provide consumers with the terms and conditions of my gift cards?

One of the key documents for any online business is a good set of Terms and Conditions (Terms and Conditions) for a product or service. It’s no different for gift cards.

Businesses offering gift cards should always communicate the terms and conditions of the gift card to customers. In addition to any legal obligations, these specific provisions will regulate the voucher system and the contractual relationship, and must be clear and complete. Important things to consider when drafting these terms and conditions are:

  • information about the company issuing the gift card;

  • the main characteristics of the service;

  • refund policy ;

  • Validity period;

  • any limitations or exclusions on use of the Gift Card;

  • if you authorize additional charges (e.g. for personalization, packaging, etc.), all relevant information;

  • right to retract;

  • the rules regarding the return or exchange of purchased items; and

  • how you handle lost, defective and damaged gift cards.

Be sure to include all of the above information and bring these terms and conditions to the customer’s attention before they complete the gift card purchase. You should also make it easy and quick for your customers to obtain a copy of the document for future reference on a durable medium (eg by e-mail).

What happens if I don’t provide this information?

The UCPD and the CRD require professionals to provide consumers with substantial information relating to the good or service, in a clear and understandable manner, before the conclusion of the contract. In this case, information such as the entity issuing the gift card, the expiration date of the gift card or how to use the service is likely to be considered material information. If you fail to provide the information or if you provide it in an unclear or untimely manner, your failure may constitute an unfair commercial practice and/or a violation of the CRD, and you may be penalized accordingly.

How long should vouchers be valid?

There is no minimum or maximum expiry period at EU level. This means that you can determine the validity period of your voucher. However, you should be aware that the rules differ from country to country within the EU. Some EU member states impose different minimum validity periods. For example, while there is no minimum expiry date for vouchers in Italy, Ireland sets the minimum validity at five years and Germany has a minimum expiry period of three years. You will have to respect the minimum or maximum deadlines set by the national legislation of the countries where you offer your services, decide on the best approach in terms of deadlines and communicate it to your customers.

In any case, you should always prominently display the validity period of the voucher in your terms and conditions and the corresponding date either as the full date or as a time period. For example: “Gift cards expire five years from the date of issue shown on the voucher”.

Should I accept gift cards after the expiration date?

If the gift card has expired, in most cases you are under no legal obligation to accept it, but you may choose to do so as a gesture of goodwill.

Is the right of withdrawal applicable to the purchase of a gift card?

If you sell gift cards online, your consumers in the EU have a right of withdrawal of 14 days from the date of receipt of the gift card. This means that a consumer can change their mind and receive a full refund, except in certain specific cases. If the consumer begins to use the gift card before the end of the withdrawal period, they may still retain their right of withdrawal, but you may be able to deduct an amount proportional to their use based on the total price.

Remember that consumer rights apply to gift cards just like any other item. So, for example, in addition to the right of withdrawal, if the gift card is faulty and not working properly, EU consumers can also return it for a replacement or refund.

What steps should I follow?

The first step is to review your terms and conditions to ensure that they comply with the applicable rules and that they do not violate any country-specific requirements. Any misleading or unfair practices can be addressed by applying existing legislation, and the potential costs of non-compliance can be extreme, so it is important to seek legal advice before implementing gift cards or reviewing your practices and existing conditions.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

POPULAR ARTICLES ON: European Union company law / commercial law

Trust Essentials: July 2022

oger

As the demands (and resulting litigation) of wealthy individuals and families continue to grow in complexity, courts in our jurisdictions frequently see cases that establish new…

ESG Weekly Update – July 20, 2022

Debevoise & Plimpton

On 11 July 2022, the EU Sustainable Finance Platform, the independent advisory body of the European Commission, published a draft report on minimum human and labor rights guarantees.

Beliefs, Behaviors and Outcomes

AlixPartners

All publicly traded companies seek to deliver superior returns to shareholders over time. Less than two percent did. Those who succeed exhibit five similar traits.

Michael N. Clark