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gift cards online business law

Legal aspects of gift cards explained for online businesses

Offering gift cards to your consumers can be a great strategy to bring in money. But, if your business sells gift cards to consumers based in the European Union (EU), there are some specific rules you need to follow. So, to help you better understand this thriving market and seize the opportunities for your business while reducing the risks, we’ve compiled the key questions surrounding the implementation of gift cards by online companies and summarised what key steps you should take to ensure your practices comply with EU law.

What is a gift card?

Gift cards (also called gift certificates) are nothing more than any 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 contain a specific amount of prepaid money available for purchases. Gift cards can frequently be used both online and in-store retail channels and take the form of a simple paper receipt, a plastic card or even a code.

Is there EU 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 they purchase or use gift cards. The purchase of a gift card is also covered by the Consumer Rights Directive (the “CRD“). When consumers buy a gift card, they enter into a contract with the trader, and therefore, the agreements related to gift cards are subject to the CRD.

In addition, if your company is targeting consumers in certain EU countries, the legislation from the respective EU member state will apply. Before launching the voucher scheme, you should carefully examine the applicable laws, as they may contain specific provisions linked to gift cards (e.g., as it is the case for Ireland and Germany).

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

One of the key documents for any online business is a good set of general terms and conditions of sale (general conditions) for a product or service. This is not 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 scheme 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;
  • redemption rules;
  • period of validity;
  • any limitations or exclusions to using the gift card;
  • if you allow additional costs (e.g., for personalisation, packing, etc.), all the relevant information;
  • right of withdrawal;
  • rules around returning or exchanging items purchased; and
  • how you deal with lost, faulty, and damaged gift cards.

Ensure you include all the above information and bring these terms and conditions to the customer’s attention before they conclude the purchase of the gift card. You also need to enable your customers to get a copy of the document easily and quickly for future reference on a durable medium (e.g. via email).

blank Isadora Werneck

Of Counsel

info@loganpartners.com

More about Isadora

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 What happens if I don’t provide this information?

The UCPD and the CRD require traders to provide consumers with material 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 gift card’s expiry date, or how to use the service are likely to be considered material information. If you don’t provide the information or provide it in an unclear or untimely manner, your omission  can constitute an unfair commercial practice, and/or a violation of the CRD, and be sanctioned accordingly.

How long should the vouchers be valid for?

There is no minimum or maximum expiry date period at an EU level. This means that you can determine your voucher validity period. However, you should know that the rules differ from country to country within the EU. Some EU member states impose different minimum periods of validity. 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 need to observe the minimum or maximum periods set out by the national law of the countries where you offer your services, decide on the best approach in terms of the time limit, and communicate this to your customers.

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

Do I have to accept the gift cards after the expiration date?

If the gift card has expired, in most cases, you do not have a legal obligation to accept it, but you might choose to do so as a goodwill gesture.

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

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 a consumer can change their mind and receive a full refund, except in some specific cases. If the consumer starts using the gift card before the end of the withdrawal period, they may still retain their right to withdraw, however, you may be able to deduct a proportionate amount for 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 doesn’t work properly, consumers in the EU can also return it for a replacement or refund.

What steps should I take?

First step is to review your terms and conditions to ensure they comply with the relevant rules and do not infringe any country-specific requirements. Any misleading or unfair practices can be addressed by enforcing existing legislation, and the potential costs of non-compliance can be extreme, so it is important to consult a legal advisor before implementing gift cards or reviewing your existing practices and terms and conditions. If you have any questions, our e-commerce team has a strong EU presence and will be happy to help.

 

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