Europe declares war on Britain's shoddy goods

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Brussels is preparing to give consumers new rights that will crack down on low-quality electrical goods, clothes, shoes and computers and could cost British manufacturers and shops as much as pounds 775m a year.

Draft European legislation is offering to double some existing consumer guarantees, giving shoppers a one-year right to free replacement of faulty goods, and a right to free repair for up to two years.

The estimated cost has been drawn up by the Department of Trade and Industry, and has been obtained by The Independent in advance of a report by the Commons European Legislation Committee.

Sir Stanley Kalms, chairman of Dixons, has said that the new law is hanging like a "sword of Damocles" over the electrical retailing business. The Federation of Small Business has warned that more than 60,000 of Britain's 217,000 small retailers could be driven out of business, with the loss of 200,000 jobs.

The proposals, which go far beyond United Kingdom consumer rights as laid down by the Sale of Goods Act, could become law next year.

The present Irish presidency of the European Union is expected to hold an "orientation" meeting for ministers in Dublin next month - possibly paving the way for a firm decision when the Dutch take over the presidency in January. Manufacturers, retailers and consumer groups have been given until 15 November to respond to a government request for views. But whatever they say, no one country has a veto; the law can be passed by ministers by qualified majority vote.

In a memorandum sent to the Commons European Legislation Committee this month, the Consumer Affairs Minister John Taylor said the Department of Trade and Industry's "tentative estimate of the level of costs associated with the proposal to allow consumers replacement or refunds up to a year after purchase is pounds 350m per annum. The estimate of the additional cost arising from an extended right to free repair in the second year is pounds 425m per annum."

Both estimates exclude the impact on the car market, where the proposals could reduce the present statutory rights for buyers. But the overall impact of the proposed new rights is described as substantial.

"As far as the right to reject is concerned," Mr Taylor says, "the proposed one-year period would be considerably longer than will normally be the case under present law, where in practical terms the right to reject may often be a matter of days or weeks." The law would also cover auctions, and it contains a presumption that a fault developing within six months of purchase "was present at the time of sale".

In court cases, it would be up to the seller, "rather than at present the buyer", to prove otherwise. The areas most likely to be affected by the new law include electrical appliances, new and used cars, computer hardware and software, clothes and footwear.

Last year, consumer spending on those goods came to about pounds 156bn - about a quarter of national income - covering about 5.8 million employees in manufacturing, wholesale and retail trades.

For the moment, it is not clear what view the Government takes, but in the small print of its memorandum to Parliament, the Department of Trade and Industry appears critical.

It says that some of the benefits claimed by the European Commission - easier redress for consumers, increased competition, improved quality control and durability, and higher demand for repair and maintenance services - are "far-fetched".

The Department adds that other claimed benefits are questionable. "Manufacturers do not believe that generally there would be quality advances leading to cost savings," MPs are told. On the other side of the argument, the commission has argued that costs are likely to be "negligible" - saying there would only be a "slight increase in the costs associated with the handling of defective goods". This is disputed by Whitehall, which says that assessment is "open to serious question".

Mr Taylor said increased costs could arise from:

n The creation of a one-year right to reject, which could increase the volume of replacement goods.

n Making the seller liable for any lack of conformity [defect or fault] appearing within two years, which could increase firms' repair costs in the second year after purchase;

n A higher number of false claims for replacement goods which could result from the presumption in favour of the consumer during the first six months.