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Consumer rights protection in Georgia

In Georgia, the Law on Consumer Rights Protection comes into force.
Anna Davidson, founder and managing partner of JUST Advisors.
May 31, 2022

The essence of the new law

As of June 1, 2022, a new law titled "On Protection of Consumer Rights" came into effect in Georgia (with the date of publication on the website being 06.04.2022 and the date of adoption by the Parliament in the third hearing being 29.03.2022) (hereinafter referred to as 'the law'). Without any exaggeration, it can be said that this is a long-awaited law. It is worth noting that the previous similar law was repealed before the adoption of the new law and was valid until 25.05.2012.
The mentioned law regulates the relationship between the trader and the consumer in the field of the sale of goods and services, including financial services. According to the law, a trader is any natural person, legal entity, or association of persons acting in the course of commercial activity. Additionally, it includes any other person acting on behalf of or for a trader. A consumer is defined as any natural person to whom goods are offered, or who acquires or further uses the goods or services primarily for personal use and not for commercial, entrepreneurial, professional, or other professional activities.
It should be noted at the outset that this document does not permit the exchange or return of new items and does not establish significant penalties that may be imposed on the trader in favor of the consumer in court. Simultaneously, it is largely tailored to address the challenges of the rapidly changing mechanism of the country’s economy, incorporating regulations for the online trading process. It is noteworthy that the National Competition Agency will play a decisive role in the implementation of the law.

As is known, the concept of a 'retail purchase agreement' does not exist in Georgian legislation, and special rules of civil law regulating this type of relationship have not yet been adopted. The new law addresses this gap. Specifically, it simplifies the process for consumers of goods and services in Georgia to cancel transactions related to defective goods. Article 17 of the law stipulates that, in case of discovering a defect, the buyer of the product has the right to file a complaint with the seller, request the correction of the defect, or demand free repair or replacement of the product within a reasonable time. The right to reduce the price of the goods or terminate the contract entirely arises when repair is completely impossible or, for example, if the seller has not repaired the item within a reasonable time, and the buyer has already lost interest in performance. Additionally, it is noteworthy that the trader is not required to conduct an examination of the quality of the goods at the stage of considering the claim.
It should be noted that the buyer does not have the right to refuse the contract if the defect in the goods is insignificant or non-existent.

It is significant that the new law applies not only to the retail purchase and sale of goods in stores but also to the remote sale of goods via the Internet, trade in samples, delivery of goods, and various financial services.

Moral damage caused by the violation of the consumer’s rights is subject to compensation only in one case: when the consumer is discriminated against in the public offer of goods or services, such as on the basis of nationality, race, or sex. Actions carried out on a similar basis are prohibited under Article 3 of the law.

Requirements for product information

The legislator has accorded significant attention to the consumer’s right to receive reliable information about products and services. The law mandates that, before the conclusion of a contract, the buyer must be clearly and comprehensively provided with reliable information about the product or service, including its name, manufacturer, all essential characteristics, and the address and name of the entrepreneur.
The price of the product should be indicated, with taxes in mind. Additionally, the contact information of the merchant, on whose behalf the person is acting at the point of sale, details about service points, as well as the service price with all additional costs (including delivery and installation charges), information about the warranty, and the terms of contract termination must be specified. For digital content, it is necessary to provide the user with information 'about the technical means used for its protection.' Importantly, all information must be presented in the state language of Georgia.
Distance contracts, such as those concluded via the Internet, differ from conventional ones in that they can be unilaterally terminated by the user. The application for termination can be submitted within 14 calendar days without any justification. However, it’s important to note that this rule does not apply to all types of goods and services. Nonetheless, the buyer still has the obligation to cover certain costs, including delivery and a number of other associated expenses.

No aggressive advertising

The new law introduces an element of protection for consumer rights, specifically by prohibiting 'aggressive commercial activity.' This prohibition addresses dishonest techniques employed by some car dealers, a practice well-known to customers, where the impression is created that the customer cannot leave the company’s premises until they sign the contract—an unacceptable practice. Additionally, it includes the entrepreneur’s refusal to leave the residence against the consumer’s will, sending 'spam' messages via telephone or other means of remote communication, and, surprisingly, advertising directed exclusively at children with the obvious purpose of influencing parents.

The list of prohibited aggressive actions also encompasses 'creating a false impression' that the customer has won or, as a result of taking a certain action, will win a prize or receive another benefit. In other words, it addresses the established and well-known practice of presenting a product as a prize in a lottery.

Penalty sanctions

The law imposes significant penalties for engaging in actions prohibited by the law. It is essential to note that the penalty is not imposed for the violation of the right per se but for non-compliance with the decision made in connection with the complaint submitted due to prohibited actions.

The new law envisions the establishment of non-profit organizations dedicated to the protection of consumer rights. However, as envisioned by the authors of the law, their role is limited to preparing collective consumer statements and mediating in resolving disputes with entrepreneurs.

The resolution of consumer disputes is subject to an out-of-court review procedure, falling within the competence of the National Competition Agency.
The National Competition Agency of Georgia was established based on the Law of Georgia "On Competition" and is accountable to the Prime Minister of Georgia. The agency is located at 154 Aghmashenebeli St., Business Center "Green Office," Tbilisi, with contact information as follows: Tel: 2 440 770; E-mail: info-gca@competition.ge; Website: www.competition.ge ; The Regulation of the Competition Agency (in Georgian) can be found at: https://gnca.gov.ge/legislation/national  (Data on the creation of additional offices in other territories is not known).

How will it work

The final chapter of the law elucidates the types of complaints falling under the authority of the agency. Notably, the services provided by banks, resource providers, insurance companies, and other similar enterprises are excluded from its jurisdiction. However, it is crucial to emphasize that despite being beyond the agency’s direct oversight, the activities of these entities remain subject to the law. Any violations of consumer rights by such companies will be scrutinized by the relevant profile authorities.

Articles 30−36 of the new law outline the regulations guiding the agency’s investigation of consumer complaints. These investigations are conducted in a cameral manner, as the law does not grant the agency the authority to physically visit the trader’s location, seize documents, or conduct on-site inspections. Instead, agency employees remotely request documents, invite involved parties, and, if necessary, engage experts.

Decisions related to complaints, including issues such as the elimination of violations or termination of contracts with customers, must be made no later than one month after receiving the complaint. In cases of non-compliance within five days, the trader may be subject to a fine. The fine’s amount is at the discretion of officials but can reach up to 2 percent of the trader’s turnover from the previous financial year.
Importantly, the law grants the agency the right to accept "conditional undertakings proposed by the merchant" to rectify alleged violations. In simpler terms, if the violation is acknowledged, the entrepreneur may opt for limited losses without facing substantial penalties.
The new law specifies that the agency may conduct an inspection even without a specific user’s application (complaint). This will occur if there is information that objectively indicates the violation of the rights not only of one user but also of a group of users.

If a violation of consumer rights is uncovered during the case review, the trader must be provided with a reasonable period to rectify the violated right or cease the action deemed a violation. Subsequently, the agency is authorized to impose a fine on the entrepreneur. It is noteworthy that the deadline for applying to the agency to establish a violation of the requirements of the Consumer Rights Protection Law is quite generous, allowing a timeframe of 2 years after the violation was committed. Detailed rules governing the operations of the National Competition Agency of Georgia within the framework of the law will be further elucidated in a separate legal act, slated for adoption before October 1, 2022.
In conclusion, it is noteworthy that the new law introduces a fundamentally different approach to the legal regulation of consumer disputes compared to the familiar prioritization of administrative proceedings over litigation in many jurisdictions. Additionally, the law does not encompass the possibility of judicial review for consumer claims. However, it’s important to clarify that the absence of judicial review for consumer claims does not limit the option to appeal the agency’s decisions in a court of law, nor does it restrict the possibility of terminating contracts through general civil proceedings, particularly based on requests for reimbursement of the price of goods or compensation for damages.

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