New laws to strengthen consumer protection have come into force and will apply across the EU from 28 May 2022. There is a focus on more transparency online, extending rights to "free" digital services and strong sanctions linked to annual turnover.
New rules aimed at modernising EU consumer protection laws for the digital era and to make it easier to enforce consumer rights will apply across the EU from 2022.
Directive (EU) 2019/2161 on the better enforcement and modernisation of Union consumer protection rules (the "Directive") came into force on 7 January 2020. Member States have until 28 November 2021 to implement the Directive into their national laws and must apply those measures from 28 May 2022.
The Directive is part of the EU's "New Deal for Consumers" package of measures aimed at strengthening consumer protection in the EU (covered previously on Productwise here). The package also includes proposed new legislation to introduce representative actions across the EU for breaches of certain EU laws including, amongst others, those dealing with consumer rights, product liability and product safety (see Productwise here). The proposed legislation to introduce group actions is still subject to on-ongoing negotiations between the Council and the European Parliament.
The Directive will amend four key pieces of EU consumer protection legislation: the Consumer Rights Directive (2011/83/EU); the Unfair Contract Terms Directive (93/13/EEC); the Unfair Commercial Practices Directive (2005/29/EC); and the Price Indication Directive (98/6/EC).
The changes introduced will be substantive and cover a broad range of issues including:
- Strong sanctions: national authorities will be required to impose stronger penalties for certain violations of EU consumer laws, including – where infringements affect several EU countries – imposing fines representing 4% of annual turnover in each country. Member states will be free to levy higher fines if they wish, including fines based on worldwide turnover. Where information on turnover is not available, fines of at least EUR 2 million may be levied.
- Consumers harmed by unfair commercial practices will be able to seek remedies in all Member States: the rights of consumers to bring claims for compensation, a price reduction or termination of a contract (refund) where they have been harmed by unfair commercial practices (such as misleading practices or aggressive marketing) will be harmonised across the EU.
- Transparency online: consumers buying products or services from online marketplaces will have to be told whether they are buying from a trader or an individual. If buying from an individual, the marketplace will be required to inform consumers that protections under EU consumer law will not apply. Online marketplaces must also let consumers know how the obligations related to the contract are shared between the third party offering the product or service and the online marketplace (such as who is responsible for delivery). When searching online, consumers will have to be informed of the basis on which search results are ranked and when higher rankings have been paid for. A prohibition on submitting fake consumer reviews and endorsements, as well as manipulating reviews will also be introduced. Where businesses state that reviews are from consumers who have purchased or used a product, they will need to take steps to ensure that such reviews are from genuine customers. Consumers will need to be informed when the price presented to them has been personalised based on automated decision-making (for example algorithms based on personal consumer behaviour).
- "Free" digital services: current rights to information and withdrawal for paid digital services will be extended to free digital services such as cloud storage, social media and email, where the consumer "pays" by providing their personal data.
- Dual quality products: the Unfair Commercial Practices Directive will be updated to clarify how national authorities should address misleading practices involving the marketing of products as being identical across EU countries, when their composition or characteristics are different.
- Price reductions: rules will be introduced on the information that needs to be provided for products marketed with a price reduction.
Businesses should start to understand these requirements and plan for any changes they need to make – for example, to the content of online information provided to consumers, and how this information is displayed. They should also start thinking about whether any changes are required to their internal processes and procedures. The Directive will affect a wide range of businesses, in particular online marketplaces, online retailers and providers of digital content and services. The sanctions for failing to comply are hefty, and businesses will also face an increased risk of litigation by consumers, especially if proposed legislation introducing group actions across the EU becomes law.
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