Businesses should prepare themselves for significant changes introduced by the EU directive on the enforcement and modernisation of consumer protection - which provides a new deal for consumers in the digital age.
Why the change?
Following a recent MOT of EU consumer legislation, the European Commission found that the application and enforcement of consumer laws within Europe should be strengthened. The most significant change being the introduction of potentially eyewatering fines against traders who fail to comply with consumer protection laws.
What are the key changes?
The directive provides for the following key changes:
Fines: GDPR-style fines to be imposed on traders for breaches of national consumer protection law;
Individual remedies: A right to individual remedies for consumers when they are harmed by unfair commercial practices;
Transparency: Enhanced transparency in online transactions, including the use of online reviews or higher ranking of products by traders due to paid placements;
Who's who?: Consumers to be informed on whether the responsible trader in a transaction is the seller and/or the online marketplace itself;
Data protection: Ensuring the protection of consumer data in respect of free digital services, for which consumers do not pay money but provide personal data, such as cloud storage;
Price reduction: Clear information to be provided regarding pricing before a price reduction or offer to avoid misleading consumers about discounts; and
Methods of communication: Methods of communication to be used by traders to be modernised to reflect the digital age, including references to emails as opposed to fax.
From May 2022 member states shall be able to fine traders up to 4% of their annual global turnover or, if turnover information is not available, up to at least two million EUR for breach of their obligations under consumer laws.
As well as ensuring that fines are effective, proportionate, dissuasive and enforceable, member states will now have to consider the following non-exhaustive list of criteria when imposing fines:
- The nature, gravity, scale and duration of the infringement;
- Any mitigating actions or remedies undertaken by the trader;
- Previous infringements by the trader;
- Any financial gains (or losses avoided) by the trader as a result of the infringement, if the relevant data are available;
- Any penalties imposed on the trader for the same infringement in other member states; and
- Any other aggravating or mitigating factors applicable.
Of course, until fines start to be imposed, we will not be too sure how to interpret the criteria or understand what emphasis the regulators and courts are likely to place on some over others.
What does this mean for the UK and Brexit?
Should the UK remain an EU member state following the two-year transposition deadline, the UK will be required to introduce these consumer reforms into domestic legislation. If that is not the case, it is still likely that the UK will choose to align consumer protection laws in the UK with the rest of the EU, especially given the Conservative Party’s strong appetite to ensure consumer rights are maintained to a high standard and on a level playing field across Europe.
What does this mean for you?
Businesses should sit up and take note of existing and “beefed up” European consumer protections as “traders who continue to cheat will face high sanctions” (European Commissioner for Justice).