On 8 November 2019, the European Parliament and the Council adopted a directive on the better enforcement and modernisation of EU consumer protection rules. The directive is a part of the so-called “New Deal for Consumers” legislative package proposed by the European Commission in April last year. The directive, which the Member States will have 24 months to implement into their national legislation, is bound to bring about many significant changes, especially for businesses trading online. The most notable updates are briefly set out below.
Online Marketplaces
In today’s online intermediation services (marketplaces), the trading coordinates of the actual seller is not always clear to the end-consumer. This has been identified as an issue, since consumer protection rules do not apply to C2C (consumer to consumer) relationships, and a consumer could unknowingly purchase products from another private individual through a marketplace. The new legislation introduces transparency as regards whom the consumer is entering into an agreement with.
That is, when buying from an online market place, consumers will have to be clearly informed about whether they are buying goods or services from a trader or from a private person, so they know what protection they will benefit from if something goes wrong. Moreover, when searching online, consumers must be clearly informed when a search result is being paid for by a third-party trader or not. They will also be informed about the main parameters determining the ranking of search results and who they can turn to when something goes wrong.
Personalised Pricing
Transparency will be further required with respect to personalised pricing. The new legislation mandates that consumers be clearly informed when the price presented to them is based on personalisation on the basis of automated decision-making. There should be noted, here, that GDPR restricts the use of automated decision-making, which may also impact the use of personalised pricing.
Consumer Protection for “Free” Services
There is no denying the fact that data may often replace monetary payment when using online services such as social media, cloud services, and email services. To bolster consumer protection for such “free” services, the directive now requires that the fourteen (14) day withdrawal right be applicable to digital services will also apply to such “free” services.
Clear Information on Price Reductions
In order to address misleading price information, the new directive dictates that any announcement of a price reduction must indicate the prior price applied by the trader. The prior price means the lowest price applied by the trader during a period of time not shorter than 30 days prior to the application of the price reduction.
New penalties for Violations
Aiming to reimburse consumer protection, the new directive grants the national legislator the right to impose a fine of up to 4% of the trader’s turnover for violations that are widespread and affect consumers in several Member States. This follows the same pattern with personal data protection, where the GDPR introduced similar fines for violations. This pattern has proved successful, as many enterprizes have proceeded with substantial investments to enhance data protection. It is therefore expected that businesses shall now need to turn their attention to furhter enhancing their compliance with consumer protection legislation.
The directive is only one of the two directives making up the New Deal for Consumers legislative package. The second directive on representative actions for the protection of the collective interests of consumers would empower certain qualified entities, such as consumer organisations, to launch representative actions seeking injunctions and collective redress (e.g. compensation, replacement, or repair) on behalf of a group of consumers. This directive is still making its way through the legislative process.