European Union: New Directive Amends Consumer Protection Rules

(Feb. 10, 2020) On January 7, 2020, Directive (EU) 2019/2161 of the European Parliament and of the Council of 27 November 2019 Amending European Union (EU) Consumer Protection Rules for Better Enforcement and Modernization (Directive) entered into force. The Directive updates the current EU consumer protection rules to incorporate technological developments and improve enforcement.

An EU directive is binding only as to the result it sets out to achieve; the means are up to the member states. Member states must transpose directives into their national law. (Consolidated Version of the Treaty on the Functioning of the European Union (TFEU) art. 288, para. 3.) The deadline to adopt and publish national measures transposing the Directive is November 28, 2021. (Directive art. 7, para. 1.)

Background

The aim of establishing and protecting the internal market was first set out in article 13 of the Single European Act of 1987. Today, it is codified in article 114 of the TFEU. The protection of consumers is an integral part of safeguarding the internal market. As a result of the 2017 Commission report of the “fitness check” on EU consumer law, the then-Commission President Jean-Claude Juncker announced in a 2018 communication titled “A New Deal for Consumers” a need to modernize certain rules and to strengthen the level of enforcement and compliance. The Directive is part of this new deal for consumers.

The Directive amends the Unfair Contract Terms Directive 93/13/EEC, the Price Indication Directive 98/6/EC, the Unfair Commercial Practices Directive 2005/29/EC, and the Consumer Rights Directive 2011/83/EU.

Amendments to Bring Rules in Line with Digital Developments

 Ranking of Consumers’ Online Search Results

Traders are prohibited from “[p]roviding search results in response to a consumer’s online search query without clearly disclosing any paid advertisement or payment specifically for achieving higher ranking of products within the search results.” (Directive art. 3, para. 7(a).) Traders—in this case the providers for the online search functionality—must clearly inform consumers of such facts in “a concise, easily accessible and intelligible form.” (Recital (Rec.) 20.) Consumers must be informed of the general parameters determining the rank of the search results as well as of their importance. (Recs. 22–23; art. 3, para. 4(b); art. 4, para. 5.)

New Definition of Marketplace

The definition of online marketplace has been updated to make it technology neutral. (Rec. 25.) The Directive defines online marketplace as “a service using software, including a website or an application.” (Art. 3, para. 1(b); art. 4, para. 1(e).) Furthermore, to increase transparency in online marketplaces, providers of online marketplaces must inform customers whether the third party is a trader or nontrader (consumer) in accordance with the self-declaration of the third party. However, providers do not need to verify that information. Consumers must be informed that, in the case of a contract with nontraders, EU consumer protection laws do not apply. (Art. 3, para. 4(a)(ii); rec. 28.)

Digital Content and Digital Service Suppliers

The Directive aligns the definitions of digital content and digital services with their respective definitions in Directive (EU) 2019/770 Concerning Contracts for the Supply of Digital Content and Digital Services. (Directive 2019/2161, art. 4, para. 1(d).) Digital content providers are now considered to be “continuous suppliers over a period of time” (as opposed to “suppliers of a single act”). As a result of this change, consumers must be granted a 14-day test period of the service and the ability to cancel the online contract within that period. (Art. 4, para. 11(b); rec. 30.) The scope of the Consumer Rights Directive is extended to cover contracts under which the consumer does not pay a price, but provides personal data in exchange for using the services of the supplier. (Art. 4, para. 2.)

 Personalized Prices

Consumers must be informed if the prices presented to them are personalized on the basis of automated decision-making algorithms and profiling of consumer behavior. (Art. 4, para. 4(a)(ii).)

 Price Reductions

To prevent fake price reductions resulting from increasing prices just before announcing price reductions, any announcement made for a price reduction must now indicate the prior price of the product. The prior price of the product is the lowest price in the last 30 days before the price reduction. (Art. 2, para. 1.)

 Consumer Reviews

Traders are prohibited from submitting fake consumer reviews or commissioning fake reviews or endorsements. (Art. 3, para. 7(b).) When consumer reviews are provided, traders must inform consumers if and how they ensure that the submitted reviews originate from consumers who have actually used or purchased the product. (Art. 3, para. 4(c).)

 Use of Bots

Traders are prohibited from reselling event tickets purchased through automated means such as bot software and thus exceeding the limit imposed on the number of tickets that may be purchased (Art. 3, para. 7(b).)

Amendments to Enable Stronger Enforcement

Penalties

In accordance with the new Consumer Protection Cooperation Regulation, the set criteria for the application of penalties in the earlier directives are amended to be proportionate to “the nature, gravity, scale and duration of the infringement.” (Art. 1; art. 2, para. 2; art. 3, para. 6; art. 4, para. 13.) Penalties include the imposition of fines. The maximum fine that can be imposed for each infringement must be at least 4% of the trader’s annual turnover in the member states (Art. 1; art. 3, para. 6; art. 4, para. 13.)

Remedies in Case of Unfair Commercial Practices

If harmed by unfair commercial practices, including misleading marketing, a consumer has access to remedies such as financial compensation, price reduction, or replacement. (Rec. 16; art. 3, para. 5.)

Dual Quality of Products

In order to ensure legal certainty for the purposes of better national enforcement, the Directive amends the Unfair Commercial Practices Directive 2005/29/EC to include as a misleading action “any marketing of goods as being identical, when in fact they have different composition or characteristics.” (Directive 2019/2161, art. 3, para. 3; recs. 51–53.)

Other Relevant Developments

A New Deal for Consumers” also proposes to adopt a Representative Actions Directive, which aims to facilitate collective redress for consumers who are harmed across the EU by the same unfair commercial practice—that is, in case of “mass harm situations.” The European Parliament and the Council are still discussing this proposal.

In addition, the Consumer Protection Cooperation Regulation (EU) 2017/2394 on stronger cooperation between national authorities on the enforcement of consumer protection laws entered into force on January 17, 2020.

Prepared by Zeynep Timocin Cantekin, Law Library intern, under the supervision of Jenny Gesley, Foreign Law Specialist.

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