Written by John Davidson-Kelly, partner, & Katrina Anderson, associate, Osborne Clarke
Those with their ears to the tracks of European legislation might have been hearing a lot about a “New Deal for Consumers”, which will dramatically change consumer rights and protections across the EU when new legislation comes into force in May 2022.
The New Deal for Consumers is the name given to a package of EU legislation intended to enhance and modernise the EU’s consumer protection regime. Prompted by large scale events such as “Dieselgate” and unfair terms in mortgage contracts, the EU Commission carried out a review of consumer protection rules and redress options – the new deal is the result of that review.
The New Deal is an overhaul of consumer law, giving more teeth to existing consumer rights, and bringing EU legislation (some of which was passed in the 1990s) up to date for modern, digital markets. As a result, businesses in breach of consumer laws in the EU could face GDPR-style fines, set at 4% of a company’s annual turnover in relevant member states.
These high level, multi-state fines are likely to only be applied for the most serious offences. However, the availability of such fines will encourage courts and regulators to be more aggressive in their enforcement of consumer protection law. This trend is already visible and fines across the EU are becoming more significant. In Italy, the communications industry regulator AGCOM recently fined a series of companies up to €5m for consumer law breaches.
In addition to increasing fines, the New Deal also implements other changes, such as:
- Increased online transparency obligations, including on search-ranking criteria and for online marketplaces and platforms. There is also a new requirement to notify consumers each time the price they are being presented with has been personalised;
- For every price-reduction claim, sellers and traders must indicate a reference price of the lowest price applied within a period of at least 30 days preceding the current reduction;
- Digital service providers are required to grant consumers additional rights when their personal data is consideration for a contract to access digital services and content.
These changes are particularly important at the moment since, in order to open up new revenue streams, many businesses are pivoting to become consumer-facing, and need to take the time to ensure they are cognizant and compliant with applicable consumer laws, in order to avoid the risk of potentially huge fines. A recent study suggests that 67% of e-commerce businesses might be infringing EU consumer law, meaning that a significant amount of businesses will be exposed to enforcement risk when the New Deal for Consumers comes into force.
Having been approved in the tail end of 2019, EU Member States are required to implement national laws to comply with the Omnibus Directive from 28 May 2022. This implementing legislation must also be adopted and published by 28 November 2021, which will provide local businesses with a period of certainty in which to finalise their preparations. However, compliance efforts can wait for another 12 months before they get started.
Consumer-facing businesses should make sure that their board is aware of this new risk faced by the business and avoid a GDPR-style panic by planning their compliance approaches now. Just as “privacy by design” became a slogan for the GDPR, “compliance by design“, i.e. prioritising compliance with consumer law, and respecting consumer rights when bringing products and services to market, is a sensible approach for businesses in advance of the legislation coming into force.
Since the UK’s transition period will (likely) have expired before November 2021, the UK will not be bound to implement the New Deal for Consumers under the existing withdrawal agreement. However, ongoing regulatory alignment in this area may form part of any trade agreement. In any event, traders based in the UK and selling to EU consumers will have to comply with the updated consumer laws, regardless of the UK’s status or their own location. This means it is imperative to understand the amendments, and start preparations well in advance.
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