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Consumer rights enhanced by the Omnibus Directive (part of the “New Deal for Consumers”)

Published on 07 August 2020

What exactly is the Omnibus Directive? And how is it strengthening consumer rights?

The key takeaway 

Consumer protection is being strengthened, with increased enforcement and transparency measures. This includes extending rights in respect of “free” digital services.

The background

The EU has committed to improving consumer protection in a strategy sometimes labelled the “New Deal for Consumers”. As part of that strategy, the Omnibus Directive (Directive) came into force on 7 January 2020.

Member States have until 28 November 2021 to adopt the Directive, and until 28 May 2022 to bring it into force. Since it appears that the UK will not be part of the EU by November 2021, it is likely that there will be no obligation to adopt it here. However, a publication from the UK Government would suggest that it also has similar domestic consumer protection legislation in mind.

The legislative amendments 

Following a 2017 Commission review of consumer protection regulations and laws (the REFIT Fitness Check), the Commission determined that the following Directives needed updating:

  • the Unfair Commercial Practices Directive (2005/29/EC)
  • the Consumer Rights Directive (2011/83/EU)
  • the Unfair Contract Terms Directive (93/13/EEC)
  • the Price Indications Directive (98/6/EU).
The update will focus on consumer issues, including penalties for breach, protection in relation to “free” digital services, rights of withdrawal and transparency in online marketplaces. 

Key elements

  • Enforcement: the Directive allows for GDPR-style fines worth a minimum of 4% of a company’s annual turnover in the relevant Member State or €2m if a calculation is not possible. Member states can look to introduce higher fines during the implementation period.
  • Consumer claims: it also grants rights directly to consumers, allowing them to individually pursue claims against any companies in breach.
  • Digital goods and services: these will now be caught by the definition of goods and services and rights harmonized to match physical goods and services.
  • Transparency: traders must provide information on their criteria for rankings search results, justify steps taken to ensure reviews on their site are genuine, and inform consumers whenever prices have been personalised. Online marketplaces must inform consumers whenever an item is bought from an individual, and if so that they will not benefit from EU consumer protection law.
  • New obligations on traders and online platforms: the aim being to better protect consumers.
  • Free digital services: existing EU consumer protection laws will now extend to services paid for with personal data, due to a change in the definition of “price”.
Why is this important?

A key change in this development is the potential size of fines following a breach, following the imposition of a more heavy-handed enforcement regime. Note that if the UK does not implement this Directive but follows through with what has been proposed domestically, fines for consumer protection non-compliance could reach up to 10% of a firm’s global revenue. In addition, with class actions generally on the rise (as seen in recent data breach cases), it is not difficult to see this area also attracting similar levels of consumer claims. 

Any practical tips?

Begin preparations to ensure your existing transparency mechanisms are up to the additional obligations and improve them if not. Ensure also that any involvement in the provision of “free” digital services meets the same consumer protection standards as anything which is paid for. And look out for UK implementation of this Directive, or whatever domestic alternative is decided on – it could have an even sharper financial bite than that in the Directive.