Get ready for the EU’s “New Deal for Consumers” landing May 2022

The question

The Omnibus Directive is on its way, but what does this mean for retailers and sales platforms? 

The key takeaway

Current EU consumer rights legislation which governs physical goods and services is being extended to include digital goods, content and services. This includes GDPR-level fines for non-compliance. While the UK is not obliged to implement the Directive post-Brexit, UK traders selling to EU consumers need to comply. 

The background

The EU has implemented and updated numerous EU directives as part of its commitment to improve consumer protection (including the Directive on Representative Actions and the Digital Content Directive) as a result of (i) EU infringement risks which appeared to be undermining consumer trust, and (ii) market developments including an increase in e-commerce. This commitment forms part of a strategy which was adopted in early 2018 and which has been labelled the “New Deal for Consumers”, aka “The Omnibus Directive”.

The development

On 7 January 2020, the Enforcement and Modernisation Directive (2019/2161/EU), which is also known as the “Omnibus Directive” (the Directive), came into force in order to harmonise, modernise and reinforce existing consumer protection law by amending four existing consumer directives, namely:

• the Unfair Commercial Practices Directive (2005/29/EC)
• the Consumer Rights Directive (2011/83/EU)
• the Unfair Contract Terms Directive (93/13/EEC), and
• the Price Indications Directive (98/6/EU).

Member states were given until 28 November 2021 to adopt the Directive into national law and have until 28 May 2022 to fully bring the Directive into force. Examples of some of the key changes are set out below.

Digital goods

The Directive aligns consumer protections awarded to digital goods and services with those awarded to physical goods and services. The definition of “goods and services” is extended to include digital content and services, meaning that as well as physical goods, the Sale of Goods Directive now regulates goods which have a digital element. Requirements include: (i) goods being fit for purpose, (ii) consumers receiving all reasonably expected instructions and accessories, and (iii) a two-year guarantee period for any defects following delivery.

Additional rights awarded to consumers of free digital content services (ie services which are provided in exchange for consumers personal data) include rights to: (i) cancel a digital services contract within 14 days, and (ii) receive all necessary pre-contractual information. Under the Directive, consumers’ personal data will be equivalent to digital currency or money in the online marketplace in certain circumstances.

Fake reviews prohibition

To enhance transparency and ensure that consumers are fully informed when making purchases, any submission or commissioning of fake reviews, or the deletion of negative reviews is prohibited by the Directive. Retailers are obliged to ensure that the reviews are legitimate, ie from genuine consumers, which will involve taking reasonable and proportionate steps in order to verify such reviews.

Was/now pricing

The Directive requires that, where discounts are available, base prices for physical and/or digital goods (not content or services) that the discounts are being applied against must have been available within a period of at least 30 days before the discount is publicised. Retailers are also required to disclose where prices are altered for consumers due to automated decision making. 

Fines for non-compliance

Retailers who fail to comply with the Directive could face fines of either up to (i) 4% of their annual turnover in the relevant Member State where the non-compliance occurred, or (ii) €2m (if a turnover calculation is not possible). Although fines under the Directive may be smaller than those under the GDPR, there is the potential for fines exceeding the thresholds to be issued.

Why is this important?

Although there is no requirement for the UK to transpose the Directive into UK law, it is important that UK retailers and sales platforms providing those goods and services to EU consumers understand the Directive as its application to digital goods and services across the EU will have extraterritorial effect for those retailers.

Any practical tips?

Retailers and sales platforms should carefully consider the consumer rights protections now awarded to digital goods and services and whether any internal changes need to be made to ensure they are compliant with the Directive and thereby not be liable to a potentially sharp fine. For example, consumer rights must be incorporated into any terms and conditions for digital goods and services (including free digital content services – all of which should be reviewed on an ongoing basis), with particular consideration required as to exactly which terms and conditions are applicable to each country (the necessary requirements may differ if, for example, there were differences in implementation across Member States).

Winter 2021