On 28 th May 2022 the Directive of the European Parliament and of the Council (EU) 2019/2161 on the better enforcement and modernization of Union consumer protection rules, also known as the Omnibus Directive, have entered into force. The Omnibus Directive aims to strengthen and expand the scope of EU consumer law by modernizing EU consumer protection rules for new market developments. New rules could have a significant impact on business practices for new age e-commerce enterprises that uses modern tools and methods (paid advertisements, “cherry picked” customer reviews, etc.) for their products to look more appealing to a consumer.
Key changes
- Introduction of GDPR level penalties
- Increased transparency online
- Extension of consumer rights to “free” digital content and services
- Amendments to several existing pieces of EU consumer protection legislation, including the Unfair Contract Terms (Directive 93/13/EEC), Price Indications (Directive 98/6/EC), Unfair Commercial Practices (Directive 2005/29/EC), and Consumer Rights (Directive (2011/83/EU)
New unfair commercial practices, penalties, and redress
The changes to The Unfair Commercial Practices Directive as the directive itself are relevant to all traders. It does not matter if a business is selling goods, providing consumer services, or financial services online they must follow EU legislation that prohibits enterprises in business-to-consumer cases from acting in an unfair way.
The Unfair Commercial Practices Directive always attracts the attention of enterprises because it establishes sanctions and fines that a business could encounter if it will violate directive’s clauses. Fines could go up to 4 % of the trader’s turnover or up to €2 million when information on turnover is not available. Individual Member States also have the option to introduce higher fines and the national authority of each Member State can work together where a cross-border infringement has occurred. Individual consumers have direct rights to compensation for unfair commercial practices. This will inevitably oblige businesses to pay more attention to compliance aspects in their day-to-day operations.
The Omnibus Directive introduced a right to appropriate remedy for a consumer who encountered unfair commercial practices. Consumers now have a right to compensation, contract termination, and other remedies interplay with other EU legislation. This means that unfair businesses could not only expect a fine, but also compensation claims from consumers.
The Unfair Commercial Practices Directive now has new clauses establishing rules and procedures that enterprises should follow to operate within the framework of fair business. For example, traders operating marketplaces now have the obligation to inform consumers about how offers are ranked in search results and to identify paid advertisements. What is more, all traders showing consumer reviews of products have to include information about whether and how the trader ensures that the published reviews originate from consumers who have actually used or purchased the product. This is to combat quite popular but clearly unfair practice of fake or “cherry picked” reviews. Now traders will need to have a workflow on how they will assure compliance to this requirement. In addition, information on their websites T&C regarding rules on reviews will need to be provided.
The Omnibus Directive addressed “Dual quality” aspect of consumer goods. This topic was particularly popular during the time when The Omnibus Directive was proposed. “Dual quality” is considered when the goods that are sold in identical or similar packaging sometimes have a different composition or characteristics than in other Member States. New rules will give authorities legal tools to stop practices that are misleading consumers into believing that they are buying the same product when they are not.
Adapting to rapidly evolving e-commerce
The Omnibus Directive also amends the 10-year-old Consumer Rights Directive. Not all online enterprises should worry about new rules regarding Consumer Rights Directive, because the Consumer Rights Directive is not applicable for financial, package travel, package holidays, healthcare, real estate, service providers.
The Omnibus Directive is trying to catch on with new business trends and introduced amendments to EU law regarding “Free” digital services that involved the processing of personal consumer data. Service providers are now obliged to provide information about themselves and the characteristics of the service. Also, consumers now benefit from 14-day right of withdrawal as in a standard case with paid services.
Rules on price changes of products offers based on specific consumers algorithms and behavioural profiling are now established. Consumers will have to be informed about these pricing methods each time. In this way consumers will be aware of the risk regarding increased asking price.
An important change that will improve transparency on online marketplaces is the obligation for marketplace administrators to clearly indicate whether the seller is a professional or another consumer. EU consumer protection rules do not apply when buying from another consumer. In addition, a clear indication is now needed on who (a seller or a marketplace) is responsible for the delivery of goods and returns.
Combating fake discounts and ticket resellers
EU legislators has also clarified some aspects regarding discounts. Discounts are still probably the main attraction for consumers who are browsing the world wide web for the best deals. It is expected that changes to the Price Indications Directive will ensure genuine price reduction claims. Now If a discount or sale price is announced, the original price of the product must have been made public at least 30 days beforehand. It is important to note that this requirement only applies to goods, not content or digital services. This means that an online store must display the price history of the last 30 days of a discounted product. Finally, The Omnibus Directive tackles a specific problem regarding the resale of event tickets. Event organizers are usually issuing a limited quantity of tickets, so ticket resellers who are using online “bots” to buy tickets in bulk are making consumers to pay more for their favourite sports event or a concert. New rules prohibit traders to resell tickets bought by using mentioned method.
Recommendations
The changes that Omnibus Directive brought definitely require business to pay more attention to compliance issues. In some cases, enterprises will have to change their sales and advertising practices. We encourage enterprises not to consider is it worthwhile to continue the activities with measures that may be considered unfair. We recommend carrying out activities in accordance with the legislation. It is more profitable to invest in the consumer-friendly business model. In the end of the day, huge fines, legal disputes with consumers and adverse media will have major negative consequences for business not only financially but also reputationally.
Prepared by Aušvydas Čebatorius, associate of ECOVIS ProventusLaw, and Loreta Andziulytė, partner of ECOVIS ProventusLaw
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