EU Omnibus Directive: what is the impact of the consumer protection reform for traders? Some takeaways and results of the poll
Nearly one year ago, the EU Parliament adopted the directive No 2019/2161 (better known as the “Omnibus Directive”) as a result of the “New deal for consumers” initiative.
During a webinar co-organized with Lexology on 22 October 2020, Lydian’s team discussed the aims of the Omnibus Directive as well as the main modifications brought by such directive (see below).
However, before examining that directive, Lydian’s team discussed two other important directives, namely directives No 2019/770 (on certain aspects concerning contracts for the supply of digital content and digital services) and No 2019/771 (on certain aspects concerning contracts for the sale of goods). They are not well known by the public (it results indeed from the poll that only the half of the participants had already heard about these directives) but have a big impact for traders of digital sectors, online market platforms and are also linked to the Omnibus Directive and the directives it amends.
Indeed, the directive No 2019/770 applies to a contract where the trader supplies digital content (e.g. movies, photos, e-books, music files) or digital services (e.g. apps such as Netflix and Spotify…) to the consumer and the consumer pays (or undertakes to pay) a price or provides personal data to the trader. The directive No 2019/771 applies to contracts for sale of goods and updates the definition of “goods” (which now also includes goods with digital elements (like smartwatches)) and provides for further warranties obligations and remedies for consumers.
With these new definitions in mind that applies to the Omnibus Directive, Lydian’s team then focused its presentation to solve the puzzle created by that directive.
The Omnibus Directive has two main goals: the modernization of consumer protection rules and a better enforcement of such rules.
In order to achieve the modernization goal, the Omnibus Directive added several obligations in 3 directives: directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers, directive 2005/29/EC concerning unfair B2C commercial practices and directive 2011/83/EU on consumer rights.
The main modifications to the directive 2005/29/EC on unfair B2C practices are the following:
- The scope has been explicitly broadened to digital content and digital services. The black and grey lists of unfair trade practices also apply now explicitly to digital content and services.
- Certain transparency obligations have been added which, if not respected, will result in misleading commercial practises and/or misleading omissions, like for instance :
- More transparency in case of ranking (mandatory mention : paid advertisement) ;
- More transparency in case of customer reviews (more control on the identity of the customer). When you know that 87% of the participants to our webinar rely on such review when making a commercial decision, there was indeed a need for regulation and sanction for this kind of practice;
- More transparency on online market places since the status of the third-party supplier (trader or consumer) has to be mentioned;
- Marketing goods as identical although they have substantial differences may be considered misleading.
The main modifications to the directive 2011/83/EU on consumer rights are the following:
- The scope of certain obligations has been broadened to explicitly include digital content and digital services, including in cases where a consumer “pays” with personal data;
- Certain pre-contractual information requirements have been added in view of more transparency ;
- Personalized pricing on the basis of automated decision-making is allowed provided that the consumer has been informed and that it is compliant with GDPR ;
- More transparency from the online market platform as well in case of ranking;
- More transparency from the online market platform as well regarding the status of the third party supplier ;
- Mention that EU consumer protection law does not apply if the third party is not a trader;
- Mention of the possible contractual arrangement between the provider and the third party trader (e.g. delivery, right of withdrawal).
- The right of withdrawal has been adjusted and establishes additional obligations regarding data protection and content provided or created by consumers. Notably, service providers must refrain from using such content unless certain exceptions apply.
The main modifications to the directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers are new rules on price reductions. Directive 98/6/EC now explicitly provides that price reductions shall indicate the prior price applied by the trader.
The enforcement aspect, mainly translates itself in the introduction of severe, GDPR-like fines in Directives 93/13/EEC on unfair terms in consumer contracts, 2005/29/EC on unfair business-to-consumer commercial practices and 2011/83/EU on consumer rights. It results from our poll that 97% of the participants recognize that such fines motivate their companies to make sure that they comply with the rules.
Hence, what to do to be compliant?
1. Prepare in time
These types of compliance projects often take much longer than one may think. Time is still on our side (the deadline is 28 May 2022). Even though this may seem like a long way out, businesses will need to start their compliance activities well in time (as you may have learned from implementing the GDPR).
2. Follow-up on implementing legislation
In Belgium, we often notice that our legislators stick closely to the text of the directive. Hence, the content of implementing legislation generally is not surprising. However, make sure to follow-up on implementing legislation, to understand the exact scope of the changes in your Member State.
3. Re-evaluate your activities
The scope of many consumer protection rules has been broadened. Additional obligations will arise for providers of digital services, digital content and goods (including goods with digital elements). Hence, it is important to re-evaluate the rules that apply to the goods/services you offer and to the means you use to put them on the market (e.g. market platforms, customer reviews, etc.) and think to adapt your website, terms and conditions, pre-contractual information.
We are of course at your disposal should you have any further question or would like to receive an unofficial coordinated version of the 4 directives modified by the Omnibus Directive. Stay tuned in any case for the Belgian legislative implementing developments.