Insights | November 25, 2020

New EU rules on e-commerce – wider powers for European consumer authorities and enhanced rights for consumers shopping online (part II)

In our last article (see link below), we discussed the directives on digital services and content and the sale of goods, respectively. This article will follow up with the upcoming enforcement and modernization of the consumer protection directive and also discuss geo blocking and cross-border parcel delivery services

New rules to enhance consumer rights and grant consumer authorities more effective enforcement powers

The new Directive (EU) 2019/2161 as regards the better enforcement and modernization of EU consumer protection rules, known as the “Omnibus” or Enforcement and Modernization” Directive, strengthens consumer rights through enhanced enforcement measures and provides for a requirement for increased transparency online. The Omnibus Directive amends four existing EU consumer protection directives on unfair contract terms (93/13/EEC), price indications (98/6/EC), unfair commercial practices (2005/29/EC) and consumer rights (2011/83/EU).

The new directive will grant consumer authorities wider powers and introduce several changes to consumer protection rules with a particular focus on the internet environment:

GDPR-style penalties for companies and new legal remedies for consumers: The directive confers powers on national authorities to impose penalties on companies similar to those in the General Data Protection Regulation (EU) 2016/679 (GDPR). The fines may amount to up to 4% of the trader’s annual turnover in the EU member states where a breach of the consumer rules has occurred, or EUR 2 million if information on turnover is not available. In addition, consumers who have been harmed by unfair commercial practices have the right to new individual remedies, e.g. direct right to access to compensation for damage.

Additional information requirements: Providers of online marketplaces are subject to additional specific information requirements for contracts in order to increase transparency. The identity of the actual seller of a product may not always be clear to the consumer on online marketplaces and a consumer might unknowingly buy items from another consumer. The Omnibus Directive requires that a marketplace must inform consumers whether an item is purchased from a private individual, in which case the EU consumer protection rules do not apply (as the transaction is made in a consumer-to-consumer relationship). This is an important addition in the current online environment, where consumers are paying more attention to sustainable choices and buying pre-used items from other private individuals.

Extension of consumer rights to free digital content and services: The definition of “price” will now also cover payments made with personal data. EU consumer protection laws will apply to digital content and services that are free in the sense that the consumer has not paid any money but instead has made a payment with their personal data. Therefore, for example, the mandatory 14-day cancellation right will apply to such services.

EU member states have to implement the directive into national law by 28 November 2021 and national rules have to be in force by 28 May 2022.

In Sweden, the national implementation is currently being assessed. The Government has commissioned a special investigator to look into how the Omnibus Directive should be transposed into Swedish law. The inquiry must be reported by 13 August 2021. For more information, please see Dir. 2020:13 (in Swedish).

Cheaper deliveries and end to geo-blocking to safeguard equal treatment of European consumers in the online environment

New rules on online cross-border parcel delivery services have been in force since May 2018, making cross-border parcel deliveries cheaper and making it easier for consumers to receive the items they have ordered online.

The Regulation on cross-border parcel delivery services (EU) 2018/644 is aimed at guaranteeing price transparency and competition to make it easier to find the cheapest way of sending a parcel from one EU country to another. Under the new rules on online cross-border parcel delivery services, businesses have to disclose their prices clearly so that consumers can easily compare them.

Another recent piece of EU legislation impacting e-commerce business is the Geo-Blocking Regulation (EU) 2018/302, which has been in force since December 2018. It aims to end unjustified geo-blocking, which prevents buying from a website based in another EU member state, and to end online discrimination on the basis of nationality or place of residence.

The regulation contains an obligation for online sellers to treat all EU consumers equally regardless of where they choose to shop from. Its purpose is to remove unjustified barriers consumers face online, e.g. being re-routed back to a country-specific website, or having to pay with a debit or credit card from a certain country.

Increased consumer protection and scrutiny for traders

The wider powers to enforce consumer rights and stricter sanctions have raised the question of whether the Omnibus Directive will be the GDPR of consumer protection. The risk of facing considerable fines adds pressure to comply with the rules and forces businesses to pay more attention to their practices so that they will not be unfair from the consumer’s point of view.

In the beginning of 2020, the European Commission coordinated an EU-wide screening of nearly 500 e-shops. The sweep was carried out by consumer protection authorities around the EU. The findings of the screening revealed that a whopping two-thirds of the screened e-shops did not comply with basic EU consumer rights. It will be interesting to see if the new rules have a similar effect on consumer protection as the GDPR has had on data protection awareness and how e-shops comply with European consumer law requirements in the future.