European Commission publishes revised guidance on the Omnibus Directive

UK - E-commerce

On 17 December 2021, the European Commission revised guidance on the interpretation and application of the Omnibus Directive. The deadline for Member States to have all measures and any national amendments implementing the Omnibus Directive is 28 May 2022. The revised version of the guidance focuses on the application of EU consumer law in the context of digital and green transitions.

Key date(s)

• 7 January 2020 – 27 November 2021: Member States undertake internal consultation and determine what derogations, fine limits etc. they will introduce.
• 28 November 2021: Deadline for Member States to have implemented the Omnibus Directive into national law.
• 29 December 2021: The EU Commission ("EC") publishes revised and new guidance on three of the consumer protection directives updated by the Omnibus Directive.
• 28 May 2022: Deadline for the Omnibus Directive measures and any national amendments to be in force in Member States.

Status

• The Enforcement and Modernisation Directive (EU) 2019/2161 (the "Omnibus Directive") is the result of an initiative originally proposed in the 2017 State of the Union speech by former Commission President Jean-Claude Junker. It was adopted by the European Commission in early 2018 under the heading of the 'New Deal for Consumers'. This aimed to modernise EU consumer law and strengthen its enforcement in light of an increasingly globalised consumer marketplace and, in particular, the rise of e-commerce.
• New guidance published on 17 December 2021 relates to the Unfair Commercial Practices Directive (2005/29/EC)) ("UCPD"), the Consumer Rights Directive (2011/83/EU) ("CRD") and the Price Indications Directive (98/6/EU) ("PID") and covers the upcoming changes introduced by the Omnibus Directive.
• For the UCPD and the CRD, the guidance flags cases brought by national regulators and the views of the Commission, in particular, on how the legislation can be applied to protect consumers from new potential harms arising from e-commerce and greenwashing. Additionally, the revised UCPD guidance includes new sections on influencer marketing, data driven practices, dark patterns and gaming.
• The guidance on the PID explains the scope and application of Omnibus Directive requirement that any announcement of a price reduction must also indicate the 'prior price' of the goods which is defined in the PID as the lowest price applied to the goods over the previous 30 days. While the other provisions of the PID are not discussed, the guidance helps provide clarity on issues that are common to all Member States, including the interplay between the PID and UCPD.

 What it hopes to achieve 

• The Omnibus Directive builds on a consumer protection framework which, while being noted by the European Commission's REFIT 'Fitness Check' as being broadly fit for purpose, required some updating and improvement to the application and enforcement of consumer rights and businesses' obligations. It therefore seeks to ensure that all EU consumers, regardless of the method of sale or type of product or service, benefit from a harmonised approach to consumer rights.
• In particular, the new penalties offer consistency for consumers across the trading bloc by ensuring that their enhanced rights can be enforced fairly and proportionately while also acting as a substantive deterrent to businesses.

Who does it impact? 

• Many of the changes brought about by the Omnibus Directive will benefit EU consumers by introducing additional rights and protections. However, the greatest impact will likely be on traders which sell to EU consumers (and to a lesser extent online marketplaces) as the positive obligations predominately lie with them.
• Traders and online marketplaces, particularly larger operators who may be a target for regulators, Member States and activist consumers, will have to closely consider the new and expanded obligations imposed on them and how best to implement changes, particularly given the high penalties in the event of infringement.
• It should also be noted that the legislation has been drafted in a technology-neutral way, therefore all businesses, regardless of the technology they employ, will be impacted.
• Additionally, all EU consumers will be the beneficiaries of the expanded rights which means that the Omnibus Directive will reach non-EU-based businesses who provide goods, services or content to EU-based consumers.

Key points 

1. Penalties

• • Non-compliance by a trader or online platform with their updated obligations could result in action by one or multiple Member States with a fine of at least 4% of the businesses' annual turnover or €2,000,000 being levied. Indeed, Member States have leeway to derogate and introduce larger fines than this.

2. Digital goods, services and content

• • New definitions coordinate consumer rights legislation with other digital regulation and aligns the supply of physical goods and services with that of digital ones.

3. "Free" service contractual rights

• • Consumers who receive "free" digital services (e.g. where personal data is provided as consideration) will now benefit from consumer rights protections. Providers of such services will need to put in place appropriate terms and conditions to ensure that consumers are appraised of their new rights.

4. Consumer transparency
   • Online marketplaces must provide more information in respect of seller identities and their decision-making behind the ranking of search results.Traders will be prevented from manipulating reviews and must disclose any paid-for advertising which promotes a product in a search result.These obligations are designed to provide consumers with clarity regarding what products, services, and content they are presented with and their rights once these have been purchased.
5. Price manipulation and dual-quality products
   • Stricter parameters have been introduced in relation to discounting products, while consumers must also be told where prices have been personalised on the basis of automated decision-making. Additionally, where traders market products across different territories in an identical manner, they must ensure that the manufacturing does not involve significantly different compositions or characteristics.

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