The new Enforcement and Modernisation Directive 2019/2161, more commonly known as the ‘Omnibus Directive’ (the Directive), aims to strengthen consumer rights through enhanced enforcement measures and increased transparency requirements.
EU Member States must adopt national implementation measures by 28 November 2021. The new requirements set out in the Directive must then come into force by 28 May 2022.
Who the Directive applies to
Those engaged in online business-to-consumer (B2C) transactions as well as companies offering digital services to consumers where payment by the consumers is in the form of personal data rather than money, will fall under the remit of the Directive.
- 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)
Key changes explored in more detail
- Increased enforcement powers with the introduction of GDPR level penalties:
The Directive introduces fines of up to 4% of the trader’s annual turnover in the Member State (or Member States) where the breach occurred, or €2 million in cases where information on turnover is not available.
The appropriate level of fines imposed is determined using criteria which is similar in nature to the criteria under the GDPR:
- the nature, gravity, scale and duration of the infringement;
- whether there has been any action to mitigate damage;
- any financial gains or losses by the seller from infringements of consumer law; and
- whether the trader has any previous allegations made against them.
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.
- Increased Transparency obligations on traders:
- Ranking and search results: traders must provide clear information to consumers on the criteria used by traders to rank products in online searches. Traders must also disclose paid advertising and whether specific payments have been made to achieve a higher ranking in the search results.
- Fake reviews and endorsements: submitting or commissioning fake reviews or endorsements are prohibited, and traders must justify the reasonable and proportionate steps they have taken to ensure that reviews on their website are genuine, for example by limiting the ability to post a review to verified purchasers only.
- Personalised pricing: traders must inform consumers whenever a price presented to them has been personalised as a result of automated decision-making and consumer profiles.
- Online marketplaces: online marketplaces are obliged under the Directive to inform consumers whether the item they are purchasing is from a private individual and that such transactions do not benefit from the EU consumer protection regime.
- Extension of consumer rights to “free” digital content and services:
The definition of price has been extended to include payment with personal data and as a result, “free” services (such as cloud storage and social media accounts) will fall within the ambit of the EU consumer protection regime, including the 14 day cooling-off period/right of cancellation for 14 days from the date of purchase.
Irish approach to date
The Consumer Rights Bill 2021 will transpose the provisions of the Directive into Irish law. At the time of publication of this article, the Irish Government had published the General Scheme of the Consumer Rights Bill 2021, and further clarification and updates on the status of the Bill are pending.
Action points for businesses
Preparation is key and if you trade online and operate a B2C business model, offering your goods and services to consumers based in the EU, you should:
- Ascertain which aspects of your business will be affected by Directive;
- Familiarise yourself with the changes, in particular the increased transparency obligations; and
- Take appropriate action to mitigate fines.