The Enforcement and Modernisation Directive (commonly referred to as the “Omnibus Directive”) is one element of the EU’s “New Deal for Consumers”, which aims to strengthen enforcement of EU consumer protection whilst also modernising the rules. The Omnibus Directive has made various changes to the EU consumer protection regime with member states required to apply them from 28 May 2022.
How does the Omnibus Directive impact UK businesses?
Post-Brexit, UK businesses may be forgiven for asking why the Omnibus Directive is of any concern to them given that the UK is no longer an EU member state and therefore was not required to implement it.
Whilst the UK was not required to implement the Omnibus Directive, UK businesses will need to comply with the rules to the extent that they sell their goods and/or services to EU consumers. A failure to do so could result in claims from EU consumers and enforcement action from regulators.
As the UK and EU consumer protection regimes begin to diverge, there is uncertainty as to what extent the UK courts and regulators will be willing to enforce penalties handed down to UK businesses for breaches of EU consumer protection law.
What are the key changes?
The key changes outlined below provide a high-level summary of some of the key changes applicable from 28 May 2022 but it is not a complete list of all changes implemented by the Omnibus Directive.
The headline-grabbing change is that the penalties for infringements are ramped up. The Omnibus Directive requires member states to ensure a mechanism for imposing fines is in place, with the level of fines being up to 4% of annual turnover of the business in the member state in question, or €2,000,000 if turnover cannot be determined.
Whilst not as onerous as GDPR fines, clearly the financial penalties are significant should serious breaches of EU consumer protection law occur.
Additional information requirements
Beyond fines, changes are also made in respect of online traders’ information obligations. In addition to information which traders are already obligated to provide, the Omnibus Directive requires online traders to provide consumers with details of:
- the criteria used to rank search results (including, for example, if search results have been paid for)
- if (and how) reviews of products and/or services are verified.
Online marketplaces also need to:
- confirm the status of the product/service seller (i.e. trader or otherwise)
- confirm whether consumer protection law applies
- explain where responsibilities lie between the seller and the platform
- confirm to the extent pricing is personalised due to automated decision making.
Dual quality products
It will be considered misleading for a business to market goods in different member states as being identical despite there being a different composition or characteristics across the member states. However, this does not prevent a business from doing so where there are legitimate reasons for doing so, such as the application of national law.
Extension to “free” digital services or content
Some businesses have structured their services to allow consumers to access digital content or services in return for their personal data (usually with a view to sending marketing messages to them). Such arrangements, where personal data is the consideration, are now captured as a result of the changes, meaning that the businesses operating in this way need to provide certain pre-contract information and details of cancellation/withdrawal rights to the consumer as it would be required to do with other types of consumer contracts.
The Omnibus Directives requires member states to ensure that individual consumers have a personal right of redress in respect of any unfair commercial practices of a trader.
It is clear that the EU is toughening its stance on consumer protection issues, seeking to further empower individual consumers and to ensure that there is a robust penalty regime to deal with significant breaches.
Any UK businesses selling products or services to EU consumers cannot simply ignore changes to EU consumer protection law in the post-Brexit era. Those rules will continue to apply to them and therefore businesses need to keep up to date on changes made in the EU, especially as the UK and EU regimes begin to diverge.
Any such business should review their practices to ensure compliance with EU rules to mitigate the risk of consumer claims and/or enforcement action being taken against them.
Looking further down the track, more change is coming with the EU member states required to amend their national law to allow for “representative actions” which is essentially paving the way for collective or class/group actions on behalf of consumers.