Consumer Directives reloaded: stricter requirements for traders in online retail

Category: product liability, product safety Industry: consumer goods Author: Year:
Philipp Reusch

Directive (EU) 2019/2161, which took effect on 7 January 2020, introduces a large number of changes, including amendments to no less than four existing Directives. Member states have until 28 November 2021 to implement the Directive into national law, to take effect no later than 28 May 2022. The changes are designed to strengthen consumer protections and will affect the laws governing unfair competition as well. The new rules relate in particular to online retail.

The processes behind online product sales are often incomprehensible to consumers. The Directive therefore aims to ensure that consumers are better informed about these processes and that they are notified accordingly. These new notification requirements include e.g. information about

  • personalized prices;
  • the parameters used when ranking products and how those parameters are weighted;
  • more prominent placement in online marketplaces for paying advertisers;
  • how customer reviews are initiated and compiled (if e.g. only positive reviews are displayed);
  • private or commercial offerings in online marketplaces.

In addition to these notification requirements, the Directive also involves additional changes, e.g. with respect to instructions about withdrawal. It will soon be necessary to provide instructions about withdrawal for free digital services for which consumers are charged no fee but do "pay" by providing personal data (e.g. in social media). The Directive also makes slight changes to the "model instructions on withdrawal."

If traders violate rules of unfair competition law, consumers will be entitled to additional rights on this basis alone, e.g. termination, rescission or reduction, in addition to their warranty claims.

Fines

Traders who violate the duties set down in the Directive could face severe fines. While those who violate these rules currently get off with a warning in Germany, violators will have to pay at least 4% of their annual revenues once the Directive is implemented. If the competent authority has no information about the trader's annual revenues, violations will result in a fine of at least 2 million Euros. Failure to comply with the notification requirements and the other obligations, or doing so inadequately, could be significantly more expensive than is currently the case.

Practical tip

It remains to be seen exactly how the Directive will be implemented in Germany. However, traders can already expect that a variety of changes will be necessary. They should absolutely heed the new rules and adapt their online sales processes and structures accordingly in order to avoid what could be severe penalties in some cases.

[April 2020]