June 18, 2021
Big changes are on the horizon for consumer-facing businesses. Part of the so-called “New Deal for Consumers”, the Omnibus Directive is an EU-wide initiative aimed at strengthening enforcement of consumer law and modernising consumer protection rules.
The Omnibus Directive is the informal name given to the “Directive on Better Enforcement and Modernisation of EU Consumer Protection” (Directive (EU) 2019/2161), also known as the Enforcement and Modernisation Directive, which amends four existing EU consumer protection directives.
The Directive came into force on 7 January 2020. Member States have until 28 November 2021 to adopt and publish their implementing legislation, and those laws must then come into effect on 28 May 2022.
The implications of the Directive are wide-ranging, but the key changes are:
Significantly enhanced enforcement
The big headline-stealer – the introduction of substantial, GDPR-style fines of a minimum of 4% of a company’s annual turnover in the relevant Member State (or €2m if a calculation is not possible). Member States are also free to introduce higher fines.
Digital goods and services
The Directive expands the scope of existing consumer rights (previously applying only to physical goods and services) to cover digital goods, content, and services.
“Free” digital services
Certain existing consumer laws which previously extended only to paid-for services (i.e. paid for with money) will now extend to “free” digital services (e.g. cloud services or social media) which are ‘paid for’ with a consumer’s personal data. This is a big change for relevant businesses that, until now, have escaped the reaches of consumer law.
Direct consumer claims
The Directive introduces a new, direct right to individual remedies for consumers harmed by unfair commercial practices.
Increased transparency requirements for online marketplaces
Online marketplaces will be subject to much stricter transparency requirements, including:
• clearly indicating paid placements in search results; and
• providing consumers with information about how offers are ranked in a search, whether consumers are entering a contract with a professional trader or a private individual, and whether consumer protection legislation applies.
Consumers must be informed whenever pricing is individualised (i.e. based on an algorithm).
Price reduction claims
For every price reduction claim, businesses will have to indicate the lower price that applied within a period of at least 30 days preceding the price reduction
What about the UK?
As the Brexit transition period has now ended, the UK will not be obliged to implement the Directive and we do not yet know what the UK Government’s plans are (though it has, separately, indicated its intention to modernise UK consumer laws and significantly increase enforcement powers).
In any event, UK traders selling to EU consumers will have to comply with the Directive, because EU consumer law applies to, and protects, consumers
in Member States regardless of the location of the business.
What steps should I be taking?
If we learned anything from GDPR, it’s that preparation is everything. While there’s still time until the new laws come into effect, businesses that are going to be
affected by the changes should be preparing now.
The first step: understanding the legal changes (more will be known about this once Member States have published their implementing legislation) and determining which aspects of the business and which product/service offerings are going to be affected.
If you enjoyed this article, you can find similar pieces in our Expert Insight on Consumer Law & Regulatory Compliance Brochure.