Insights

16/04/2018

EU consumer rights and enforcement to be strengthened

On 11 April 2018, the European Commission proposed what is being referred to as a "New Deal for Consumers". The purpose of the New Deal is to ensure that consumers benefit fully from the rights granted to them under EU law.

The New Deal will:

• introduce collective redress and administrative fines throughout the EU;
• enhance online consumer protection; and
• tackle the dual quality of consumer products marketed in different Member States.

Although the New Deal is primarily intended to enhance consumer rights, it also includes certain changes that will benefit businesses by reducing some of their administrative burdens.

Collective redress and administrative fines

The New Deal will ensure that consumers in all Member States are able to claim individual remedies when they are affected by unfair commercial practices. In addition, the New Deal will empower certain qualified entities, such as consumer organisations, to launch representative actions seeking injunctions and collective redress (e.g. compensation, replacement or repair) on behalf of consumers. These entities will also be able to negotiate a settlement on such redress with the relevant trader. This settlement must be approved by a court or administrative authority. In each case, the relevant trader will be obligated to inform consumers about a final decision and the necessary steps to benefit from redress.

The New Deal will also introduce stronger sanctioning powers for Member States' consumer authorities, enabling them to impose effective, proportionate and dissuasive penalties in a coordinated manner. For widespread infringements affecting consumers in several Member States, the New Deal will provide for a maximum fine of at least 4% of the trader's annual turnover in each Member State in which the infringement has taken place. However, Member States will also have the option of adopting higher maximum fines.

Online consumer protection

The New Deal will increase transparency in online marketplaces by requiring that consumers must be clearly informed of the main parameters determining the ranking of search results, whether the party they are contracting with is a trader or a private person, and whether or not consumer rights stemming from EU law will apply to the contract. Moreover, in all types of online platforms consumers will need to be clearly informed of which search results are being paid for by a trader.

The New Deal will also extend the 14-day withdrawal right consumers have in distance sales to "free" digital services for which consumers do not pay with money but by providing their personal information, for example, for marketing purposes. Services to which this withdrawal right will typically apply include email and social media services.

Dual quality of consumer products

To ensure that consumers are not misled about the quality of the products they are purchasing, the New Deal will prohibit traders from marketing a product as being identical to the same product being marketed in several other Member States if their composition or characteristics are substantially different.

For example, it will be prohibited to market chocolate containing less cocoa in one Member State using the same branding and packaging that is used in several other Member States where the cocoa content of the product is higher.  

Benefits for businesses

The New Deal will benefit businesses operating online stores by lifting the obligation to accept returns of goods that have already been used rather than just tried in the same way as in a physical store. Moreover, such businesses will no longer be obligated to reimburse consumers merely on the basis of proof that goods have been sent back. Instead, they will be allowed to withhold payment until the returned goods have actually been received.

As regards online communications with consumers, more flexibility will be introduced by allowing web forms and chats to be used instead of email, provided that consumers can keep a record of their communications with the trader.

Next steps

The New Deal, which comprises two proposals for Directives, will next be discussed by the European Parliament and Council. If adopted, the Directives will still need to be transposed into national law by each Member State. Therefore, it is currently still unclear if and when the New Deal will enter into force.

Krogerus will monitor and publish updates on the progress of the New Deal.

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