As part of the New Deal for Consumers, aimed to strengthen EU consumer protection in light of the digital era, a new Directive 2019/2161 of 27 November 2019 has been adopted by the European Parliament and the Council (hereinafter the “Directive”). The Directive amends Council Directive Council Directive 93/13/EEC and Directives 98/6/EC, 2005/29/EC and 2011/83/EU with a view to better enforcement and modernisation of EU consumer protection rules. The Directive contains modernised rules in view of digital market developments such as the rise in online platforms. A non-exhaustive overview of these modernised rules is briefly described below.
Safer online marketplaces
An online marketplace is a service using software, including a website or application, operated by or on behalf of a trader, which allows consumers to conclude distance contracts with other traders or consumers. As both private individuals (i.e. other consumers) and professional traders are offering goods and services via online marketplaces, the identity and capacity of whom you are purchasing from is often unclear. Since EU consumer protection rules only apply in B2C relations and not when buying from another consumer (C2C), this often entailed unpleasant surprises such as not being able to change your mind and exercising your right to withdrawal.
The Directive brings more transparency to online marketplaces, allowing consumers to easier assess the risks. Online marketplaces must provide information on whether the supplier is a trader or another private individual, with a warning that EU consumer rules do not apply where relevant. With respect to search results, providers of online marketplaces must also provide transparency on their ranking criteria and must clearly disclose results that reflect paid advertisements.
“Free” digital services not so free anymore
Nowadays many digital services are offered for “free”, such as dating apps, social media platforms, cloud services, etc. While we do not actually pay for such services, the providers collect and monetize our data. As some important EU consumer rights only apply to services paid with money, such “free” services were not subject to those. The Directive considers that, given the similarities and interchangeability of paid digital services and digital services provided in exchange for personal data, they should be subject to the same rules.
Hence, the Directive also applies to so-called “free” digital services, i.e. contracts under which the trader supplies (or undertakes to supply) a digital service and the consumer provides (or undertakes to provide) personal data. However, an exception is provided for digital services whereby personal data are exclusively processed for the purpose of supplying the digital content or services or for meeting legal requirements, as the data are not further processed for other purposes and therefore do not have any additional value to the trader.
Consumer reviews: to trust or not to trust
When buying goods or services, or simply choosing which restaurant to go to, consumers increasingly rely on reviews and endorsements provided by other consumers on online platforms. Unfortunately, such reviews are not always genuine and consumers need to be protected against fake news.
The Directive now introduces new obligations to tackle this. Traders that use consumer reviews must clearly inform consumers on whether or not procedures ensuring the authenticity of reviews are in place and how the checks are made. Moreover, misleading consumers by stating that reviews of a product were submitted by actual consumers when no reasonable and proportionate steps were taken to ensure that this is the case (e.g. verifying the reliability by requesting additional information) must be considered as an unfair commercial practice.
The Directive also includes rules with a view to empowering consumers with respect to their personal data (e.g. a right to access, retrieve and transfer data to another provider upon termination of an agreement) and with a view to better enforcement of consumer rights (e.g. fines of 4% of the trader’s annual turnover in case of “widespread infringements” and effective remedies). Such developments are very similar to the changes introduced by the General Data Protection Regulation with respect to data subjects.
The Directive enhances consumer protection online, including with respect to online platforms and marketplaces, as such in keeping with the trend to regulate online platforms. Whereas Regulation no. 2019/1150 introduced transparency requirements (e.g. with respect to ranking algorithms) between traders and online intermediaries, this Directive now imposes similar transparency requirements towards the customers and further completes the puzzle. See also our previous blogpost on the regulation of online platforms.
EU Member States must implement the Directive by 28 November 2021 and must apply the implemented measures as of 28 May 2022.