EU commercial regulation: new proposals

EU commercial regulation: new proposals

1. The “New Deal” for consumers

The EU Commission has proposed a “new deal” for consumers which will consist of a proposal for an omnibus general consumer protection law. This will consolidate a number of piecemeal consumer protection rules: the Unfair Commercial Practices Directive, Consumer Sales and Guarantees Directive, Unfair Contract Terms Directive, the Misleading and Comparative Advertising Directive, Injunctions Directive and the Consumer Rights Directive. The new package will update this legislation and provides for the following highlights:

a) Penalties for EU consumer law breaches

The real problem with the current consumer protection rules has been the difficulty of enforcement, and how dissuasive the remedy is for breach. Following from the success of the sledgehammer approach to dealing with competition and data protection infringements, the proposal introduces a maximum fine under national law, for widespread infringements, of at least 4% of the trader’s annual turnover.

In addition, breaches will entitle consumers to apply civil remedies such as contract termination and damages for victims of unfair commercial practices.

This means that consumers will be able to get meaningful redress for breaches which might otherwise only be enforceable by a local Trading Standards Office.

b) Transparency requirements for online marketplaces

Online marketplaces will be obliged to provide more transparency to consumers. This will require, as a minimum, informing users of the main parameters for ranking of offers via a search query. In addition, the consumer rights that all online shoppers have become used to i.e. pre-contractual information and the 14-day right of withdrawal, will be extended to “free” digital services where the consumer provides personal data.

2. Proposal for a Regulation on online intermediation for business users

This second notable proposal is interesting in the context of the commercial regulation of businesses.

It is pretty well understood that consumers might be entitled to protection from being misled by traders and online marketplaces gaming the system. In addition to this, however, the second proposal is aimed at preventing online marketplaces from gaming business users.

While online platforms and intermediaries offer efficiencies in terms of access to cross-border consumer markets, there is a concern that the concentrated power of the marketplaces themselves need regulating.

The Commission’s findings are that platforms terms and conditions are generally found to be unclear – even for legal professionals – and users report frequent and arbitrary changes to them.

In addition, while the majority of SMEs explain that their position in search results has a significant impact on their sales, many internet users do not trust that search results are the most relevant to their query.

Again, the highlight of this proposal is transparency. Terms and conditions must be in clear and unambiguous language and any changes will have to be informed to users with a notice period of 15 days in principle. The platforms must state the reasons for delisting business users’ goods/services or for suspending or terminating their accounts. In addition, platform providers will be required to clearly inform users of the general criteria determining how goods and services are ranked and the use of contract clauses demanding the most favourable range or price of goods and services offered by business (i.e. “most favoured customer” clauses) on the platform.

Digital marketing is almost, by definition, an exercise in the practice of the dark arts of the manipulation of business and customer preferences. This proposal will have the scope to disrupt the online marketing industry – everyone from Amazon, Ebay, and Facebook – through to the government’s G-Cloud Digital Marketplace.

It will be interesting to see how much of this proposal retains its shape after the lobbying process.