Gearing up for enhanced consumer protection: the impact of the EU's new rules

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Hogan Lovells

On 7 January 2020, Directive (EU) 2019/2161 (the "Directive") came into force, setting into motion a swathe of measures aimed at modernizing the existing consumer protection rules, bolstering the level of protection available to consumers and providing an enhanced level of transparency in the face of ever-growing digital complexity.

Part of the EU's 'New Deal for Consumers', the Directive amends four key pieces of EU consumer protection legislation. Member States must implement the Directive within national regulations by 28 November 2021. The deadline for the actual application of the measures is 28 May 2022.

What do you need to know?

Significant penalties for infringements

Fines for breaches of consumer protection law can be now levied at a maximum level of at least 4 percent of the trader's annual turnover in the relevant Member State. Member States may elect to impose higher fines for particularly egregious infringements.

Private enforcement by individual consumers

Consumers are to be provided with direct rights to individual remedies where they have been harmed by unfair commercial practices.

Big implications for online sales

Several provisions are aimed at fostering increased transparency for online transactions:

  1. Personalized pricing: an obligation on traders to inform consumers where the price offered has been personalized based on automated decision-making and profiling of consumer behavior.
  2. Fake reviews: a prohibition on the manipulation of reviews (i.e., publishing only positive reviews) and a prohibition on traders procuring the submission of fake reviews.
  3. Ticket touts: a prohibition on traders reselling event tickets that have been acquired through the use of automated 'bots'.
  4. Search results: an obligation to inform consumers about the parameters determining the ranking of offers within search results and to disclose where payment has been made for a higher ranking.

Protection for consumers contracting for digital services in exchange for personal data

Contracts where no price is paid by the consumer, but where personal data is provided, are now caught by existing consumer protection legislation. Consumers that have entered into such contracts may now for example take advantage of a 14-day cooling off period.

What does this mean for you?

If you are a trader with consumers within the EU, then you will need to ensure compliance with the new rules irrespective of where you are based.

  • Check your consumer-facing terms. Are they compliant with the new rules?
  • Check your website wording. Does it fit with the new rules?
  • Does your business collect data? Consider the implications of how that is monetized.
  • Do you do personalized pricing or pay for higher rankings in search results, or are you at risk of fake reviews? Consider if the new rules apply to you.

The clock is ticking to 2022 - in order to avoid the possibility of significant fines, make use of the next two years to ensure your business is compliant with the new regime.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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