LEGAL DEVELOPMENTS
EU Omnibus: Are You Ready?
With changes to several EU directives and potentially large-scale fines for brands, the EU Omnibus Directive places significant obligations on brand owners, finds Tom Phillips.
By the end of November, EU member states are required to transpose into national law a major directive that places increased responsibilities on brand owners.
The Enforcement and Modernisation Directive (EU) 2019/2161, more commonly known as the Omnibus Directive, “serves to strengthen the enforcement of EU consumer protection laws and modernize e-commerce and digital content regulations, by prescribing more transparency and high penalties,” explained Paula Sailas, partner, Berggren Group (Finland), during yesterday’s session EU Omnibus Directive—News for Brand Owners in Online Marketing in Europe (presented by the Unfair Competition Committee).
With a requirement for greater transparency from brands that market online, higher penalties, and amendments to several EU texts, the Omnibus Directive is “not an easy read,” according to Eric De Gryse, partner, Simont Braun (Belgium).
“It touches on very different parts of consumer protection law, but in the end with very concrete implications for companies,” he warned.
Ms. Sailas urged brand owners to familiarize themselves with the increased transparency obligations, and take action to mitigate behavior that could result in fines.
“I would recommend that businesses trading online and operating in business-to-consumer business models be ready and ascertain which aspects of their business will be affected by this directive,” she said.
“Online marketplaces will have an obligation to inform consumers about the status of third-party suppliers.”
Martins Prieditis, European Commission (Belgium)
New Deal for Consumers
EU member states must implement the Omnibus Directive by November 28, 2021, and ensure that national legal provisions are effective as of May 28, 2022.
Created as part of the EU’s New Deal for Consumers initiative, which was adopted in 2018, the Omnibus Directive’s key provisions include a legal ban on the marketing of products of different quality in different countries without justification, and new notice and information obligations concerning consumers.
Online traders operating their own websites must also ensure that customer reviews or recommendations are real, and they must explain how this is ensured.
For infringements of a widespread nature, EU member states must impose fines of at least 4 percent of the trader’s annual turnover, or at least €2 million (US $2.3 million).
The introduction of the amendments was driven by the “Dieselgate” scandal of 2015, which revealed massive, large-scale cheating by car manufacturers regarding the environmental properties of their vehicles.
The situation revealed that European consumers were disadvantaged compared to consumers in other jurisdictions, explained the European Commission (Belgium) Directorate-General for Justice and Consumers Martins Prieditis.
“That scandal brought to light very prominently that Europe is not sufficiently equipped in terms of penalty-sanctioning powers of public authorities of the member states and the possibilities for consumers to claim adequate redress from those who engage in unfair practices,” explained Mr. Prieditis, who provided a detailed history of the Omnibus Directive and its implications for brands.
The directives amended by the Omnibus Directive include the Unfair Commercial Practices Directive (UCPD) 2005/29/EC, Consumer Rights Directive 2011/83/EU, Unfair Contract Terms Directive 93/13/EEC, and the Price Indication Directive 98/6/EC.
“Businesses trading online and operating in business-to-consumer business models [should] be ready and ascertain which aspects of their business will be affected by this directive.”
Paula Sailas, Berggren Group (Finland)
Digital Modernization Rules
The Directive’s main provisions are the modernization of the digital marketplace and better enforcement and consumer remedies.
Changes to the rules on the digital marketplace include those regarding online search results. Online marketplaces are required to make available to consumers new information about the ranking criteria.
In addition, online marketplaces will have an obligation to inform consumers about the status of third-party suppliers and who is responsible for the “performance of the contract”—for example, to whom the consumer should turn if there is a defect with the product, explained Mr. Prieditis.
Brands are also now obligated to inform consumers about how online reviews are collected. The Directive prohibits buying and selling fake reviews or presenting consumer reviews when no measures have been taken to ensure they are from real consumers.
“It touches on very different parts of consumer protection law.”
Eric De Gryse, Simont Braun (Belgium)
Price Reduction and ‘Dual Quality’
The Omnibus Directive introduces measures around price reduction, designed to prevent situations where the price of a product is increased for a short period before it is lowered again, giving the consumer a misleading impression of the product’s “normal” price.
Other provisions relate to “dual quality,” including the prohibition of misleading marketing of a good as being identical to the same good in other member states when they are actually different in their composition or characteristics.
EU guidance notes on the application of the amendments are expected to be published by mid-December, Mr. Prieditis confirmed.
Video courtesy of Envato Elements / kohanova1991
Thursday, November 18, 2021
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