E-commerce ‘sweep’: regulatory action taken across the EU against non-compliant transactional consumer websites

Written on 21 Nov 2016

The European Commission recently co-ordinated one of its compliance ‘sweeps’ across 743 EU, Icelandic and Norwegian websites in multiple market sectors. The results showed that almost two-thirds of those were not compliant with the Consumer Rights Directive’s pre-contractual information requirements, and enforcement action is now in progress against some of these. Online businesses must therefore ensure their platforms and websites are fully complaint to avoid any future regulatory scrutiny and action.

The Sweep

So, what is a ‘sweep’?

A sweep is an EU-wide screening of websites co-ordinated amongst national regulators to see if consumer laws are being complied with. There have been several ‘sweep’ actions to date focused on various areas including airlines, mobile content and electronic goods. This latest one focused on compliance with the Consumer Rights Directive’s (CRD) pre-contractual information requirements.

The first stage of any sweep is simultaneous compliance checks on the relevant websites. It’s at this stage that any non-compliance is identified, and this latest sweep looked whether the CRD’s requirements to provide pre-contractual information about the trader, price, product characteristics and cancellation rights had been met.

The ‘enforcement’ stage then follows for any non-compliant websites. National authorities deal with local cases, and look for breaches to be rectified, and any cross-border infringements are dealt with by multiple regulators via the Consumer Protection Co-operation Network.

The Findings

So, what were the findings?

This latest sweep was the largest to date, and looked at online players of varying sizes across sectors from fashion to electronic goods. Overall, a significant and surprisingly high figure of 63% of websites were found to be non-compliant with the CRD.

The main findings of non-compliance related to:

  • missing, unclear or incomprehensible information on consumer cancellation rights (e.g. the cancellation period was not specified, or no model cancellation form was provided);
  • incomplete or unclear details about the trader;
  • failure to provide consumers with a clear and prominent price before order confirmation; and
  • unclear information on product or service characteristics.

The Outcome

After the sweep, local authorities, or the CPC, contacted the non-compliant website owners. At the end of this enforcement phase, 88% of sites became compliant, but proceedings are continuing for the 83 websites which did not. This therefore represents possibly the largest scale enforcement of the CRD to date, and something that’s not been seen before.

So what?

Clearly, all website owners need to be much more aware of the CRD and other consumer law compliance obligations, as enforcement on this scale is unprecedented. Website owners need to audit current practices and amend any non-compliant practices as soon as possible.

Over and above that, this sweep is also reflective of far more onerous online consumer enforcement that we’ve been seeing across the EU. The landscape is changing, and the risk profile for non-compliant consumer facing businesses is increasing.

We’ve set out below some other recent enforcement activity that we’ve seen across the EU:

EU Jurisdiction Short summary
  • General investigation into e-commerce sites (October 2014 – February 2015, results published on 20 October 2016). 63% of websites committed minor infringements (missing standard cancellation form, no mention of the company registration number). 7 websites were referred to the public prosecutor and risk a penalty of up to EUR 25.000.
  • Investigation linked to the recent sweep day. 59 websites investigated, 27 of which infringed commercial and/or legal guarantee information duties. 9 websites were referred to the public prosecutor risking a penalty of up to EUR 25.000.
  • Online sales of food supplements – 78 websites have been investigated and 80% of them were using unauthorised health claims. This investigation led to 56 warnings, 55 administrative measures and 15 litigation proceedings.
  • Sale of low-cost airline tickets – the purpose of the investigation was to ensure that price and general terms and conditions information was clear and detailed. The investigation revealed that the information was unfair in 70% of the cases (9 companies out of 13). The investigation led to 5 warnings, 1 injunction and 1 certificate of offense.
  • February 2016 – OLG Cologne (Higher Regional Court) ruled that Amazon’s order button for the Prime service labelled with “test now for free – later fee based” (as translated) is insufficient  with regard to payment obligations.
  • September 2016 – the consumer advice centre of North Rhine-Westphalia issued a written warning to Amazon as there was no information on “Amazon Dash Buttons” as to the fact that pushing the button means you are making a chargeable order, and there is no information about the price or the specific product at the point of pushing the button.
  • March 2016 – the Italian Competition and Market Authority (AGCM) fined an online store for incomplete CRD pre-contractual information to consumers, as well as for an infringement of the legal guarantee of conformity – combined fines of EUR 300.000
  • July 2016 – the AGCM fined an online store for incomplete CRD pre-contractual information to consumers – combined fines of EUR 100.000
  • July 2016 – the AGCM fined an online store for misleading commercial practice – combined fines of EUR 100.00.
The Netherlands
  • September 2016 – ACM fined four online stores for breaching refund rights – combined fines of EUR 500,000
  • October 2016 –  ACM fined five online stores for breaching order-cancellation rules – combined fines of EUR 590,000

So what do I need to do?

If you are a consumer-facing online transactional business, you need to ensure your websites are fully compliant with all relevant regulation. This regulation can be diverse, encompassing consumer, e-commerce, privacy and payments requirements.

OC’s digital commerce lawyers offer a full website audit check to ensure that all regulatory compliance requirements are being met. This is increasingly important in today’s regulatory environment. These audits can be as wide ranging or specific as is required, and if you would like to discuss any aspects of these please get in touch.

[This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.]