Under the EU's new legislative package to update and modernise consumer law, businesses must prepare for stricter punishments for consumer law breaches, including huge GDPR-style fines. The pressure on businesses to ensure they are consumer-law compliant will be greater than ever. We have been providing updates and summaries to help guide businesses through the progress of the legislative process. Our latest summary of the changes can be found here.
In order to face the upcoming challenges, businesses must understand the ambition of the legislative reform. We are therefore taking a step back to look at the basic components of the New Deal for Consumers and the significance it will have upon businesses.
What is this new deal?
The "New Deal for Consumers" is the name given to a package of EU legislation intended to enhance and modernise the European Union's consumer protection regime. In 2017, the European Commission carried out a fitness check of six pieces of legislation to evaluate whether the EU's legislative framework, which set standards for consumer protection and marketing across the Union, was "fit for purpose".
The six directives were the:
- Unfair Commercial Practices Directive;
- Misleading and Comparative Advertising Directive;
- Unfair Contract Terms Directive;
- Price Indication Directive;
- Sales and Guarantee Directive; and
- Injunctions Directive.
The directives were assessed to check effectiveness, efficiency, relevance, coherence, and the added value provided by the EU's action.
What prompted these checks?
The fitness check was brought on by recent high-profile events such as the Volkswagen emissions scandal, or "Dieselgate", and controversy around unfair terms in mortgage contracts, which affected consumers across the EU. These developments prompted debate over whether the EU had mechanisms that were strong enough to enforce consumer protection rules and provide redress to harmed consumers.
The Commission concluded that the EU's consumer protection rules were fit for purpose overall, but some areas needed to be updated and improved. This modernisation effort, known as the New Deal for Consumers, builds on existing EU consumer policy legislation and introduces new rules to reflect changing markets and business practices, along with revised enforcement and redress tools.
What is the Omnibus Directive?
The Omnibus Directive is the name given to the "Directive on better enforcement and modernisation of EU consumer protection", which was adopted by the European Parliament in November 2019. This crucial piece of legislation follows the conclusion of the fitness check and updates four of the directives, including:
- The Unfair Commercial Practices Directive (2005/29/EC), which was implemented in the UK by the Consumer Protection from Unfair Trading Regulations 2008.
- The Consumer Rights Directive (2011/83/EU), which for the most part was implemented in the UK by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations) 2013.
- The Unfair Contract Terms Directive (1993/13/EEC). This was implemented in the UK by Part 2 of the Consumer Rights Act 2015.
- The Price Indications Directive (1998/6/EU)implemented in the UK by the Price Marking Order 2004.
At a high level, the standards set by the EU have been raised, to harmonise the approaches taken by EU Member States. Alongside the headline issue of the GDPR-style fines for the most serious infringements, there are also new transparency obligations on businesses and consumer remedies for unfair commercial practices.
And after Brexit?
Since the UK’s transition period will have expired before November 2021, the UK will not be bound to implement the Omnibus Directive under the existing withdrawal agreement. However, ongoing regulatory alignment in this area may form part of any trade agreement.
In any event, UK traders selling to EU consumers will have to comply with the updated consumer laws, regardless of the UK’s status or the trader’s location. This means it is imperative to understand the amendments, and start preparations well in advance, to avoid a GDPR-style panic to comply with the new requirements.
What else is coming?
The Omnibus Directive is one of two directives. The second directive proposes to modernise the Injunctions Directive, and the headline issue will be the right of consumer groups to bring "class action" for compensation. A compromise agreement was reached on 22 June 2020 which states that a qualified entity such as a public body or charity will be able to bring representative actions on behalf of classes of consumers on all aspects of consumer law breaches. Once formally published, Member States will have 24 months to transpose the directive into domestic law, and a further six months to apply it.
The new measures are designed to provide better enforcement options for consumers who might be deterred from taking action against infringements of their rights or Union law, due to high litigation costs or low value individual claims. We will continue to report on developments as it progresses to adoption as part of our "New Deal" series of insights. For updates please subscribe to our podcast series or check Osborne Clarke's dedicated New Deal for Consumers page.