Regulatory Outlook | Consumer Protection | January 2021

Written on 13 Jan 2021

Current issues

EU New Deal for Consumers

The EU’s ‘New Deal for Consumers’ is an overhaul of consumer law, giving it more teeth against non-compliant businesses, and bringing EU legislation (some of which was passed in the 90s) up to date for modern, digital markets.

One of the most significant changes brought by the Consumer Omnibus Directive (part of the New Deal) is the introduction of ‘GDPR-inspired’ fines, meaning that national regulators may impose fines of not less than 4% of a trader’s annual turnover (in the affected EU Member State(s)) in the event of ‘widespread’ consumer law infringements. This, combined with the proposed collective action enforcement mechanism, means that consumer law compliance is set to become a board level issue.

The reforms will not form part of UK law but will apply to businesses selling to consumers in the EU. The strengthening of the consumer protection regime means that it is all the more important that companies look to achieve compliance by design for new products and services. Now is also a good time to start reviewing compliance for existing products and services – to avoid scrambling to achieve compliance in advance of the deadline as was often the case with GDPR.

Member States have until 28 November 2021 to adopt and publish their implementing legislation, so businesses will have more information on the exact scope of the changes by then. The laws will then come into effect on 28 May 2022.

In Focus: Regulation after Brexit

What do UK businesses trading in the EU need to do now that the Brexit transition period has ended?

Consumer-facing businesses need to understand the changes that are coming into effect and make sure they comply with them. This will mean continuing to follow and comply with EU consumer protection regulations, such as the New Deal for Consumers discussed above, as well as UK law.

This includes changes in UK law such as the following:

  • The loss of the country-of-origin regime from the E-Commerce Directive and the UK implementation, the E-Commerce Regulations as implemented by the Electronic Commerce (Amendment etc.) (EU Exit) Regulations 2019. This means that UK-based online businesses will need to comply with the laws in each ‘country of destination’ in relation to their online activities in the fields of law covered by the legislation.
  • The Geo-blocking Regulation (Revocation) (EU Exit) Regulations 2019. These Regulations revoke the EU Geo-Blocking Regulation, allowing a UK business to geoblock EU customers when operating in the UK. However, the EU Geo-Blocking Regulation will still apply to UK businesses when supplying goods and services into the EU, meaning in that scenario UK businesses would not be able to geo-block / discriminate between customers from different Member States.
  • The Consumer Protection (Amendment etc.) (EU Exit) Regulations 2018 which amongst other things will end the operation in the UK of the EU Online Dispute Resolution Regulation. This means UK-based businesses will no longer be obliged to offer access to cross-border alternative dispute
    resolution procedures, nor link to the EU’s online dispute resolution platform.

What do non-UK businesses trading in the UK need to do now that the transition period has ended?

Businesses not located in the UK will need to keep a close eye on local legislation, such as that discussed above, to determine whether there are any changes which impact their dealings with the UK.

In addition, they should also note the changes to the Geoblocking Regulation which effectively allows EU-based companies to prevent UK citizens accessing their website.

Which incoming EU laws should UK businesses be aware of, and is the UK likely to implement similar rules?

As discussed above, the New Deal for Consumers represents a major overhaul of EU consumer protection, bringing in GDPR-level fines for breaches of consumer protection. The Injunctions Directive will also make it easier for consumer groups to bring class action-style claims for compensation. As consumer protection is not one of the ‘level playing field’ areas set out under the EU-UK Trade and Cooperation Agreement, the UK is under no obligation to maintain regulatory
alignment with the EU in this area. While previous UK governments have stressed that the UK would maintain high consumer protection standards, it remains to be seen whether the current government will seek to implement similar reforms to the EU New Deal for Consumers.

Are there any other areas where the UK regime might start to diverge from that of the EU? If so, what should businesses do to ensure they are prepared?

Much of the UK’s consumer law is derived from EU legislation. While that legislation remains part of UK law, as ‘retained EU law,’ the UK is free to amend those rules to reflect changing consumer behaviours and government policy priorities.

It is not clear at this point to what extent the UK will choose to do so, and thereby to diverge from EU rules. What is clear is that businesses serving consumers in both the UK and EU markets will need to ensure they remain compliant with both consumer protection regimes.

Dates for the diary

28 November 2021

Deadline for EU Member States to implement Omnibus Directive.