Sweeping reforms proposed to EU product regulation
Published on 1st Jul 2021
New product safety regulation proposed by European Commission will cover online marketplaces for first time
Between June and October 2020, the European Commission carried out a consultation on consumer policy which included a refit review of the General Product Safety Directive (GPSD). The Commission has now published its announcement of a proposed General Product Safety Regulation (GPSR), which promises to significantly shake up product safety law and require a number of new obligations for anyone involved in the manufacture, supply and sale of products including, for the first time, online market places. The new regulation will, in principle, be consistent across all EU member states and, once negotiated by the European Council and Parliament, will have direct effect with a six-month transition period.
The GPSD sets safety requirements for products which do not benefit from sector specific or "New Approach" directives. Typically these are products that are not CE-marked. However, the GPSD was established in 2001, and being 20 years old, was not written in the context of modern online consumers, with platform marketplaces and international e-commerce retailers selling direct to EU consumers, and did not anticipate concepts such as the Internet of Things, or artificial intelligence.
The GPSR would increase the obligations on businesses operating in product supply chains, meaning additional responsibilities for different economic operators, new traceability information requirements, and a blanket requirement for technical documentation to be produced for every product not just CE-marked products.
In its Evaluation Roadmap, the Commission identified five key issues they aim to tackle through their reform of product safety law. We have set these out below, along with some of the proposed changes in the draft GPSR.
Connected devices and new technology applied to physical products
Problems: Connected products and the application of new technology presents new product safety risks, and can change the way that risks can materialise. For instance, a previously safe product may become unsafe due to insufficient security updates, or a software update which provides new features could fundamentally change the product which was initially placed on the market.
- The definitions of "products", and whether a product is "safe", have been expanded.
- Products now constitute items, whether or not interconnected to other items, and can be "made available" in the context of a service, in addition to simply transferring title or ownership.
- Whether a product is "safe" will be assessed against a broader set of criteria, including by reference to international standards, voluntary schemes, the state of the art and technology, codes of practice, and consumer expectations.
- A safe product is also now intended to be and remain safe for the actual duration of its use, including how it may evolve or change from how it was initially placed on the market through software updates, artificial intelligence, or machine learning.
- For connected devices, the criteria to determine whether the device is safe will include the impact or effect that product has when it is used alongside, or when interconnected with, other products.
Online sales channels
Problems: The Commission regards current online marketplace surveillance as insufficient. New business models, distribution networks and supply chains have developed over the last two decades that were not anticipated when product safety legislation was drafted.
Osborne Clarke has commented on this in detail in our recent response to the UK's Product Safety Review.
- Online marketplaces that facilitate business-to-consumer and consumer-to-consumer distance contracts will be obliged to act with "due care" in relation to product safety.
- New due diligence obligations will be established for online marketplaces, requiring trader names, trademarks and addresses, and traceability information to be collected for all products listed. Additional contact information of responsible persons will have to be provided where manufacturers of products are based outside the EU. However, the marketplace will not have a responsibility to verify the completeness, correctness or accuracy of such information.
- A single point of contact will be provided by online marketplaces for the facilitation of communication of information on product safety issues.
- Some previous voluntary measures that formed part of the Product Safety Pledge have become mandatory. Binding time limits will be introduced for platforms to respond to notifications from market surveillance authorities. For example, platforms will have two working days to act upon an order from a regulator referring to a dangerous product.
Overall market surveillance effectiveness
Problems: Market surveillance is currently too complex and not sufficiently effective. In particular, reliance on voluntary standards is burdensome, and obligations for different members of the supply chain are unclear.
- The definition of a "producer" will be removed, and the roles of "manufacturer, "distributor", "authorised representative", and "importer" will instead be introduced, to align the roles of different members of the supply chain with harmonised legislation.
- New European Standards will be introduced to ensure the safety of products, to simplify and streamline compliance processes where the Commission deems it necessary.
Problems: Current recall processes are insufficient and ineffective, with too many dangerous products remaining with consumers.
- All economic operators, including online marketplaces, will have an obligation to act and/or cooperate to ensure effective product recalls.
- Potential for third countries to participate in the Safety Gate system.
- The regulation will introduce new obligations with regard to disseminating recall notices, and will attempt to standardise the structure and contents of notices.
- When corrective actions are taken, the most sustainable action resulting in the lowest environmental impact should be preferred.
Problems: The Commission is concerned that the legal framework for food-imitating products is applied inconsistently.
Proposed reform: The Food Imitating Products Directive is to be repealed. Instead, the appearance of a product, and whether or not it resembles and is likely to be confused with food, will be a characteristic assessed when considering the safety of a product.
Osborne Clarke comment
The proposed new regulation contains further sweeping reforms which are likely to significantly change the way that both modern and traditional products are produced, supplied and monitored across the EU. The regulation retains the same scope and purpose of the GPSD: to capture products that are not in the scope of specific harmonised legislation. It will raise the requirements of safety and add sophistication in terms of compliance obligations for all non-food products and the businesses involved in manufacturing and supplying them to end users.
In addition to changes in process, the proposed regulation also increases enforcement powers for regulators. This includes increased levels of fines, similar to those that can be levied under the General Data Protection Regulation and the Consumer Omnibus Directive.
New requirements for dissuasive, effective and proportionate penalties for non-compliance are to be introduced by Member States. The maximum amount of these penalties will be at least 4% of the annual turnover of the economic operator or online marketplace in the relevant Member State(s) where the non-compliance occurred.
There is also scope for periodic penalty payments to be applied to compel certain actions to be taken, for example "to allow market surveillance authorities to perform data scraping of online interfaces".
Osborne Clarke will be publishing more detailed analyses and summaries of the changes, please register for Regulatory and Compliance updates to ensure you are among the first to receive these.