Background

Last week, EU Parliament approved a proposal for a new directive on the sale of goods (New SGD). The New SGD would enhance European consumers’ contractual rights to remedies if products do not perform properly and repeal the existing Consumer Sales and Guarantees Directive 1999/44/EC (“CSGD”).

The New SGD will apply to both the online and offline sale of goods and will allow consumers to:

  1. have defective products repaired or replaced free of charge; or
  1. obtain a price reduction or contract termination and refund if issues remain after repair, repair is not carried out within a reasonable period of time or the defect is serious; and
  1. obtain a remedy for two years (without having to establish the product was faulty if they claim within year one).

Comment

The New SGD is an attempt to harmonise sale of goods legislation across the Union, and to make the regime ‘fit for purpose’ for another generation. Existing EU sale of goods legislation is a hodgepodge of national consumer protection laws. These vary by country, with only minimum EU requirements in place under CSGD, such as a minimum six month legal guarantee period. The New SGD extends this period and reverses the burden of proof to allow all EU consumers to seek a remedy up to two years after delivery, without having to prove the fault existed at delivery if they do so within the first year. For goods with digital elements with continuous supply of digital content, both liability and the burden of proof rest with the seller for two years. Member States can opt to extend these periods under national law.

The New SGD will enter into force alongside the Digital Content Directive (which we blogged about previously) and is another piece in the Digital Single Market puzzle, aimed at facilitating interconnectedness and digital transformation across the Union. The New SGD targets goods with digital elements and entitles consumers to software updates for a minimum period. In a world of interoperable and constantly changing products, EU legislators see updates as key to ensure products continue to function in the same way and remain safe. For this reason, the New SGD will require consumers to be provided with all necessary updates to keep products in conformity, meaning a lack of updates, or defective or incomplete updates, may render goods non-conformant. This duty extends to necessary updates, not upgrades, and usually for a period of time “which the consumer may reasonably expect given the type and purpose of the goods” and the “circumstances and nature of the contract”. In the case of goods with digital elements with continuous supply of digital content, this is a minimum of two years. For all other goods, sellers are left with the uncertainty of determining what the consumer may reasonably expect.

The EU claims that the New SGD will help to “level the playing field” for small businesses selling online to ensure they get “their fair share” alongside “e-commerce giants”. However, despite the rhetoric, it seems unlikely that these rules will be particularly helpful for small European businesses, or significantly alter the landscape when it comes to online consumer purchasing. In fact, extending the minimum legal guarantee and placing the burden on the trader to establish that goods were not faulty is likely to increase the cost and burden for small businesses. On the other hand, properly implemented, the New SGD should increase the number of safe products on the market, which is to the benefit of all players. Undoubtedly, though, it is the EU consumer who takes home the biggest prize here.

What’s next?

The New SGD will be submitted to EU Ministers for formal approval. After entry into force, there is a two and a half year transposition period.

More information:

The procedural file can be found here.