On 11 April 2018, the European Commission released the so-called “New Deal for Consumers” initiative with the aim of further developing EU consumer protection rules, which are already ranked among the strictest in the world.
The “package” (as the name goes when several independent legal texts are intended to be negotiated together) includes two legislative proposals: a Directive on better enforcement and modernization of EU consumer protection rules as well as a Directive on representative actions for the protection of the collective interests of consumers.
In terms of modernizing consumer rights, the Commission seeks to improve transparency over the main parameters determining the ranking of the results of users’ queries. Marketplaces, comparison tools, app stores or search engines will be requested to make it clear when third parties pay to be included in the list of search results (“paid inclusion”) or for receiving higher ranking (“paid placements”). Moreover, the new rules introduce a most important change with long term consequences for companies in the digital environment. Up to now, the very definition of consumer was essentially linked to the existence of a money payment made in exchange of goods or services. These changes will extend the concept of consumer, and with that the scope of the existing consumer protection rules, to users who receive digital services (e.g. cloud storage, webmail and social media) in exchange of access to their personal data, even when there is no currency payment at all.
The proposed changes also intend to harmonize Member States’ penalties for “widespread infringements”, defined as those harming consumer’s interests across various Member States. In those cases, the maximum fine would be at least 4% of the infringing trader’s turnover in the Member States concerned.
As regards representative actions, the Commission seeks to introduce a EU-wide collective redress mechanism against illegal practices affecting a large number of consumers. Under the proposal, only nonprofit “qualified entities” designated by Member States will be authorized to bring actions before courts or administrative authorities.
Those entities will be enabled to apply for a provisional or definitive injunction order to stop or prohibit a harmful practice; and subsequently to seek a redress order which can obligate the trader to provide consumers with compensation, repair, replacement, price reduction, contract termination or reimbursement. To make a clear distinction with the U.S. system, redress cannot have punitive effect and will be limited to the actual loss or damage suffered by the consumers.
The proposals will be now discussed within the European Parliament and the Council of the EU. National provisions transposing the new rules will become applicable two years after the entry into force of the Directives.