Introduction and Overview
The year 2022 is one of major changes to consumer protection laws in Germany and the EU, namely:
- Changes in connection with digital products and corresponding new provisions for the sale of consumer goods took effect on 1 January 2022 (see our earlier Reed Smith Client Alert Part I).
- New consumer protection rules regarding automatic renewal and notice periods took effect in March 2022.
- Requirements regarding termination buttons will come into force on 1 July 2022 (see our earlier Reed Smith Client Alert Part II).
On January 7, 2020, the Directive (EU) 2019/2161 on better enforcement and modernization of EU consumer protection laws entered into force (the ‘Omnibus Directive’). This Omnibus Directive adapts the following four directives:
- The Consumer Rights Directive (2011/83/EU);
- The Unfair Commercial Practices Directive (2005/29/EC);
- The Unfair Contract Terms Directive (93/13/EEC); and
- The Price Indication Directive (98/6/EC).
The amendments by the Omnibus Directive had to be implemented into national law by 28 November 2021. Member States’ implementing legislation must enter into force by 28 May 2022. Germany does so “en point”.
The individual amendments to German Law
The regulations in German law implementing the Omnibus Directive include, in particular, the changes detailed below.
Changes to the German Civil Code (Bürgerliches Gesetzbuch) and the Introductory Act to the Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuche) by adjusting the Consumer Law Directive
Expanded scope of the Directive on Consumer Laws
Information obligations and withdrawal rights for consumers, explained in more detail below, will in future also apply to agreements (i) for digital content and (ii) digital services for which the consumer does not “pay” with money but with personal data (Sec. 312 (1a), 327 (3) German Civil Code). Online sellers will therefore have to inform consumers before concluding an agreement that the service is not offered for free, but that the consumer pays for it with data.
New information obligations for sellers
- In the case of long-distance agreements (especially over the internet or via other remote technology), the seller must, from now on, inform the consumer in accordance with Art. 246a, Introductory Act to the Civil Code, if a price has been personalized based on automated decision-making.
- New special information obligations for online marketplaces are being introduced (Sec. 312k German Civil Code): the consumer must be provided with information on what parameters have been used to rank search results (e.g. price, rating, purchase history, or a combination of the same), and the relative importance of each of the parameters used.
Changes to the withdrawal right for agreements for services and digital Content
As part of the Omnibus Directive, the legislator also introduced new exceptions to the withdrawal right relating to consumer agreements for the provision of services or digital content. With regard to expiry conditions for withdrawal rights, the German Civil Code will differentiate between agreements with a payment obligation, and agreements in the context of which the consumer provides personal data in exchange.
Changes to the withdrawal right for service agreements
In case of service agreements for which the consumer pays with data, the right of withdrawal now expires with the completed provision of service.
Changes to the withdrawal right for digital content not provided on a durable medium
For digital content not delivered on a durable medium (e.g. CD, USB) and for which the consumer provides personal data in exchange, the withdrawal right expires at the beginning of the performance of the agreement.
In case the consumer has to pay for the digital content, the withdrawal right for digital content expires under the same requirements as for service agreements, namely if:
- the consumer explicitly agrees that the seller begins to fulfil the contract before the expiration of the withdrawal period;
- the consumer confirms the knowledge that with the beginning of the fulfilment of the agreement his right of withdrawal expires; and,
- as an additional requirement for digital content, the seller provides the consumer with a confirmation of the consumer’s consent according to Sec. 312f German Civil Code.
Amendments to the model cancellation form
In future, online sellers will have to provide a telephone number and an e-mail address in their cancellation policy, while a fax number is no longer required. Since the model cancellation policy in Annex 1 to the Introductory Act to the Civil Code has been revised as well, online sellers should be aware of these changes and replace their cancellation policy. Violations may result in an extended or non-terminated cancellation period.
German Act Against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb)
Due to the new Omnibus Directive, adjustments have also been made in the German Act against Unfair Competition, to extend transparency obligations for online sellers.
Specific rules on influencer marketing
The German legislator has provided more clarity on the obligation to label a posting as advertising for influencers: influencers do not need to label a posting if it does not have a commercial purpose (Sec. 5a (IV) German Act against Unfair Competition). A commercial purpose can be assumed if the influencer receives remuneration or similar consideration for this act, such as payments, press trips, equipment or products.
As the German Act against unfair Competition generally presumes that a consideration was received, in future, influencers will have to demonstrate they have not been promised nor have they received any consideration, should a legal dispute arise.
New information obligations according to the German Act against Unfair Competition
There are more newly-introduced information obligations for online sellers under Sec. 5b of the German Act against Unfair Competition:
- Rankings: If an online seller offers consumers the opportunity to search for goods or services offered by different sellers or by other consumers, the seller that offers this opportunity must provide information about the main parameters used to determine the ranking and their relative importance. This information must be directly and easily accessible from the display of the search results.
- Customer Reviews: Furthermore, an online seller must inform whether and how it is ensured that only consumers who have actually purchased or used the reviewed product can write customer reviews. Steps to ensure that reviews originate from such consumers could include technical means to verify the reliability of the person posting a review, e.g. by requesting information to verify that the consumer has actually used or purchased the product. This only applies to reviews published by the seller, and not reviews to which the seller merely refers.
- Status of the seller: In future, operators of online marketplaces (legally defined in Sec 2 No. 6 German Act against Unfair Competition, revised version) will have to provide information on whether the providers of goods or services on their marketplace are entrepreneurs or consumers according to their own declaration.
Another new provision will give affected consumers the possibility to bring an individual action for damages (Sec. 9 (2) German Act against Unfair Competition). Previously, the German Act against Unfair Competition did not provide for such direct claims by customers and consumers. Instead, only competitors or associations could claim damages.
Consumers will only be able to claim damages if they have been induced by the relevant intentional or negligent unlawful commercial act to make a commercial decision they would not otherwise have made, and they have suffered damage as a result.
The legislator has added a completely new element to the German Act against Unfair Competition, according to which fines of EUR 50.000 or up to 4% of annual turnover can be imposed if an unfair commercial act has been committed that infringes consumer interests (Sec. 19 (1)).
Fines can only be imposed on ‘widespread infringements’ and ‘widespread infringements with a Union dimension’. A ’widespread infringement’ requires a EU cross-border act, for example a violation of EU law protecting the collective interests of consumers in at least three (3) EU member states.
The practical significance of the new laws on fines is limited, as fines can only be enforced in the context of a ‘coordinated enforcement action’, meaning that there must be cooperation between the national authorities of at least two EU Member States.
Price Indication Directive
The Omnibus Directive also provides for an adaptation of the Price Indication Directive (98/6/EC), resulting in corresponding amendments to the Price Indication Ordinance (‘PAngV’).
For example, in order to make it easier for consumers to understand price reductions, the previous price must be displayed alongside the discounted price whenever a reduction is announced. This is the lowest price applied by the trader within the last 30 days before reducing the price.
Recommendations and what to do now
As the upcoming changes in the area of consumer protection are highly practice-relevant, we recommend that all businesses engaged in selling online and providing digital content or services, as well as operators of e-marketplaces, start their preparations for the new rules.
Key priority areas for attention:
- General terms and conditions as well as withdrawal policies should be reviewed and updated.
- New transparency obligations need to be implemented, also by means of new technical solutions.
- With regard to new rules on sanctions and fines, businesses should strengthen their compliance mechanisms and create even clearer responsibilities within their own structure.
- Online sellers should verify their consumer rating process and rethink their pricing process.