The New Deal for Consumers – the GDPR of Consumer Protection?

Authors: Jessica Tressfeldt, Anna Räty, Sarita Schröder and Liisa Vaaraniemi

The New Deal for Consumers – the GDPR of Consumer Protection?

On 8 November 2019, the European Parliament and the Council adopted a directive on the better enforcement and modernisation of EU consumer protection rules. The directive is a part of the so-called ‘New Deal for Consumers’ legislative package proposed by the European Commission in spring 2018. The directive, which the Member States will have 24 months to implement into their national legislation, will bring about many significant changes especially for businesses trading online. The most notable updates are briefly presented below.

• Transparency requirements for online marketplaces
  The online market has developed, resulting in extensive use of online intermediation services (marketplaces), where the identity of the actual seller may not always be clear to the consumer. This has been identified as an issue, because consumer protection rules do not apply to consumer-to-consumer relationships, and a consumer could unknowingly purchase products from another private individual through a marketplace. The new legislation will require transparency with regard to whom the consumer is entering into an agreement with. Furthermore, the marketplace will be obligated to inform the consumer if the marketplace itself is responsible for the delivery and returns, and who the consumer should turn to should any issues arise.

• Personalised pricing
  Transparency will be required with respect to personalised pricing, too. The new legislation will mandate that consumers be clearly informed when the price presented to them is based on personalisation on the basis of automated decision-making. It should also be noted that the GDPR restricts the use of automated decision-making, which may also impact the use of personalised pricing.

• Criteria for ranking offers
  Online marketplaces and price comparison sites rank their offers based on criteria that may be unknown to the consumer. The new legislation will require platforms to inform consumers about the main criteria based on which the consumer receives the response to their search query, including whether the search results are based on payments received from traders.

• Consumer protection for “free” services
  Data is of utmost value for companies. That is why the currency for the use of online services such as social media, cloud services, and email services is often data instead of a monetary payment. To strengthen consumer protection for such “free” services, the new legislation will ensure that the 14-day withdrawal right applicable to digital services will also apply to such “free” services.

• Clear information on price reductions
  The new legislation will require that any announcement of a price reduction must indicate the prior price applied by the trader for a determined period of time prior to the application of the price reduction. The prior price means the lowest price applied by the trader during a period of time not shorter than 30 days prior to the application of the price reduction. This will clarify the current rules on price reductions and may help tackle issues identified with misleading price information.

• New penalties for violations
  In order to make consumer protection more effective, the new legislation will grant national authorities the right to impose a fine of up to 4% of the trader’s turnover for violations that are widespread and affect consumers in several Member States. This follows the same trend as seen with respect to data protection, where the GDPR introduced similar fines for violations. This has proved successful, as many businesses have made substantial investments to ensure their compliance with data protection legislation. It can be expected that businesses will now need to turn their attention to enhancing their compliance with consumer protection legislation.

The directive on the better enforcement and modernisation of EU consumer protection rules is only one of the two directives making up the New Deal for Consumers legislative package. The second directive on representative actions for the protection of the collective interests of consumers would empower certain qualified entities, such as consumer organisations, to launch representative actions seeking injunctions and collective redress (e.g. compensation, replacement, or repair) on behalf of a group of consumers. This directive is still making its way through the legislative process.

Our consumer law experts in Helsinki and Stockholm are on hand to provide further information on the new legislation, as well as assistance in ensuring compliance with EU and national consumer protection rules.