The Omnibus Directive – Harmonising EU Consumer Rights (Part 1)25 November 2021
The new directive on consumer protection, also known as the “Omnibus Directive”, brings many quality-of-life changes for consumers, alongside several new obligations towards traders and online marketplaces. For the former, the Omnibus Directive expands consumers’ rights further into the digital world, thus ensuring that online customers benefit from similar rights to those purchasing goods or using services offline. In what regards the latter, the new directive introduces additional requirements, amongst others, on transparency, double standards and market manipulation.
This article is structured in two parts. In this first part, we are going to break down the Omnibus Directive, by focusing especially on the most impactful changes it brings, e.g., aligning the regime of physical and digital goods & services, limiting traders’ market manipulation, combating double standards between traders’ products and improving transparency for online marketplaces and consumer reviews.
In the second part, we shall talk about the other important changes brought by the Directive, including the way it shapes the relationship between the traders and consumers and how it will be enforced, before wrapping things up and showcasing the main implications for traders and online marketplaces alike.
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This informal designation is the short name used for Directive (EU) 2019/2161 regarding the better enforcement and modernisation of Union consumer protection rules (the “Omnibus Directive” or the “Directive”), adopted by the European Parliament on 27 November 2019. The Omnibus Directive amends four other key directives (hereinafter referred to as the “EU Consumer Protection Framework”):
► Directive 2005/29/EC on Unfair B2C Commercial Practices;
► Directive 2011/83/EU regarding Consumer Rights;
► Directive 93/13/EEC on Unfair Terms in Consumer Contracts;
► Directive 98/6/EC on Consumer Protection in the Indication of the Prices of Products Offered to Consumers.
The Directive entered into force on 7 January 2020 and the Member States have until 28 November 2021 to transpose its provisions into their national laws. After this, the local legislation implementing the Directive will become applicable starting 28 May 2022.
The main scopes of the Directive are to align the application of consumer contract rules across the EU, enhance transparency in the online marketplace, apply sanctions in a consistent manner, as well as improve consumers’ rights.
As we shall see in the following, the Omnibus Directive appears to be quite future-proof, this piece of legislation being drafted in a technology-agnostic manner, so that tomorrow’s consumers shall continue to benefit from this new harmonised approach, thus reducing the risks of lagging behind cutting edge technological advancements.
Reconciling physical & digital goods and services
Probably the most important addition of the Omnibus Directive is the expansion of the EU Consumer Protection Framework’s scope, by covering digital content and services, alongside physical goods and services. This is all aimed at aligning the legal framework, so that consumers will be protected in a similar manner, regardless of whether their purchases are made online or offline, and irrespective of whether those goods or services are digital or not. The Directive brings new definitions (e.g., online marketplace, ranking) and revises some of the current definitions (e.g., digital service, product, sales contract).
In many cases, digital content and services are provided in exchange for the consumer’s personal data (e.g., offering free access to a limited number of online articles or posts, in exchange for the user submitting its email address). Given that in such a scenario, there is a rather clear quid pro quo taking place (i.e., the consumer receives access to digital content or service, whilst the trader collects personal data that generally stores valuable information, which in turn can be used to further enhance the trader’s commercial operations), the Omnibus Directive will now regard these transactions as payments. This means that these “digital consumers” will start to benefit from additional consumer rights (e.g., the right to receive pre-contractual information; the right of withdrawal within fourteen days). In other words, in such cases, personal data shall essentially have a similar regime with fiat money or e-currencies. However, this will not be applicable in cases where personal data are provided and exclusively processed for the purpose of supplying digital content, which is not provided on a tangible medium, or following a legal requirement incumbent on the trader.
Limiting traders’ market manipulation
How many times have you seen outlandish advertisements proclaiming huge discounts (e.g., “60% off – only today”), whilst showcasing various products with excessive initial (not discounted) pricing that only reach the normal realm after the discounts are applied? In the modern digital day, such practices have become rather common, affecting many consumers who are less diligent and more gullible.
Fortunately, under the Omnibus Directive, consumers will benefit from better protection against such price manipulations. When the trader advertises price reductions, the previous price needs to be the lowest price charged by the trader for a period of at least thirty days before the discount has been made public. Put differently, traders are obliged to maintain the primary (reference) price for at least thirty days before discounting that said price. The intention of the European legislator here is to disincentivise the practice of artificially increasing prices in order to give the impression of valuable discounts, whereby, in reality, the reduced prices are the actual “real” or “normal” ones. The Directive provides an exception to this rule, allowing the Members States to set different rules for goods that are liable to deteriorate or expire rapidly.
Combating double standards between traders’ products
It is hard to argue against the fact that many products vary quite substantially between the different Member States. In most cases, one can actually “taste” those differences (not the rainbow, though), by comparing apparently identical products sold in distinct geographic markets.
This may well start to be a thing of the past under the new Directive. Traders are now obliged to make sure that products, which are marketed across the various Member States in identical ways or which are at least implied to be identical (such as those bearing the same brand), are not manufactured with significantly different composition or characteristics. This requirement may be avoided as long as the traders can justify the differences between the products, based on legitimate and objective factors. However, making a strong case for such justifications is, in many cases, not an easy feat.
Improved transparency for marketplaces and consumer reviews
To ensure adequate transparency towards consumers, online marketplaces must specify whether the third-party selling products therein is a trader or not, based on a declaration of that third party made to the provider of the online marketplace, without any other specific verification requirements. If the third party is a professional trader, then consumer protection rules will apply; otherwise, if the third party is a private individual, the buyer will not benefit from the general consumer protection legislation.
This is another good addition brought by the Directive. Consumers that buy products from online marketplaces will be better informed about the sellers and will know exactly whether they will be protected as consumers or not, as well as how responsibility is allocated for those products (i.e., between the online marketplace and the seller). Member States may also come with further requirements on these matters.
Additionally, the Omnibus Directive also focuses on consumer reviews. Traders are required to inform consumers whether they provide consumer reviews of products, what procedures are in place to ensure that these reviews come from consumers who have actually used or purchased the products, as well as how the trader verifies those reviews (e.g., if reviews are published regardless of their positive or negative feedback on the products; whether the reviews have been sponsored or influenced by a contractual relationship with a trader, etc.). The Directive goes a step further by introducing a new unfair commercial practice, i.e., misleading consumers via implying that the reviews were submitted by consumers who actually used or purchased those products when no reasonable or proportionate measures were taken to ensure they originate from such consumers.
Another important requisite is the obligation of online marketplaces to clearly disclose the main parameters (e.g., price, reviews, relevance, etc.) determining the ranking of products presented to the consumer as a result of a search query on the website, as well as the relative importance of each of those parameters. This is not applicable to providers of online search engines, but only to online marketplaces’ websites.