The Omnibus Directive – the new way to enhance protection of EU consumers

In recent years the European Union has issued a few initiatives which aim is to adjust current legislation to changes on the market and development of the digital world. 

One of them is the New Deal for Consumers which went into effect on 11 April 2018 and its purpose is to enhance the protection of European citizens – as the EU noticed the remaining gaps in national laws regarding effective and proportionate penalties to deter and sanction intra-Union infringements and insufficient model of the individual remedies for consumers. The part of the New Deal for Consumers is the Directive 2019/2161[1] known broadly as the Omnibus Directive or “Enforcement and Modernization Directive” that came into effect on 7 January 2020. It will bring changes to four consumer protection directives:

• The Unfair Commercial Practices Directive (2005/29/EC)
• The Unfair Contract Terms Directive (93/13/EEC)
• The Consumer Rights Directive (2011/83/EU)
• The Price Indications Directive (98/6/EC)

EU member states were obliged to implement the Omnibus Directive (hereinafter called also as “the Directive”) into their national legislation by 28 November 2021 and to bring it into force until 28 May 2022. The work on its implementation into Polish law is currently in the Sejm.

The Omnibus Directive - main changes

The Omnibus Directive will strengthen the consumer rights through modernization of the EU consumer protection rules such as enhanced enforcement measures and increased transparency requirements, but simultaneously will impose additional obligations on the entrepreneurs (in the Directive called as “trader”) conducting online business (especially B2C transactions) and offering digital services in exchange of personal data instead of the money as the payment (called also as “free services”). It will widen the scope of the current consumer protection framework to digital goods, content and services. Also for the first time EU consumer protection rights will apply to free services. Therefore the Directive will have the biggest impact on the traders, online traders and marketplace platforms from the sectors such as sales and service market and e-commerce. The abovementioned entities will be obliged to (we list only the most prominent obligations below):

1. inform about the prior price in case of price reduction;

2. check whether the reviews actually come from consumers of the purchased/used the product/service. If a trader provides access to consumer reviews of products there should be information about whether and how the trader ensures that the published reviews originate from consumers who have used or purchased the product;

3. apply regulations of the GDPR and consumer protection rights to contracts for the provision of digital content or digital services without the consumer paying a specific monetary amount, but in exchange for their personal data;

4. inform if the price presented is personalised on the basis of automated decision-making and profiling or not;

5. inform whether the third party offering the goods, services or digital content through the online marketplace is a trader or not, on the basis of the declaration of that third party to the provider of the marketplace. If the third party is not a trader there is an obligation to inform that the consumer rights stemming from consumer protection law do not apply to the contract.

In accordance with the abovementioned requirements entities will be obliged to adapt their terms and conditions and similar documentation such as offers and information available in online stores. Especially, on the pre-contractual stage consumers must be properly informed about their rights and how they can be exercised. For example this includes the information regarding the right of withdrawal, to make a complaint or to terminate the agreement.

The Omnibus Directive - sanctions

Noncompliance any of the obligations stemming from the Omnibus Directive may result in substantial fines. The Omnibus Directive establishes a system of penalties similar to the one introduced in GDPR. The Directive introduces fines up to 4% of annual turnover of the entity in the Member State (or Member States) where the breach took place, or up to at least EUR 2 million in case where information on turnover is not available. Member States are also able to introduce even higher fines in its own legislation when they implement the Directive.

The administrative fine will of course be graded, as it is now the case with fines that are imposed based on the GDPR. The following criteria will be taken into consideration in case of the noncompliance:

• the nature, gravity, scale and duration of the infringement;
• whether there has been any action to mitigate damage;
• any previous violations, including fines in other EU countries;
• any financial gains or losses by the seller from infringements of consumer law;
• whether the trader has any previous allegations made against them.

Moreover, individual consumers have a right to get a direct compensation for unfair commercial practices of the entities. National authorities of all Member States can work together where a cross-border infringement has occurred.

[1] Directive (EU) 2019/2161 of the European Parliament and of the Council of 27 November 2019 amending Council Directive 93/13/EEC and Directives 98/6/EC, 2005/29/EC and 2011/83/EU of the European Parliament and of the Council as regards the better enforcement and modernisation of Union consumer protection rules.