UK: Important Recent Developments In EU Consumer Law

Last Updated: 27 September 2016
Article by Mark Smith

On 25 May 2016 the European Commission tabled a package of measures designed to help businesses and consumers buy and sell products and services online with more ease and greater confidence across the European Union ("EU").

The Commission's view is that the full potential of e-commerce in the EU remains untapped. Research indicates that only 15% of EU consumers buy online from another EU country and only 8% of EU companies sell cross-border, chiefly due to the complexity and expense that is often involved.

The package of measures forms part of the EU's Digital Single Market strategy and consists of three elements:

1. Preventing unjustified geoblocking and other forms of discrimination based on nationality, place of residence or place of establishment

A new Regulation has been proposed by the Commission to ensure that customers seeking to buy products and services in another EU country, whether online or in person, are not discriminated against with respect to access to prices, sales conditions or payment conditions.

In the Commission's view widespread discriminatory practices that currently exist in the online world, such as blocking customers from accessing offers available in another country by re-routing them back to a country specific website, have no place in the Single Market.

The principle of non-discrimination already exists under the Services Directive and has been applied by the Commission in services sectors such as car rental and amusement parks, but the proposed Regulation is much wider in scope and offers greater legal certainty with respect to which practices are allowed and which are not, both online and offline.

There would be exceptions to the proposed rules where objective justification could be provided for the discrimination (e.g. because of VAT or certain public interest legal provisions). It is also worth noting that the proposed Regulation does not impose an obligation to deliver across the EU and exempts small businesses from certain provisions.

Furthermore, the proposed Regulation would not apply to certain services already covered by sector-specific legislation or initiatives or which are not easily traded across borders (e.g. transport services, retail financial services and audiovisual services).

2. Making cross-border parcel delivery more affordable and efficient

The Commission also proposed a new Regulation to increase the regulatory oversight of cross-border parcel delivery services and ensure the transparency of their prices.

The intention behind the proposed Regulation is to allow retailers and consumers to benefit from convenient return options and affordable deliveries, even to and from remote regions. It is a response to complaints from consumers and small businesses regarding parcel delivery, particularly expensive delivery charges with respect to cross-border deliveries. These charges are often considerably higher than those for domestic delivery, without a clear correlation to the actual costs incurred.

As well as encouraging competition by introducing greater price transparency, the proposed Regulation would provide national postal regulators with certain data to help them monitor cross-border markets and assess the reasonableness of prices. It would also require non-discriminatory and transparent third-party access to cross-border parcel delivery services and infrastructure in order to further promote competition between service providers.

3. Increasing consumer trust in e-commerce

The Commission's proposed revision of the Consumer Protection Cooperation Regulation will provide national regulators with more powers to better protect consumers.

National regulators would be provided with powers to: (a) check whether websites geo-block consumers or offer after-sales conditions that do no respect EU rules; (b) order the immediate removal of websites hosting scams; and (c) request relevant information from banks and domain registrars to detect the identity of the responsible trader.

In addition, where there is an EU-wide breach of consumer law, the revisions will allow the Commission to coordinate common actions with national regulators to stop the practices in question, ensuring swifter protection of consumers.

The Commission also published updated guidance on unfair commercial practices, which is discussed in more detail below.

Updated guidance on unfair commercial practices

The updated guidance published by the Commission is largely intended to respond to the challenges presented by the online world and clarifies the application of the Unfair Commercial Practices Directive ("UCPD"). The UCPD is the main piece of EU legislation regulating misleading marketing and other unfair practices in business-to-consumer transactions.

The updated guidance is based on case law from the Court of Justice of the EU and also explains the interplay between the UCPD and other EU consumer legislation such as the Consumer Rights Directive (applicable from 2014) and the new Package Travel Directive.

There are dedicated sections in the guidance relating to certain sectors including: (a) the online sector; (b) travel and transport; and (c) financial services and immovable property. It also features a section that looks specifically at environmental claims.

The section examining the online sector clarifies the application of the UCPD to some of the new business models and online commercial practices that have emerged in recent years such as online platforms, app stores, comparison tools, user review tools and social media.

The guidance highlights that any platform that qualifies as a "trader" by promoting or selling goods, services or digital content to consumers must ensure that it complies with the UCPD.

For example, where a platform acts as an intermediary it should take appropriate steps which would enable third party suppliers selling via the platform to comply with EU consumer and marketing law and help users of the platform to understand with whom contracts are being concluded. The guidance suggests that there is not, however, a general obligation to monitor suppliers.

What happens next?

The proposed Regulations on geoblocking and cross-border parcel delivery will now be sent to the European Parliament and the Council of the EU for approval. The Commission is likely to facilitate the negotiation process between the European Parliament and Council such that the proposed Regulations would take effect across the EU in 2017.

Impact of Brexit

On 23 June 2016 the UK voted to leave the EU. Article 50 of the Treaty on European Union sets out the process which must be followed in order to actually leave, but it has not yet been triggered.

Once the Article 50 process commences there is a two (2) year period before existing treaties will cease to apply. Given that it appears the UK will not trigger the Article 50 process until early 2017 at the earliest, it is highly likely that the UK will be subject to the new Regulations on geoblocking and parcel delivery when they first take effect.

Whether compliance with these particular Regulations, and the Consumer Protection Cooperation Regulation, would be imposed in the terms of any trade deal the UK reaches with the EU remains to be seen. If that doesn't happen, then from a UK perspective the laws would fall away post-Brexit, as EU Regulations apply directly without the need for domestic legislation. It would of course be open to the UK to introduce similar rules in domestic law, though it could of course take the opportunity to adopt a different approach.

By contrast the UCPD was implemented in domestic legislation, like other EU Directives, and that domestic legislation (e.g. the Consumer Protection from Unfair Trading Regulations 2008) would continue to apply after the UK leaves the EU unless it was repealed or amended. However, unless stated otherwise in any trade deal, the UK is unlikely to be bound by the decisions of the Court of Justice of the EU, and so the updated guidance document mentioned above may become of more limited value from a UK standpoint.

Remember that for traders operating internationally the EU rules will of course remain relevant post-Brexit if they continue to sell to consumers in the remaining EU member states.

What should businesses do?

Clearly the proposed Regulation on geoblocking and other forms of discrimination based on nationality, place of residence or place of establishment will have an impact on most businesses that sell products or services to businesses or consumers based in the EU. Policies will need to be reviewed and websites potentially adjusted once the Regulation has been adopted and businesses are encouraged to keep track of its progress accordingly.

The new guidance on the UCPD is also of wide application, impacting on all businesses that sell to EU consumers, and it is of course worth those businesses reviewing their current practices against it. In particular, I would recommend businesses making environmental claims and those involved in the online sector, travel and transport and financial services and immovable property to consult the guidance as it contains dedicated sections on those areas.

The proposed Regulation on cross-border parcel delivery is much more niche, but will of course be of major interest to parcel delivery businesses, which are urged to follow its progress.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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