May brought significant changes to the ecommerce market in the European Union. The new Enforcement and Modernisation directive 2019/2161, more commonly known as the “Omnibus Directive”, introduced more stringent regulations regarding consumers’ protection and transparency requirements.
In this article, prepared in cooperation with Cezary Kożon, CEO of Spyrosoft eCommerce, we’ll analyse the changes brought by the new Directive, explain how they’ll affect ecommerce businesses and propose an action plan to adhere to the new requirements.
What is the new EU Omnibus Directive and why has it been introduced?
The Omnibus Directive is part of the EU’s New Deal for Consumers initiative, which aims to strengthen consumer protection laws and expand them to new developments in the ecommerce market. It was adopted by the EU Parliament in November 2019. The EU Member States must have included the Directive into their national laws by November 28th, 2021. It came into force on May 28 and since then all B2C ecommerce companies in the EU must comply with it.
The Directive amends the four existing consumer protection directives:
- The Unfair Commercial Practices Directive (2005/29/EC)
- The Consumer Rights Directive (2011/83/EU)
- The Unfair Contract Terms Directive (1993/13/EEC)
- The Price Indications Directive (1998/6/EU)
At a high level, it expands consumer rights also to cover the purchase of digital goods and services. It also poses new transparency requirements on ecommerce businesses and penalties for not adhering to them.
What are the changes introduced?
Let’s look at the new regulations in more detail.
Consumer rights to include all digital transactions
The EU Omnibus Directive extends consumer rights for physical products to also apply to the digital goods purchases, naming the right to receive necessary pre-contractual information and the right to withdraw from a transaction within 14 days.
An exception to this rule is a scenario where a consumer provides personal data that is processed solely to supply the digital content or given due to a legal requirement.
Pricing to be more transparent for customers
This is one of the most discussed requirements introduced by the new Directive. The price of goods a discount applies to must be available for at least 30 days before the discount is made. In practice, it means that a store must disclose the price history of the last 30 days for a discounted product.
The aim is to prevent price manipulations and “fake” discounts when in reality, the price hasn’t changed. Such situations often take place during the holiday season.
Another change is related to personalised pricing for individual consumers based on their recent purchase history. Traders must now inform consumers if a price has been personalised as a result of automated decision-making based on consumer profiles.
Marketplaces to be more transparent in terms of consumer rights
Consumers must be given a clear notification of their rights and contact information to turn to in case they believe their rights have been denied.
Online marketplaces must provide the information on:
- whether a seller is a private person or a business entity in order to determine if they are subject to consumer protection laws,
- what consumer protection elements apply to any transaction,
- how the responsibility for compliance is shared with a seller,
- what criteria are used for ranking search results (purchase history, rating, price, a combination of various parameters?) and if higher ranking results are paid advertisements.
Ban on fake reviews
The EU Omnibus Directive banned fake reviews. The sellers must ensure that reviews come from actual buyers and are prohibited from manipulating opinions. It’s also strictly forbidden to delete negative reviews, claiming that reviews have been verified when they weren’t, transferring opinions from one product to another and not disclosing paid search results.
Exchanging personal information for free services
Until now, providing free services or goods in return for consumer personal information has been stuck in a “grey area”. The new Directive has finally regulated this issue. It has extended consumer rights also to free services and goods. Consumers now have 14 days to cancel the contract without providing a specific cause. Providers of “free” services must inform consumers about the duration of a contract and the conditions for termination.
It’s also worth noting that the EU Omnibus Directive has finally regulated the sometimes controversial issue of whether exchanging personal data for “free” goods, for example, ebooks or webinars, is entirely legal. Such practice is now compliant with the updated law.
New conditions for online communication between merchants and consumers
According to the new Directive, any method of communication is acceptable as long as it’s reliable and efficient and consumers get a copy of the correspondence. The recommended types of communication include chatbots, conversational AI and speech-based assistants.
What are the fines and penalties for not following the EU Omnibus Directive?
There are severe fines for ecommerce businesses that don’t meet the requirements of the Directive. The penalties vary up to 4% of an annual turnover, depending on a range of considerations, like the nature, gravity and scale of offence, the financial implications for a business, the presence of aggravating or mitigating factors, and so on.
Each Member State is responsible for enforcement of the new Directive on its own.
How can your ecommerce business comply with the new requirements?
Whether you’re just entering the ecommerce market or you’ve been around for a while, you should ensure that your processes are in line with the new regulations:
- Create or review your process of managing consumer reviews. Establish rules for verifying reviews and consider including them in your terms and conditions.
- Ensure that you disclose the information about price history on your product page and, if you use personalised pricing, disclose that information too.
- If you sell digital goods, review and update your terms and conditions to incorporate traditional consumer rights and ensure you’re transparent as to how consumers can exercise these rights if needed.
Our consultants will help you adhere your webshop to the new regulations. Contact us to set up a no-obligation meeting and discuss how we can support you.