Commission finds EU consumer law inadequate to protect consumers in the digital world

The European Commission's digital fairness "fitness check" was launched in 2022 to assess whether the current EU consumer law framework is fit for purpose in the digital environment and consider whether any new regulation is needed to ensure digital fairness for consumers.

The fairness check addresses rising concerns that online businesses are employing new technologies and online practices – for example, addictive design and dark patterns – to the detriment of consumers.

The Commission assessed the three EU directives that make up the core of the EU consumer protection framework: the Unfair Commercial Practices Directive, the Consumer Rights Directive and the Unfair Contract Terms Directive.

The headline finding from the results of the fitness check, which were published on 3 October, is that the legal framework needs to be adapted if it is to provide a high level of consumer protection online. However, the report is vague on next steps and avoids setting out specific follow-up action.

One potential outcome is a new Digital Fairness Act, which the Commission's president, Ursula von der Leyen, has said is needed to "tackle unethical techniques and commercial practices related to dark patterns, marketing by social media influencers, the addictive design of digital products and online profiling."

Problematic practices

The Commission found that the directives' core objectives are still relevant and have ensured the "necessary minimum of regulatory certainty and consumer trust" for the general protection of consumers. However, the principle-based rules have only partially met their goals (of achieving a high level of consumer protection and a better functioning of the internal market) in the digital world.

The assessment identified various problematic online practices, including:

• Dark patterns in online interfaces, designed to influence and pressurise consumers.
• Addictive or deceptive interface design.
• Content personalisation based on behavioural tracking that exploits consumer vulnerabilities.
• Difficulties in dealing with subscription contracts.
• Unfair contract terms or terms and conditions that are difficult to find or understand.
• Lack of transparency around advertising and selling through social media, including influencer marketing.
• "Dropshipping", which involves the sale of products without their being held in stock.
• Traders only communicating through AI chatbots.
• The use of "scalper bots" that automatically purchase products in high demand with a view to selling them on at a higher price.
• Dynamic pricing in relation to event ticket sales.

The Commission notes that consumers behave differently online than offline. There is, therefore, a gap between behaviour anticipated by the current laws (that were developed for an offline world) and real-world behaviour. When consumers are online, they pay less attention and do not read terms and conditions thoroughly or properly process the information with which they are presented. People often do not fully understand digital commercial practices, such as data collection and algorithmic processes, which can mean that they have less bargaining power and are more vulnerable.

The Commission is keen to point out that not all the identified digital practices are problematic in themselves; it depends on how they are applied. Nonetheless, it recognises that the scale and rapid evolution of these practices, along with their broad impact, make current EU consumer law inadequate.

Current framework's inadequacy

The report identified various reasons why the current EU consumer law framework is inadequate, including: 

• Legal uncertainty
  The broadly drafted provisions of current laws are not specific enough to be applied effectively to the problematic practices identified and businesses find it difficult to interpret and apply them when designing digital products and services.
• Regulatory fragmentation
  Diverging national laws and interpretations across member states means there is regulatory fragmentation. The introduction of new digital legislation in recent years, such as the Digital Services Act, the Digital Markets Act, the EU Artificial Intelligence Act and the Data Act, has also made applying consumer protection laws in the digital environment more complicated.
• Lack of enforcement
  Current enforcement mechanisms are inadequate and there is a lack of relevant case law. The Commission recently undertook an evaluation of the Consumer Protection Cooperation Regulation, which sets out the framework for enforcement cooperation among EU consumer protection authorities, finding that, although the regulation is achieving its objectives, digitalisation and emerging technologies have resulted in enforcement challenges. The alternative dispute resolution framework is also currently being revised to address the challenges.

Areas identified for improvement

The Commission suggests that the concepts of "average consumer" and "vulnerable consumer" may need to be revised. It also suggests introducing a "fairness by design" duty, which would oblige businesses to incorporate consumer protection measures into the design and development of a digital product or service. However, the Commission does not suggest making changes at this stage. Instead, it identifies "areas for improvement", including:

• Addressing the most harmful problematic practices, such as dark patterns.
• Reducing legal uncertainty in the application of EU consumer law to the digital environment.
• Ensuring the consistent application of EU consumer law and other digital legislation that regulates B2C digital markets, emerging technologies and personal data.
• Facilitating more effective enforcement and compliance with EU consumer law.
• Simplifying the existing rules.

In the Commission's view, further monitoring and assessment is needed, as well as time to see how the recently introduced digital laws, some of which cover the problematic practices identified, affect consumer protection in the digital world.

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Osborne Clarke comment

The lack of concrete plans for reform in the report may be due to the number of new digital laws introduced in recent years and calls on the Commission to prioritise enforcement, rather than introduce yet more regulation. The new Commission is due to set its legislative programme for the next cycle in November 2024. It remains to be seen whether it decides to embark on the development of a Digital Fairness Act or indeed any other additional digital-related laws.

Anna Matsiienko, Knowledge Paralegal, assisted in producing this Insight.