Regulatory Outlook | Consumer Law | February 2020

Current issues

New rules for online marketplaces and search engines

The Platforms for Business Regulation came into force in July 2019 and will apply from 12 July 2020. The Regulation aims to promote fairness and transparency for business users of online intermediation services (search engines and online marketplaces) in order to remedy a perceived imbalance in the relationship between online marketplaces and the traders. Online intermediation service providers will need to implement a raft of changes to comply with the Regulation.

The GDPR of consumer law is on its way

The Consumer Omnibus Directive (or 'New Deal for Consumers') requires Member States to introduce powers to fine traders up to 4% of the trader's annual turnover for breaches of consumer protection law, along with other reforms.

Member States will have until 28 November 2021 to adopt and publish measures to comply with the Directive, and will then have to apply those measures by 28 May 2022. Unless the Brexit transition period is extended beyond that date, the UK will therefore not be compelled to apply these reforms. UK traders selling to consumers in EU Member States will still have to comply with the new rules when selling in the EU, and the UK may choose to align with them.

New digital content consumer protections on the horizon

The Digital Content Directive aims to fully harmonise across the EU a set of key consumer rights and remedies concerning contracts for the supply of digital content or services (such as games, music or video), even where there is no payment, and to reduce legal fragmentation in the area of consumer contract law. The intention is this will reduce the costs of compliance for businesses.

These rules will break new ground in the EU, offering the first set of consumer law covering mobile applications and software.

The Digital Content Directive will apply from 1 January 2022, so as with the Consumer Omnibus Directive, is unlikely to be required to be implemented in the UK, but will apply in relation to consumers based in the EU and the UK could choose to align with the rules.

New laws for consumer group actions have been proposed

The proposed Collective Redress Directive aims to protect the collective interests of consumers by allowing consumer group actions for breaches of consumer law. The new rules address concerns raised by recent high profile cross-border scandals.

The Directive would allow group action against trader violations with a broad public impact in domestic and cross-border cases in various consumer areas. The first meeting of the European legislature took place recently, in January 2020, to hear the proposal. Again, although the Directive is unlikely to be passed and implemented by the end of the Brexit transition period, UK traders selling to consumers in EU member states will still have to comply with the new rules if and when they come in, and the UK may choose to align with them.

In Focus | Responsible business

Which aspects of responsible business are driving the regulatory agenda?

The upcoming step-changes in consumer law, epitomised by the Consumer Omnibus Directive, are driven by a perceived need to enhance consumers' rights. There is a feeling that businesses should be more socially responsibly in their interactions with consumers, and that if some businesses are not inclined to change their approach voluntarily, regulation can be used as a "stick" to drive them to. In the same way that GDPR drove the ethical treatment of data up the agenda, the enhanced consumer regime will do the same for the protection and fair treatment of consumers.

Are responsible business considerations having an impact on the tools that regulators are using?

At the moment, the focus is on the fundamental regulation-based reforms, rather than guidance or codes. However, we expect more detailed guidance to come in time, following the revised legislation.

The reforms do represent a change in emphasis in one respect: the Collective Redress Directive seeks to harness the power of private consumer groups, as opposed to public authorities to enforce breaches of regulation. This 'private enforcement' model is a common feature in the US, where class actions represent the major regulatory risk in areas such as antitrust law.

Which of the recent or upcoming developments are based on international consensus or agreements?

The consumer law reforms have been driven at an EU level. Sitting behind many of them is a recognition that in order for them to be enforced effectively and proportionately, multi-national co-operation amongst regulators is required, although this is currently framed within an EU context, rather than globally.

This is perhaps best illustrated by the Consumer Protection Cooperation Regulation that came into force January this year, setting out the framework for international enforcement, knowledge sharing and action amongst EU consumer regulatory bodies.

What are the main challenges for businesses in complying with these developments?

These developments represent a step-change in the scale and likelihood of consumer law enforcement measures. For example, the Consumer Omnibus Directive will bring GDPR-style fines to, and also update, three existing EU Directives.

This means that businesses will have to step up to the compliance plate across both existing and new requirements, which is no quick or easy task.

Dates for the diary