Insights | November 25, 2020
New EU rules on e-commerce – wider powers for European consumer authorities and enhanced rights for consumers shopping online (part I)
It is safe to say that consumers have changed their behavior from brick and mortar to virtual shopping. The trend, which has been in progress for decades, has accelerated as a result of the COVID-19 pandemic, and today consumers are using digital to connect and consume more than ever. This article aims to provide a brief overview and introduce some of the new initiatives adopted, which apply to any e-commerce business operating in the EU.
Rules relating to e-commerce are widely harmonized in the European Union. However, whilst the current legislation provides some protection, it has, to a large extent, been unchanged over the last 20 years. By contrast, in addition to changing consumer behavior, as highlighted in Roschier’s recent article on the rise of the e-commerce and platform economy puts the legal framework for vertical restraints to the test, digitalization and the growth of e-commerce have fundamentally changed the structures of many markets and disrupted traditional distribution models.
In an effort to keep up with the market trends and to foster a Digital Single Market, numerous legislative measures have been initiated or enacted on EU level in recent years.
New digital contract rules expand consumer protection for intangible goods
To create, maintain, and protect the EU’s Digital Single Market, two new directives on contract rules relating to digital content and services and contracts for the sale of goods have been enacted.
The directive (EU) 2019/770 on contracts for the supply of digital content and digital services, e.g. music streaming services or social media accounts, grants new remedies for consumers when such digital content or services are faulty. Moreover, this directive will also regulate a transaction between a consumer and a trader wherein the consumer provides, or undertakes to provide, personal data for digital service or content. This is a significant improvement for consumers. The trader is further obligated to provide updates to the digital service or content for the period of time that the consumer would reasonably expect.
According to the preparatory works to the directive, this obligation lasts for at least three years. Further, where the digital content or digital service is supplied in exchange for the payment of either money or digital representation of value (NB. not personal data), the consumer will be entitled to terminate the contract if the service is defect, and the defect is not minor. The burden of proof with regard to whether the defect is minor shall be on the trader.
Moreover, the second directive, (EU) 2019/771 on contracts for the sale of goods, sets out more detailed rules on what constitutes a defect. The directive applies to all physical goods, including products with a digital element, e.g. buying a camera or a smart watch. According to the new rules, the goods have to be in conformity both with what is agreed, and also what the consumer could reasonably expect. In the event of such lack of conformity, the same liability and remedies for defects will apply throughout the EU.
Another interesting change regards the sale of used goods. General disclaimers that a product is sold “as is” is suggested to be unlawful. Instead, the trader must inform the consumer of any fault, and the consumer in turn must explicitly agree to such fault.
Both directives entered into force on 11 June 2019, and EU member states have two years to implement the rules into their national law. The implementation in Sweden is currently being assessed and the Swedish Government published its inquiry in September 2020 (please see SOU 2020:51 (in Swedish)).
Effects of the new rules on e-commerce businesses and consumers – will stricter requirements and the possibility of sanctions ensure compliance?
Harmonizing rules and removing barriers for cross-border e-commerce makes it easier for European consumers to do business online regardless of the EU member state where they reside, work or travel. Consumers gain more remedies and traders may face even tougher scrutiny from local consumer authorities with the possibility of large fines.
In our next article, we will, among other things, discuss the coming GDPR styled sanctions for e-commerce traders, and geo-blocking.