In brief
On 30 November 2022, a new law amending the Code of Consumption for the purpose of transposing Directive (EU) 2019/2161 (“Omnibus Directive“) (“New Law“) was published in the Luxembourg Official Gazette. The New Law entered into force on 4 December 2022.
The Omnibus Directive amends several existing EU consumer protection legislation, including the Unfair Contract Terms Directive, Price Indications Directive, Unfair Commercial Practices Directive and Consumer Rights Directive and widens the customer rights framework to also cover digital goods, content, and services.
Contents
- What are the changes?
- New rights to information for consumers
- Extension of the list of unfair commercial practices
- New rights for consumers in the case of price reductions of goods
- Enforcement/penalties
Accordingly, the New Law, among other things, strengthens consumers’ rights when shopping online or in stores through the following:
- New transparency measures in the case of price reduction
- Enhanced consumer’s information in the case of online purchases
- Strengthening of sanctions in cross-border cases
- New rights for the Ministry for Consumer Protection to issue written warnings to ensure professionals’ compliance with the Consumer Code
For further information on what this development might mean for you and assistance to review and/or amend your (pre-)contractual documentation or to adapt your business practices, please get in touch with your usual Baker McKenzie contact.
The New Law updates several provisions in the Consumer Code to adapt consumer protection in the digital age and take into consideration new business practices.
The key takeaways can be summarized as follows:
Increasing general information obligation
The Omnibus Directive extends the scope of the Consumer Rights Directive to the notions of “digital content” and “digital services.”
To reflect this extension, several articles in the Consumer Code have been modified.
Among other things, protective measures, such as obligations regarding pre-contractual information and the right of withdrawal, have been extended to consumer contracts regarding digital content or digital services.
In that respect, professionals are required to inform the consumer of the following:
- The functionality, i.e., under which conditions digital content or a digital service can be used given the absence or existence of technical restrictions (e.g., the protection provided by digital rights management or regional encoding)
- Interoperability, i.e., whether the digital content or digital service may operate with hardware or software that is different from that with which digital content or similar digital services are normally used, and in how far they can
- The compatibility, i.e., the capacity of the digital content or digital service to operate with computer hardware or software with which digital content or similar digital services are normally used
The New Law also provides that the pre-contractual information obligation will apply when the consumer receives a digital service or digital content in exchange for their personal data.
Additional specific information requirements for contracts concluded on online marketplaces
In the case of online marketplaces, the New Law specifies certain information considered as important to provide to the consumer in the context of misleading omissions.
In that respect, online marketplace providers are required to do the following:
- Explain how they rank the offers they display on their website, allowing consumers to recognize whether a trader has paid to appear in search results
- Inform consumers whether the person who offers a good, service or digital content on the online marketplace is acting as a professional
When marketplace providers provide access to consumer reviews of products, they must also guarantee that the notices published come only from consumers who have used or purchased the product in question.
New unfair commercial practices have been added to the Consumer Code, such as the following:
- Reselling event tickets to consumers if the trader acquired them using automated means to circumvent any limit imposed on the number of tickets that a person can buy or any other rules applicable to purchasing tickets
- Stating that reviews of a product are submitted by consumers who have actually used or purchased the product without taking reasonable and proportionate steps to check that they originate from such consumers
- Submitting or commissioning another legal or natural person to submit false consumer reviews or endorsements, or misrepresenting consumer reviews or social endorsements, to promote products
- Providing search results in response to a consumer’s online search query without clearly disclosing any paid advertisement or payment specifically for achieving a higher ranking of products within the search results
- Marketing a product in one member state as being identical to a product marketed in other member states when the composition or the characteristics of such product are significantly different (unless justified by legitimate and objective factors)
The New Law sets up a new regulation in the case of price reductions by creating a reference price that requires professionals to indicate the lowest previous price of the good concerned applied at least 30 days prior to the reduction.
The purpose of this new provision is to combat false or fictitious prices and, more particularly, the practice of “barred prices,” which can sometimes leave doubt as to the veracity of the proposed reduction.
Insertion of common criteria for the application of penalties
The New Law introduces non-exhaustive and indicative criteria for the application of penalties. Such criteria include, but are not limited to, the nature, gravity, scale and duration of the infringement, and any redress provided by the trader to consumers for the harm caused. Repeated infringement by the same perpetrator shows a propensity to commit such infringements and is therefore a significant indication of the gravity of the conduct and, accordingly, the need to increase the level of the penalty to achieve effective deterrence.
The financial benefits gained, or losses avoided, due to the infringement may be taken into account. Other aggravating or mitigating factors applicable to the circumstances of the case can also be taken into account.
Strengthening the sanctions in cross-border cases
For violations of consumer protection legislation, as set out in the Consumer Code and with a scope affecting at least three member states or two-thirds of the EU population, fines can now be up to 4% of an undertaking’s annual turnover or a maximum of EUR 2 million if information on that undertaking’s annual turnover is not available.
Introduction of written warnings
The New Law introduces a written warnings mechanism. In that respect, the Ministry of Consumer Protection may send written warnings to professionals in the case of noncompliance.
A two-step system is put in place. The professionals are first invited to provide information on their infringement. If their explanations are unsatisfactory or nonexistent, the Ministry can issue a cease and desist order or a prohibition.
The Ministry of Consumer Protection will publish further guidance in the following months, so that consumers can better benefit from their new rights.
