A Fine Time to be a Consumer: EU’s “New Deal for Consumers” implements GDPR-style fines for consumer law breaches

June 26, 2020

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3 min read

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What's going on here?

The EU’s “New Deal for Consumers” initiative will see fines similar to those imposed by the EU’s General Data Protection Regulation Directive (GDPR) on businesses for breaches of consumer law.

What does this mean?

The Omnibus Directive makes several amendments to existing EU consumer law with the aim of improving enforcement with larger fines and updating legislation to suit fast-paced modern digital markets. The changes include:

  1. The Directive enshrines in EU law a maximum fine of 4% of a business’ annual global turnover(much like the GDPR’s financial penalties)
  1. The creation of a new category for digital services under EU consumer law.
  1. New obligations to provide transparency around pricing and inform consumers of the processing of personal data – now included in the legal definition of “price” – for “free” products.

The EU’s 27 Member States have until 28 November 2021 to implement these laws into their national law, with the Directive coming into force by May 2022. The UK will not be bound to implement the Directive, provided that its transition period has expired before 28 November.

What's the big picture effect?

The Omnibus Directive is especially important for e-commerce businesses like Amazon. They now have more obligations to consumers and face larger fines for falling foul of the new changes. 

The size of the new fines will give online retailers’ boardrooms much to think about for their operations under European jurisdiction. The Directive empowers individual consumers with new rights and legal remedies when suffering from unfair commercial practices. This means that consumers will have more ways to either receive compensation or terminate a contract in such circumstances. Moreover, transparency must now be provided to consumers on fake product reviews and ratings, how products are ranked in search results, and if a product is priced based on algorithmic decision making or consumer profiles.

The increased obligations and fines for businesses is made even more eye watering thanks to another legislative development that is part of the “New Deal for Consumers” initiative: the Collective Redress Directive. Proposed at the end of 2019, the Collective Redress Directive allows consumers to bring group action lawsuits. This is where a non-profit entity – known as a “qualified entity” – can launch a case representing a group of consumers for a breach of the law. It allows justice to be obtained more efficiently and cheaply for multiple individuals who have suffered harm      . It is also widely considered a more effective way of creating changes in behaviour by industry players.

In the US, group action lawsuits have historically remained more prominent than in Europe and the opt-out class action – where an individual is automatically included in the lawsuit – has been the standard of such litigation since 1966. Consequently, the number and size of litigation cases has increased, which has been profitable for the legal market and has also led to the rise of litigation funders. 

Again, GDPR class actions may foreshadow the future of such group action cases.  Recently, there have been several cases of class action lawsuits for data breaches: 

  • Lloyd v Google (4.4 million individuals claiming £750 each) 
  • Various v British Airways (500,000 claimants, regulator intends to fine £183 million)
  • Atkinson v Equifax (size of claim and number of individuals is unknown – case was withdrawn)
  • Various v Morrisons (9,263 individuals, size of claim is unknown – Morrisons was found not liable)

The “New Deal for Consumers” initiative will undoubtedly change litigation in Europe and increase businesses’ concerns over EU consumer law. It also has the potential to make European expansion more difficult for businesses. But with each EU Member State able to vary the application of the law, it remains to be seen if the deal really will get consumers a better deal.

Report written by Will Holmes

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