The Implementation Bill for the EU directive to modernise consumer protection was placed online for consultation on 24 October. The Bill is designed to implement Directive (EU) 2019/2161 as regards the better enforcement and modernisation of Union consumer protection rules (the “Directive”). This directive amends four existing directives, namely those on Unfair Terms in Consumer Contracts (93/13/EEC), Price Indications (98/6/EC), Unfair Commercial Practices (2005/29/EC), and Consumer Rights (2011/83/EU). It aims, on the one hand, to improve and broaden enforcement of EU consumer rules and, on the other, to adapt existing consumer rules to make them better attuned to new developments and in particular to the digital society.
The Implementation Bill is intended to materially amend significant aspects of Book 6 of the Dutch Civil Code (the “DCC”), the Dutch Prices Act [Prijzenwet] and the ancillary Products (Price Indications) Decree [Besluit prijsaanduiding producten], and the Dutch Consumer Protection (Enforcement) Act [Wet handhaving consumentenbescherming] (the “WHC”). In this blog we give a brief explanation of the main changes proposed, focusing on those regarding enforcement. The Internet consultation runs until 22 November 2020.
In a nutshell
The Directive and, in line with it, the Implementation Bill entail a number of important changes. As regards enforcement, the core of the Implementation Bill is the introduction of an indicative list of harmonised EU criteria for determining sanctions. That list is taken from the Directive and will be included in the WHC. We will come back to this in the next section. Other changes concern a trader’s direct obligations towards the consumer. For example, the amended Price Indications Directive introduces a standard provision pursuant to which a trader advertising a price reduction must quote a reference price that it has applied during a period of at least thirty days prior to the price reduction (the “from-for” price). This change will be implemented in the Prices Act. It also adds information obligations (for example for online marketplaces) to the Unfair Commercial Practices and the Consumer Rights Directives, expands the list of unfair commercial practices, and adds rules on the right of withdrawal from purchases made outside retail premises and through distance selling. These amendments will be implemented in Book 6 of the Dutch Civil Code, mainly in Part 3A of Title 3 and Part 2b of Title 5 of Book 6.
Another significant point is the extension of the application of the Consumer Rights Directive to contracts whereby a trader provides digital services to a consumer in exchange for the latter’s personal data. This extension also means that if the consumer exercises his/her right of withdrawal, the trader is basically obliged to refrain from any use (or further use) of his/her personal data (Article 13(5) Consumer Rights Directive). This also entails various obligations regarding the use of personalised prices based on automated decision-making. The trader is expected to take appropriate measures to protect the consumer, and is also required to provide the consumer with proper information. The Directive and the Implementation Bill thus also represent an important stage in the further roll-out of obligations pursuant to the GDPR.
Supervision and enforcement
The sanction provisions that are amended in the Unfair Commercial Practices, Price Indications, and Consumer Rights Directives are to be fully implemented in the WHC. This gives the Netherlands Authority for Consumers and Markets (ACM) – and in the case of financial services and/or activities the Netherlands Authority for the Financial Markets (AFM) – power to sanction by imposing an independent enforcement order, an administrative fine, or an order subject to a penalty for non-compliance. The sanction provision contained in the Unfair Terms Directive does not need to be implemented because it has already been implemented in Dutch law (Section 2.2/3.1 read in conjunction with part a annex WHC).
What is also relevant here is the addition of the aforementioned new, non-exhaustive, and indicative list of criteria, which the competent (national) authority must bear in mind when determining an appropriate sanction. In determining the sanction, for example, the supervisory authority must take account of the nature, severity, extent, and duration of the infringement; of any previous infringements by the trader; and of the financial benefits gained or losses avoided by the trader as a result of the infringement. The Implementation Bill provides for these criteria to be set out in the new Section 2.10 WHC. The idea behind these criteria is to promote more consistent application of sanctions in respect of national provisions adopted on the basis of the four directives.
It is also relevant that in Article 15 et seq. of Regulation (EU) 2017/2394 on cooperation between national authorities responsible for the enforcement of consumer protection laws (the “Cooperation Regulation”), procedures have been agreed on to ensure that effective, proportionate, and dissuasive enforcement action (“coordinated action”) is taken jointly against a trader in the case of cross-border infringements. So as to ensure that comparable penalties can be imposed by all Member States in the event of such coordinated action, the Unfair Terms, Unfair Commercial Practices, and Consumer Rights Directives provide that in such cases Member States should in any event be able to impose a financial penalty with a sufficiently dissuasive effect. The Directive therefore provides that Member States must set a maximum fine for cross-border infringements at at least 4% of the trader's annual turnover in the Member State(s) concerned. If no information is available on the annual turnover, the maximum administrative fine is at least € 2,000,000. The Implementation Bill implements this by amending Section 2.15 WHC. The fines imposed can therefore become very considerable. In view of possible inspection, it is advisable for traders to be able to make sufficiently clear what measures they have taken to comply with consumer law (including EU consumer law).
What consequences (including financial consequences) will the Bill have for businesses? Traders will likely incur compliance costs in order to meet the new consumer protection obligations. Interestingly, the legislator notes that for online marketplaces the costs of complying with the additional information obligations currently do not appear to be very high, given that the information concerned by definition comes from third parties and the online marketplace only has to take over that information.
This Bill illustrates that consumer protection can be achieved in many different areas. On the one hand, it comprises private-law provisions such as restrictions on the resale of tickets, price reductions, and an extension of the list of unfair and misleading commercial practices. On the other, the criteria and the size of sanctions applied by the ACM (and possibly the AFM) in the area of administrative law are made clearer and more consistent.
Up to now, there have been four brief responses to the consultation. They indicate a predominantly positive reception for the Bill.