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Modernising consumer protection: future differences between EU and UK consumer protection law

  • United Kingdom
  • Brexit
  • Consumer

04-03-2021

EU derived consumer protection laws have long been implemented and embedded into the UK’s own legislative regime, consolidated by UK-specific law. However, following Brexit, the UK will no longer be required to implement EU directives and as a result, there is increased scope for the UK to diverge from the position being taken at EU level in relation to consumer protection legislation. An example of where there is clear potential for future divergence is found with the proposed modernisation of consumer protection laws by both sides. Certain key changes in EU consumer law will come into force in 2022 and 2023.

The position in the EU – the “New Deal for Consumers” package

In April 2018, the European Commission (the ‘EC’) announced the “New Deal for Consumers’” package which followed a large scale evaluation of rules on consumer protection (REFIT “Fitness Check” and Consumer Rights Directive evaluation). The New Deal’s aim is to modernise and harmonise EU consumer law, increasing consumer trust and improving the application and enforcement of consumer protection legislation. The package has resulted in the “EU Omnibus Directive” and the “EU Collective Redress Directive” being introduced.

The EU Omnibus Directive (the ‘Directive’) came into force on 7 January 2020, with member states having until 28 November 2021 to adopt and publish measures to comply with the Directive and until 28 May 2022 to apply those measures. It focuses on the better enforcement and modernisation of consumer protection law and will amend the following four EU directives :

  • the Unfair Commercial Practices Directive (2005/29/EC) - implemented in the UK by the Consumer Protection from Unfair Trading Regulations 2008;
  • the Consumer Rights Directive (2011/83/EU) - implemented in the UK by the Consumer Rights Act 2015 and the Consumer Contracts Regulations 2013;
  • the Unfair Contract Terms Directive (93/13/EEC) - implemented in the UK by the Consumer Rights Act 2015; and
  • the Price Indications Directive (98/6/EU) - implemented in the UK by the Price Marking Order 2004.

Some of the main provisions of the EU Omnibus Directive are as follows:

  • member states are required to impose penalties for breach of national consumer protection law of up to 4% of the trader’s annual turnover in the relevant member state or 2 million Euros where information on turnover is not available. Member states can also impose higher fines;
  • new rights for consumers to seek redress directly from traders;
  • new information obligations for online traders, in particular regarding the criteria used to rank search results, the verification of online reviews, the status of the seller and personalised pricing based on automated decision making;
  • the Consumer Rights Directive is amended to apply to both digital content and digital services provided in exchange for personal information (unless the trader is only using such personal data to supply the contracted for digital content or the digital service or to comply with its legal requirements);
  • an obligation on online marketplaces to inform consumers of whether the responsible trader in a transaction is the seller and/or the online marketplace itself;
  • a prohibition on the use of “ticket bots” to bulk buy tickets for resale;
  • clear information provision obligations in respect of price reductions; and
  • an obligation on the European Commission to ensure that consumers can use the single digital gateway to access up to date information about EU consumer rights and to submit a complaint through the Commission’s Online Dispute Resolution platform.

The EU Collective Redress Directive

Alongside the EU Omnibus Directive, the EU Collective Redress Directive effectively introduces a right of collective redress across EU members states, requiring the introduction of procedures to enable “qualified entities” to bring representative actions to seek injunctions, damages and other redress on behalf of consumer groups who have suffered harm due to breaches of EU consumer protection legislation. The EU Collective Redress Directive came into force on 24th December 2020, with member states having until 25th December 2022 to transpose into national law and until 25 June 2023 to apply those measures.

The position in the UK –  the “Modernising Consumer Markets” Green Paper

As the UK is no longer a member of the EU, it will not be required to implement the EU Omnibus Directive or the EU Collective Redress Directive. This does not however mean that the UK has not taken steps towards modernising its consumer law regime post Brexit.

In April 2018 the UK Department for Business, Energy and Industrial Strategy published a Green Paper titled “Modernising Consumer Markets” (the ‘Green Paper’). Responses were provided to the consultation between April 2018 and July 2018 and are currently being analysed.

The Green Paper sets out the following three main principles for responding to the challenges and opportunities of modern consumer markets:

  • competition should be central to the UK’s approach and the government should always look to remove barriers to competition where they arise;
  • consumers should benefit from new technology and new business models, with competition and regulation working together in the consumer interest; and
  • consumers should be able to get redress when things go wrong and ensure consumer rights are effectively enforced.

 The key proposals/commitments found in the Green Paper include:

  • the simplification of T&Cs to improve consumer comprehension (with good practice guides being published for businesses);
  • actions to address concerns with online subscription services e.g. difficulties in unsubscribing from a service;
  • improving business compliance with unfair terms law and reducing the use of unfair terms in contracts e.g. the use of cancellation charges;
  • taking steps to make Alternative Dispute Resolution (‘ADR’) more accessible for consumers and, in certain sectors with high value complaints, to consider mandatory ADR; and
  • ensuring stronger enforcement of the consumer protection regime in relation to unfair trading. The Green Paper proposes that fines for breaches of consumer protection legislation are capped at 10% of a firm’s worldwide turnover along with the creation of an Office for Product Safety and Standards (an independent body).

A White Paper was originally expected in late 2019 and the UK government subsequently planned to publish a “consumer and competition Command Paper” in Spring 2020 (both of these are however delayed).

In addition to the above, the independent Penrose report was published on 16th February 2021. The report contains recommendations on the reform of the UK’s competition institutions for the digital age and in light of Covid-19, aiming to increase consumer confidence and the enforcement of consumer law.                 

Conclusion

Whilst the UK’s proposed changes to modernise its consumer law regime are yet to be fully finalised, it is clear that there is a commitment, much in the same way as demonstrated by the EC, to review and update UK consumer law to ensure that it meets the needs of the modern world, and address the challenges faced with regards to enforcement.

The key question will be the extent to which the UK will look to align with the position adopted in the EU following Brexit. This is particularly pertinent in light of future transposition of the “New Deal for Consumers” Directives, alongside the wider reforms being introduced as a consequence of the EU Digital Content Directive and the EU Sale of Goods Directive. 

It would be expected that the challenges being faced in the context of the application and enforcement of consumer law are most likely shared by both the UK and EU member states, both in terms of the ever evolving digital marketplace, as well as in terms of the increased supply of products, services and digital content/services across borders.

What is known is that currently, traders based in the UK who wish to direct their business activities to EU consumers will be required to comply with those consumers’ local national laws (as well as the laws applying in the UK), and it is for this reason why there may be increased pressures on the UK to have more than one eye on the approach being take across the channel when it is considering its own consumer protection legislative changes.