The New Deal is a Big Deal
The New Deal for Consumers will have a major impact on all consumer-facing tech and media companies
With its New Deal for Consumers (NDFC) initiative, the EU has provided a comprehensive update to consumer law in an effort to strengthen consumer rights. It consists of new or updated obligations for traders as well as enforcement powers for authorities or consumer organisations. Firmly in the sights of this new legislation are large consumer-facing tech and media companies.
New regime for digital content and services
The Digital Content Directive (DCD) has been adopted with a view to enhancing consumers' confidence in their contractual rights when buying digital content or digital services.
It introduces the notions of "digital content" – any data produced and supplied in digital form – and "digital service", which is, broadly speaking, any service that allows the consumer to interact with data in a digital form, and will apply, for example, to software, apps, or social media.
The DCD provides for harmonised warranty rights, including the provision of updates necessary to keep the digital content or service in conformity (for example, bug fixes or security updates) and establishes limitations as to how the provider can modify the digital content or service after conclusion of the contract.
Despite being a maximum harmonisation directive, the DCD leaves room for important deviations by EU Member States, for example, on consumer liability claims.
The legislation is applicable as of 1 January 2022.
Existing directives
The Omnibus Directive updates the four existing key pieces of EU consumer legislation, including the Consumer Rights and the Unfair Commercial Practices Directives. The update is intended to bring consumer legislation up to date with new business models.
Specifically, it imposes transparency obligations in relation to user reviews, search rankings and online marketplaces.
In addition, for certain consumer law violations, the Omnibus Directive introduces turnover-based fines at a minimum of 4% of the trader's annual turnover in the relevant Member State. Some Member States have already elected to go beyond this.
The legislation comes into effect in May 2022.
Consumer sales contracts
To achieve unified consumer protection and a level playing field for all businesses selling goods to consumers, the Consumer Sales and Guarantees Directive will be replaced by the Sale of Goods Directive (SGD). The SGD is a maximum harmonisation directive, which introduces, in particular, harmonised warranty rights, but allows for important deviations in Member States, for example, on the length of warranty periods.
The SGD introduces a new legal framework applying to the category of “goods with digital elements”, that is goods that incorporate or are interconnected with digital content or a digital service in such a way that the goods would not function without these digital elements (for example, a smart watch which is app-dependent to properly work). The SGD notably requires traders to update the goods' digital elements for a certain period of time in order to ensure the goods remain in conformity. This includes provision of security updates.
The legislation is applicable as of 1 January 2022.
'Paying with personal data'
The NDFC introduces the concept of "paying with personal data". Traders providing digital content or services to consumers will have to respect certain pre-contractual information obligations and provide for warranty, including updates, not only where these digital products are paid with money, but also where the consumer provides personal data under the relevant consumer contract.
"Paying with personal data" is understood very broadly and the exceptions to the NDFC are limited. This concept will therefore impact many digital products marketed to date as "free" and potentially require changes in the product design and distribution process.
Additional Member States' law implications
There are key aspects left to Member States in implementing this new legislation, with some Member States enhancing certain thresholds.
In addition, there have been Member State projects introducing new consumer law legislation, for example, in France or Germany. Also, even though no longer a Member State, the UK is consulting on its own proposals to refresh UK consumer law especially in relation to reviews and subscriptions. The UK's plan is to introduce even higher fines of up to 10% of global annual turnover.
So, despite the harmonisation efforts under the NDFC, there will still be no one-size-fits-all solution for consumer law in the EU and UK.
Connect with one of our experts
Dr. Vera Eickhoff, LL.M. , Lead author Associate, Germany vera.eickhoff@osborneclarke.com +49 221 5108 4158
Konstantin Ewald Partner, Germany konstantin.ewald@osborneclarke.com +49 221 5108 4160
Marie-Laure Pidoux Senior Associate, France marie-laure.pidoux@osborneclarke.com +33 1 84 82 41 02
Laura Rio Associate, France laura.rio@osborneclarke.com +33 1 84 82 46 72
John Davidson-Kelly Partner, International Head of Media & Entertainment, UK john.davidson-kelly@osborneclarke.com +44 20 7105 7024
Katrina Anderson Senior Associate, UK katrina.anderson@osborneclarke.com +44 207 105 7661
Chloé Ponsart Associate, Belgium chloe.ponsart@osborneclarke.com + 32 2 515 93 94