SDGs(12)

New Deal for Consumers: adoption of new directive to strengthen consumer protection

With the imminent adoption of the European directive on better enforcement and modernization of EU consumer protection rules (also known as the “Omnibus Directive”), COFACE Families Europe takes this opportunity to revisit some of the most important points it has raised during the consultation process. The Omnibus Directive is set to revise/amend the current Consumer Rights Directive, in order to adapt it to latest developments in digitalisation, and the challenges that emerged since its initial adoption. COFACE-Families Europe is a part of the Expert Group of the European Commission and has actively participated in the review process.

Among the welcomed amendments present in the Omnibus Directive, reflecting COFACE-Families Europe’s input, we find:

  • The importance given to interoperability as a principle.
  • Legal guarantees for digital content and services.
  • Hidden advertising and the requirement for making advertising more transparent.
  • The extension of the Directive to cover services where the client provides data in exchange for a service/good.

It is too early, however, to celebrate since many of these provisions are highly general and principle based, which means that the transposition and enforcement process will be as important if not more than what is included in the final text. For instance, there is no indication as to how consumers will be compensated in case some of these services fail to deliver quality service. For instance, in a contract between a consumer and a company, for instance, between a consumer and Netflix, the price that the consumer pays cannot be unilaterally changed, unless there is some justification for this, or is explicitly allowed in the contract (provided it is not an abusive clause or unfair commercial practice). However, in many cases, exposure to advertising can be increased gradually, without the need to notify the consumer. COFACE-Families Europe has proposed to develop some kind of indicator which would allow consumers to compare how much advertising there is on the services they use, and compare it with other services. For instance, on average, how long are prescreening videos for 1 hour of video content? How many “posts” out of a 100 are advertising? And being able to compare the evolution of the prevalence of advertising over time.

On other topics, COFACE Families Europe regrets that the Omnibus Directive does not go far enough.

On personalized prices: while we are happy that consumers will need to be notified about the fact that a certain price was personalized, two additional measures are lacking. First, there is no provision that gives a user the right to be displayed a price which is “neutral”, or which does not take into account his/her personal data. Information is not enough. Furthermore, this transparency requirement does not cover dynamic pricing or real-time pricing which is adjusted based on other data but not personal data from the consumer. Dynamic pricing techniques have shown that algorithms can quickly adjust their prices with the effect of creating a collusion to keep prices high and “game” the market. This is a serious issue and needs to be addressed.

On consumer reviews: we welcome the increased scrutiny of consumer review quality. It is becoming an essential tool to identify scams. For instance, there are more and more advertising on Facebook and other social networks for very nicely presented goods, at record prices, but they turn out to be scams. Basically, fake companies which promote fake or very low quality goods, and count on the “lag” between virality and consumer impulsive buying and the identification of them as being a scam to make thousands of euro and then disappear. Examples here.

There are many other examples of such goods, like customized clothing based on your personal data which is very effective in luring the consumer into buying impulsively. In essence, while the Directive helps with quality reviews, solving the issue of “flash scams” that appear and disappear very quickly and go viral through social networks is an emerging issue that will need to be tackled in the future.

For more information, see the final agreed text of the draft Directive: https://data.consilium.europa.eu/doc/document/PE-83-2019-INIT/en/pdf

A quick overview of the draft Directive is available via ‘factsheet’: https://ec.europa.eu/info/files/factsheet-new-deal-what-benefits-will-i-get-consumer_en

Contact: Martin Schmalzried mschmalzried@coface-eu.org

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