Developments in UK and EU consumer protection in 2020

Developments in UK and EU consumer protection in 2020

The EU has made a lot of progress on consumer protection in the last year but the legislation it passed at the end of 2019 and in early 2020 will not apply in the UK and UK businesses will not need to make changes when selling to consumers in the UK. The UK will, however, now be faced with a decision – how far to emulate the EU and make cross-border consumer sales easier continuing beyond the end of the Brexit transition period. Either way, as the law develops, UK businesses selling to consumers in the EEA will need to make any required changes to their terms and conditions and business practices.

• EU developments
• UK changes for Brexit
• Other UK developments
• Interesting cases
  
  

EU developments

• The Digital Content and Services Directive aims to deal with the supply of digital content to consumers. It is similar but not identical to the UK's Consumer Rights Act 2015 (CRA) with respect to the supply of digital content. EU Member States must adopt implementing legislation by 1 July 2021. It will apply (with two exceptions) to digital services supplied from 1 January 2022, regardless of when the supply contract was formed.
• The Online Goods Directive on the online and distance sale of goods covers similar ground to the UK's CRA in relation to the supply of goods to consumers but contains some crucial differences. It must be transposed by Member States by 1 July 2021, and will apply to goods supplied to consumers under contracts concluded from 1 January 2022.
• The Omnibus Directive introduces GDPR-level fines for breaches of consumer protection law (up to 4% annual turnover in all EU countries in which the breach had an impact). The Directive amends four existing EU consumer protection Directives. It introduces new information obligations on online traders and new categories of contract - digital services and goods with digital elements. Member States must introduce implementing legislation by 28 November 2021 to come into effect by 28 May 2022.
• The EU's Consumer Protection Co-operation Regulation (CPC Regulation) came into force on 17 January 2020. It replaces the 2004 Consumer Cooperation Regulation (EC 2006/2004). It aims to improve EU-wide cooperation on consumer protection by giving enhanced enforcement powers to national authorities and providing for coordination on actions. The Regulation will cease to apply in the UK after the end of transition. Under the UK Revocation Regulations, EU Member States will no longer be able to bring or continue enforcement proceedings in the UK after the end of transition. Similarly, UK enforcers will not be able to use their powers for infringements of the laws of other EU Member States although they will maintain the same investigatory powers relating to infringements in the UK of specified retained law in this area.
• In November, the EU Council adopted a draft Directive of the European Parliament and the Council on representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EC as part of its 'New Deal for Consumers' package. See here for more.
• Also in November, the EC adopted a Communication to launch its New Consumer Agenda for which it adopted a roadmap in June 2020. The Agenda sets out EU consumer policy from 2020-25. It aims to respond to consumer needs resulting from the COVID-19 pandemic, and focuses on priorities and action points to assist with the digital transformation and green transition. The Commission is also prioritising effective enforcement of consumer rights, as well as looking at preparing consumer policy to deal with likely challenges, including relating to AI and the Internet of Things, mobile e-commerce and sustainable consumption.

UK changes for Brexit

The Draft Consumer Protection (Amendment etc.) (EU Exit) Regulations 2018, made under the Withdrawal Act and subsequent statutory instruments, broadly make the following changes to existing domestic laws:

• amendments to UK consumer protection legislation derived from EU legislation – this will ensure that the relevant consumer legislation continues to operate effectively at the point the UK withdraws from the EU
• revocation of the EU Online Dispute Resolution Regulation – this will arguably have little practical effect as the Regulation is not frequently relied on but could involve minor changes to terms and conditions
• amendments to EU derived consumer protection legislation to replace obsolete cross-references to EU law
• provisions to ensure contracts concerning imports from EEA countries are treated in the same way as contracts concerning imports from non-EEA countries
• the Consumer Protection Co-operation Regulation is revoked and related powers in Part 8 of the Enterprise Act 2002 (EA02), and the CRA reflect the end of the UK's role in the EU consumer enforcement cooperation regime.

The changes are minor and at most, require limited changes to terms and conditions. Essentials of consumer protection law in the UK will not change as a result of Brexit. Immediately after 31 December 2020, UK consumers buying from UK businesses will have the same rights as previously and the CMA will have the same enforcement powers regarding domestic transactions. The law will remain the same but the Supreme Court and Court of Appeal (and equivalent level courts in the devolved administrations) will be able to depart from existing CJEU judgments subject to applying the same tests they would be required to apply in order to depart from their own previous decisions.

UK businesses directing their activities to EU consumers must comply with UK law at a minimum but may face enforcement locally if they fail to comply with local national consumer protection law which will largely reflect EU-level law.

Other UK developments in 2020

COVID-19

Inevitably, COVID-19 had an impact on consumer protection issues, particularly in respect of cancellations and refunds. The CMA launched an investigation into complaints about refunds as part of a programme of work and we reported on its statement on COVID-related refunds in May, and on its updated views in September.

We also covered the impact of COVID on supply chains and on consumer protection in April. For more on data privacy issues raised by the pandemic, see the data privacy section and see here for our full range of articles on the impact of COVID-19.

CMA investigation into misleading online reviews

The CMA has launched an investigation into misleading online reviews on major websites. It will look at whether sufficient measures are being taken to protect consumers and how the websites currently detect, investigate and respond to fake and misleading reviews. While there are no allegations that any website has acted illegally, the CMA wants to ensure they have robust systems in place.

Law Commission consultation on ownership of goods rules

In July, the Law Commission published a consultation paper on proposed draft legislation to modernise the rules on when consumers acquire ownership of goods under sales contracts. It considers the current rules are outdated and do not take sufficient account of transactions carried out online where goods are paid for in advance. If adopted, the draft Bill would take effect as an amendment to the Consumer Rights Act 2015.

CMA supplementary note on transparency in consumer enforcement cases

The CMA published the outcome of its August consultation on when it should publicly name parties being investigated for consumer law breaches. The CMA concludes that it will now be standard practice to name parties when an investigation is announced and when issuing a consultation letter. It will be clear that no assumption should be made as to guilt of the named party and any decision not to proceed further with an investigation will be announced publicly.

Interesting cases

CJEU looks at duty of court to assess fairness of consumer terms of its own motion

In March, the CJEU held that national courts must assess the applicability of certain consumer law (including the Unfair Contract Terms Directive or UCTD), even if the parties have not raised the issue. In the UK, this issue is addressed under s71 CRA which provides that where there are proceedings before a court which relate to a term of a consumer contract, the UK courts must consider whether the term is fair even if none of the parties to the proceedings has raised the issue or said they intend to raise it. It is unclear whether this requires the UK courts to consider the fairness of undisputed terms but it does go further than the UCTD as interpreted by the CJEU in this case. Similar issues were looked at again in November in a Romanian reference. The CJEU said the courts could can facilitate negotiations by the parties of substitute terms (which the parties have always been free to agree) and confirmed these would also be assessable for fairness.

CJEU ruling on exemption from fairness test under the Unfair Contract Terms Directive for national rules

The CJEU departed from an Advocate General opinion in a case involving an allegedly unfair term in a B2C loan agreement. The AG suggested that while contract terms reflecting the default position under national law are exempt from the fairness test under the Unfair Contract Terms Directive, the presumption that the legislature had intended to establish a reasonable balance between the parties to the contract was rebuttable and, as such, could be investigated by the courts. The CJEU held that this was not the case. The AG also suggested that if a national court found a term to be unfair, it could modify the contract. The CJEU, having held that the term in this case was outside the fairness assessment, did not consider this issue.

CJEU ruling on how much consumer needs to pay on withdrawal from partially performed services contract

The CJEU looked at the assessment of costs payable by a consumer to a trader under Article 14(3) Consumer Rights Directive, which requires payment of "an amount which is in proportion to what has been provided until the time the consumer has informed the trader of the exercise of the right of withdrawal, in comparison with the full coverage of the contract". The CJEU said that:

• The amount the consumer has to pay should be calculated taking account of the price for all the services covered by the contract over its terms including any ancillary services necessary to ensure the performance of the principal services.
• If one or more services are provided in full at the beginning of the contract (before cancellation) the trader can only charge the full amount for them (as opposed to a pro-rated proportion) if the contract expressly provides that such service will be provided in full from the beginning of the contract and that it will be charged and paid for separately.

CJEU case on cancellation of bespoke goods contracts

The CJEU ruled in a reference from Germany that the exception to the withdrawal right that applies to consumer contracts for bespoke goods, applies from the time of conclusion of the contract and not from the time when the trader begins to make the goods.