To harmonize and modernize EU consumer protection regulations, at the end of 2019, the EU released the 2019/2161 (EU) Directive, commonly known as the Omnibus Directive. It introduces several changes with a significant impact on e-commerce in the European Union.
Although the deadline for implementation of this directive in the Member States was 28 May 2022, some countries haven’t done it yet. However, even if a given country failed to implement its provisions or if a company has been registered outside the EU, if you want to sell your services or goods to customers from those countries where the directive is in force, you need to comply with the regulations following from this directive.
Let’s start with defining what a directive is. It’s a piece of EU legislation that provides specific guidelines or instructions for a particular procedure. The recommendations stipulated by directives are usually addressed to all Member States, but some may be addressed to specific countries. While its implementation is mandatory, the implementation measures are at the state’s discretion. In other words, the directive specifies the objective without prescribing the manner or measures for achieving them.
The directives are created to uniform legislation within the EU in such fields as labor law, environmental protection, consumer protection and company law. The Omnibus Directive is an example of such a document.
The Omnibus Directive in e-commerce
The main rationale behind the Omnibus Directive was the non-transparent price juggling practice with their frequent inflating before promotional campaigns, especially before popular events such as Black Friday, Cyber Monday or the Chinese Singles’ Day, increasingly popular in the West. The Omnibus Directing aims to curb these unfair practices and impose a transparent pricing policy. The penalties imposed for infringements have also been harmonized.
The Omnibus Directive covers 5 main areas:
- presentation of the promotion,
- reliability of product reviews,
- contact details in shop regulations,
- placement of offers in the product listings,
- returns of digital products and services.
Promotion presentation in line with the Omnibus Directive
The changes related to the presentation of promotions refer to those involving a price reduction for goods and services and are aimed at the general public. To put it simply: it is no longer enough to show the crossed-out pre-promotion price next to the reduced price. The directive forces entrepreneurs to display the lowest price of the product within the last 30 days before the reduction.
However, as is usually the case, there are many exemptions and special circumstances. Fast-rotating goods with a short shelf-life are just one such exception. The above-described rule does not apply to them. The legislator does not specifically define these goods. Thus, you need to decide for yourself whether a given product falls into this category. Selected dairy products, meats or bread will certainly be concerned. For them, the last price applicable before the reduction must be displayed. It’s unclear whether a batch is in question or whether the entire sales history should be taken into account. Thus, it seems most sensible to be to look back 30 days from the promotion start.
For products that have been in the sales offer for less than 30 days, the lowest price applicable during the product offering period should be displayed.
A reasonable question is what about products that have reappeared in the offer after a period of unavailability. For them, the seller is obliged to state the lowest price at which the product was available before the period of unavailability, provided that this period was at least 30 days long.
Progressive discounts, where the discount increases every so often, are also popular in e-commerce. For example, a coat before the promotion was PLN 1,200, then for a week it was discounted by 10% off, then by 20%, and finally by 30%. In this case, PLN 1,2000 will be the base amount for each of these reductions.
It is not necessary to show the lowest price over the last 30 days prior to the discount in the case of loyalty programs based on cards or discount coupons, in which case the customer may either buy the product at a lower price or keep on accumulating points for later shopping.
The same applies to individual discounts prepared based on customer profiling and automated activities. Examples include birthdays discounts, discounts awarded for joining a loyalty program or resulting from previous purchases.
If we talk discount codes, it’s worth remembering that this does not apply to popular discount codes available to the general public and distributed through newsletters, advertising or specialized promotion aggregators.
Furthermore, if a given entrepreneur sets a price using automated price determination mechanisms based on a consumer’s activities, the consumer needs to be informed. It’s thus quite visible that the EU is trying to adapt the law to the technological options used by most e-commerce platforms.
There is another important point worth mentioning. These rules apply not only to goods but also to services. Interestingly, the Directive says nothing about the increasingly popular digital products.
How should price reduction be understood?
We have already mentioned that the Directive only applies to promotions involving price reductions and available to the general public. The European Commission, in its guidelines, provides for different price reduction presentation methods. They include:
- a specific amount, e.g., PLN 15 off,
- percentage-wise, e.g., 10% off,
- by displaying a lower price next to the pre-promotion price (which can be crossed out),
- using other promotional techniques, such as “VAT off”,
- showing the currently binding price and a coming-soon, higher price.
There are many options, but businesses need to be more strategic in their promotional campaigns so that they still encourage purchases. Let’s assume that on 10 January, the coat from the previous example was 40% off and cost PLN 840. From 12 to 20 January, it was at its regular price of PLN 1,200, and then on 30 January a big sale started and the price dropped to PLN 900. During this sales campaign, the seller would be obliged to show the PLN 840 price next to the PLN 900 promotional price, which will not necessarily be a strong incentive to buy.
We already know what about single product reductions, but what about promotions like “All coats 30% off”? In this case, it is not necessary to display the pre-promotion price on the promotional banner. It is only next to individual products, on the price tags (in a brick-and-mortar store) or on product tiles (in an online shop), that the lowest pre-promotion price needs to be shown.
Following the introduction of the Omnibus Directive, the President of the Polish Office of Competition and Consumer Protection inspected around 40 shops for the correct presentation of price reductions under the new rules. He noted numerous irregularities such as :
- lack of information on what the crossed-out price means,
- hiding information that the crossed-out price is the lowest price within the last 30 days so that it is only visible when after expanding the information icon,
- use of a very small font with poor contrast to make the information required by the Directive barely visible.
The second example seems debatable. Is this way of presenting the lowest price information truly not conforming with the European Commission’s requirements? Perhaps using a clearer indication that a given element is an information item would be an acceptable solution.
Reliability of product reviews
Changes important for entrepreneurs also emerge in the field of managing product reviews in an online shop.
First and foremost, the seller is obliged to verify that the published reviews (both in an online store and on social media) actually come from people who have purchased or used the reviewed product. In addition, the entrepreneur needs to specify review verification methods and inform buyers whether negative reviews are published as well.
Thus, the not-so-uncommon among budding entrepreneurs practice of asking friends and family for reviews will become illegal. One of the ways to ensure that reviews have been added by actual customers is review verification using order number. Another method suggested by the European Commission is to send consumers personalized links for giving reviews.
Interestingly, these requirements only apply to consumer reviews. So, if you run an exclusively B2B shop, the above rules do not apply.
Remember to make a note on how the authenticity of the reviews is verified and whether you include both positive and negative feedback. If a review is sponsored, this information must be shown to the consumer as well.
Omnibus-related amendments to the shop regulations
To a limited extent, the Directive affects the regulations of online shops, making contact with the seller easier for the consumers. Under the new regulations, a telephone number, email address and full mailing address must be included in the shop regulations. All these communication channels (and others if provided) need to make it quick and easy for the customer to contact the entrepreneur.
Offer placement in product listings
Another set of guidelines related to the Omnibus Directive mainly concern marketplace-type platforms where multiple sellers can offer their products. Paying for appearing at the top of search results is one of the common practices there.
From now on, if a product is placed on top of a list due to any paid advertising, such an offer will have to be labelled accordingly. The directive stipulates that this information is to be presented in a concise, easily accessible and readable form.
Moreover, in addition to labelling sponsored hits, marketplace platform owners and search engine providers are required to implement solutions that inform users about the main parameters determining product placement. This information should be provided in a way that is:
- clear, preferably in a separate part of the interface,
- easily accessible to the user, close to the search results,
- includes main placement determinants.
Other guidelines in the Omnibus Directive
- One of the guidelines provided for by the directive is that trading platforms (e.g., of marketplace type) must indicate whether the seller is a professional entrepreneur or an individual. This applies to the sale of both goods, services and digital content.It’s important because purchases from individuals are excluded from EU consumer protection law (e.g., the seller may refuse to accept returns without a reason statement).
2. The possibility to withdraw from a remote service contract within 14 days is a significant change for both consumers and entrepreneurs. Two situations apply, depending on the type of service:
- one-off services, which are usually performed immediately after purchase. The directive does not change much as earlier provisions already appear to comply with the new ones. It is only necessary to ensure that prior consent for service performance is obtained from the consumer. It is important that the consumer acknowledges the loss of the withdrawal right,
- services offered continuously (e.g., subscription to audiobooks and e-books), where the matter gets a little more complex. In this case, the customer has the right to cancel his or her order within 14 days, and the entrepreneur may retain a portion of the service fee in proportion to the time of service use. For example, if the service cost PLN 50 for 30 days and the customer cancels after 10 days, the seller may reimburse him or her PLN 50.00-16.66= PLN 33.34.
3. Similarly, as with one-off services, some changes have been made to the right of withdrawal for remote contracts for the provision of digital goods. The conditions under which the buyer’s right of withdrawal can be excluded (the deadline for withdrawal has passed and the consumer has been informed of the loss of this right) have been extended to include:
- consumer’s prior consent to receive the content,
- consumer’s acknowledgement of the loss of the withdrawal right,
- consumer’s receipt of confirmation of him or her giving consent for the use of digital content, e.g., in the form of an e-mail.
4. The definition of digital content and services has also been addressed. Previously enacted directives have been cited:
- types of digital content that involve a single delivery, a series of separate deliveries, or a continuous delivery over a specified period,
- examples of digital services (e.g., word processing, cloud games, cloud storage, email services, video and audio content exchange services).
The reason might be that legislation does not necessarily keep pace with technological developments and, for example, in Poland, it was not until the implementation of the Omnibus Directive that the legislators leaned over online sales of goods and services. This yielded two directives: the Goods Directive and the Digital Directive, which were published alongside the one currently discussed.
5. The Council of the European Union also leaned over personal data, specifically the transfer of personal data in exchange for digital content or services, the so-called lead magnets. This has not been regulated so far. Only the content and digital services that the consumer received in exchange for his or her money was in focus. The Omnibus Directive changed this to also include in the Consumer Rights Act those contracts where personal data become the money.
What are the penalties for non-compliance with the Omnibus Directive?
The European Commission has left decisions on the sanctions to be imposed on traders for breach of the directive up to the Member States. However, they still need to be effective, proportionate and dissuasive. “Dissuasive” should be understood as a maximum fine threshold of “at least 4% of the undertaking’s annual turnover in the Member State or Member States concerned by the infringement”. Repeated infringements may entail an increased fine.
For example in Poland, if an entrepreneur breached these obligations three times in one year, the fine can reach PLN 40 000. In Spain, in turn, sanctions range from €150 for a minor offence to €10,000 or 2 to 4 times the illegal profit.