EU Omnibus Directive Explained for Businesses and Consumers

Also known as the Enforcement and Modernisation Directive, the EU Omnibus Directive came into effect on Jan. 7, 2020.

EU member states had until Nov. 28, 2021, to adopt it and have until May 28, 2022, to bring it into action.

As part of the New Deal for Consumers initiative, the EU Omnibus Directive aims to strengthen and expand the scope of EU consumer laws. It also seeks to modernize EU consumer protection rules for new market developments.

Read on to learn about the new EU Omnibus Directive, its requirements, and how it will impact consumers and businesses. We’ll also cover how businesses can comply with it.

What Is the New EU Omnibus Directive?

The EU Omnibus Directive introduces changes to four pieces of consumer protection legislation:

1. The Consumer Rights Directive (2011/83/EU)
2. The Price Indications Directive (98/6/EU)
3. The Unfair Contract Terms Directive (93/13/EEC)
4. The Unfair Commercial Practices Directive (2005/29/EC)

The goal of the EU Omnibus Directive is to expand the scope of the existing consumer rights framework that applies to physical services and goods to cover digital content, goods, and services.

It introduces new definitions such as “ranking” and “online marketplace” and amends existing definitions such as “digital service” and “sales contract” to bring digital content, goods, and services into the scope of consumer protection legislation.

What Is the EU’s New Deal for Consumers Initiative?

The EU Omnibus Directive is part of the EU’s New Deal for Consumers initiative, which seeks to strengthen the enforcement of EU consumer laws and modernize EU consumer protection rules in light of market developments.

The initiative was adopted on April 11, 2018, and includes a communication and two proposals: COM(2018) 184 and COM(2018) 185.

Since the implementation of this initiative, two EU instruments have been adopted: the EU Omnibus Directive and the Directive on Representative Actions.

What Are the Requirements of the EU Omnibus Directive?

The EU Omnibus Directive makes key changes to existing consumer framework legislation. Specifically, it gives consumers more rights and places more restrictions on businesses to protect consumers.

Here are some of the most important requirements of the EU Omnibus Directive:

New Consumer Rights

Expansion of traditional consumer rights to transactions that deal with digital goods

Thanks to the EU Omnibus Directive, consumers involved in transactions that deal with digital goods can now benefit from traditional consumer rights such as:

• The right to receive necessary pre-contractual information
• The right to withdraw within 14 days

The only exception is when the consumer provides personal data that is:

• Processed solely to supply the digital content in question
• Given due to a legal requirement

New Restrictions on Businesses

Restrictions on price manipulation

The EU Omnibus Directive requires businesses to make pricing more transparent for customers.

If a trader says that a discount is available, the base price to which the discount is being applied must have been available for at least a month before the discount was publicized.

This measure aims to prevent traders from artificially manipulating prices by suggesting there’s a discount when there isn’t one in reality. However, there are exceptions for products that can expire or deteriorate quickly, such as dairy products.

The EU Omnibus Directive also requires traders to indicate when the price of a particular service or good has been altered based on automated decision-making.

Examples of such situations include:

• Automatic price alterations based on individual consumer data (e.g., price increases on certain services or products for a particular user based on recent purchasing history or age)
• Automatic price alterations reflecting seasonal periods (e.g., price increases on hotels during summer break)

Increased online marketplace transparency

All online marketplaces must provide consumers with up-front awareness of their rights and whom they can complain to if they believe they’ve been denied their rights.

Specifically, online marketplaces must establish:

• Whether a seller is a professional trader or a private individual — if a seller is a professional trader, they must follow the relevant consumer protection legislation, but if they’re a private individual, they won’t have to
• What consumer protection provisions apply to any given transaction
• How responsibility for compliance will be shared between the online marketplace and the seller
• What parameters they use to rank search results (e.g., purchase history, price, rating, or a combination of these), including the role and importance of each of these parameters in determining the ranking

Prohibition on fake reviews

The EU Omnibus Directive also prohibits fake reviews in an effort to increase transparency in online marketplaces. It has blacklisted manipulation of reviews, including:

• Posting fake reviews
• Transferring endorsements from one product to another
• Not disclosing paid search rankings
• Deleting negative reviews
• Claiming that consumer reviews have been verified when they haven’t been

Interaction between consumers and traders

The EU Omnibus Directive allows businesses to use any type of online communication as long as:

• Customers can maintain a written trail of correspondence
• The chosen method enables efficient and reliable communication

Suggested methods of communication include conversational AI, speech-based assistants, and chatbots.

How Are Consumers Impacted?

Under the EU Omnibus Directive, consumers can now exercise traditional consumer rights when buying digital goods, services, and content. This means they have more individual remedies when harmed by unfair business practices such as fake reviews and overly aggressive marketing.

Increased transparency in online marketplaces will also help consumers make better choices and buy the products they really want.

How Are Businesses Impacted?

Thanks to the EU Omnibus Directive’s stringent standards, businesses now have more restrictions to follow. This means that businesses need to review and renew their pricing processes, terms and services, transparency practices, and methods of protecting consumers’ personal data.

How Can Businesses Comply With the EU Omnibus Directive?

Complying with the EU Omnibus Directive can be difficult, particularly if you’re a new company. Here’s what you should review and renew in light of the EU Omnibus Directive.

Process for Verifying Consumer Reviews

The EU Omnibus Directive requires you to review and update your process for verifying consumer reviews, so every review is genuine.

Ask yourself the following questions as you go through its requirements:

Pricing Processes

Look at your current pricing processes and ensure that all of your prices have been available for at least 30 days in their respective member states. If you use any form of automated or personalized pricing, you need to disclose this in your listings as required.

Keep in mind that these particular rules apply only to goods, not digital services or content.

Existing Terms and Services for Digital Services or Goods

Review and renew your current terms and services for every digital service or good you sell to EU consumers — all of these now need to incorporate traditional consumer rights. Remember to be up front and transparent about how consumers can exercise these rights.

How Will It Be Enforced?

The EU Omnibus Directive leaves enforcement to each EU member state.

The New Deal for Consumers initiative required each member state to implement the provisions of the EU Omnibus Directive into their national laws by Nov. 28, 2021.

They have until May 28, 2022, to bring their national legal provisions into effect.

Fines and Penalties

If you don’t follow the EU Omnibus Directive, you can face heavy fines at similar levels to those levied under the EU’s General Data Protection Regulation (GDPR).

The EU Omnibus Directive imposes the following penalties if you violate the first three directives that make up the existing consumer rights legislation:

• A fine of up to 4% of your annual turnover in the EU member state to which you’re providing goods and services. If it’s not possible to calculate your turnover, you may be fined up to 2 million euros. Each member state will decide what the fine is depending on a range of considerations, such as:
  • The nature of your offense
  • The gravity and scale of the offense
  • The financial implications of the activity for the business
  • Whether there are any aggravating or mitigating factors
  • Your previous behavior

If you violate the fourth directive, you will receive a fine similar to the one described above. However, the EU member state will apply the fine in relation to your usage of any contractual term that is:

• Deemed unfair according to the member state’s national law.
• Found to be unfair by a final court decision.

This means that there will be a variety of approaches depending on which member state you’re selling services and products to.

Summary

The EU Omnibus Directive is a new directive that makes significant changes to four existing directives on consumer protection. It expands the scope of the current framework by giving consumers the ability to exercise traditional consumer rights when buying digital goods, services, and content.

Businesses now have to follow a strict set of standards when listing and marketing their digital offerings. Failure to comply with the EU Omnibus Directive will result in heavy fines at levels similar to those levied under the GDPR.

More about the author

Written by Masha Komnenic CIPP/E, CIPM, CIPT, FIP

Masha is an Information Security and Data Privacy Specialist and a Certified Data Protection Officer. She has been a Data Protection Officer for the past six years, helping small and medium-sized enterprises achieve legal compliance. She has also been a privacy compliance mentor to many international business accelerators. She specializes in implementing, monitoring, and auditing business compliance with privacy regulations (HIPAA, PIPEDA, ePrivacy Directive, GDPR, CCPA, POPIA, LGPD). Masha studied Law at Belgrade University, and she passed the Bar examination in 2016. More about the author