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Backing for GDPR-style penalties for consumer law breaches

EU law makers have endorsed plans to give regulators scope to issue GDPR-style fines against businesses that breach consumer law.04 Mar 2019

Under the proposals backed by the Council of Minister's Permanent Representatives Committee (Coreper) late last week, businesses found responsible for breaching EU rules on unfair commercial practices, consumer rights and on unfair consumer contract terms could be hit with fines of at least up to 4% of their annual global turnover "for widespread cross-border infringements".

The proposed new enforcement powers, which would follow similar measures introduced in the GDPR (General Data Protection Regulation), were first outlined by the European Commission last year. Both the Council of Ministers and the European Parliament – the EU's two law making bodies – must formally approve the measures before they can be introduced into EU law. 

According to the Council, its Romanian presidency is to seek talks with MEPs to agree a deal on the proposed reforms which could see the new rules adopted "at first reading" in the coming weeks.

The draft legislation backed by Coreper would also enhance consumers' rights to remedies whether they are harmed by unfair commercial practices, and consumers would also obtain new protections in circumstances where they access digital services that are 'free', including where they provide personal data in return for access to services and not money.

The reforms proposed would also require online marketplaces to be more transparent, the Council said.

"The [draft] directive requires online marketplaces to clearly inform consumers about: the main parameters determining ranking of the different offers, whether the contract is concluded with a trader or an individual, whether consumer protection legislation applies and which trader (third party supplier or online marketplace) is responsible for ensuring consumer rights related to the contract (such as the right of withdrawal or legal guarantee)," the Council said.

"In addition, the [draft] directive obliges digital applications such as online marketplaces, comparison tools, app stores and search engines to indicate to their users which search results contain 'paid placements', i.e. where third parties pay for higher ranking, or 'paid inclusion', i.e. where third parties pay to be included in the list of search results," it said. 

The new rules, if introduced, would also modernise requirements regarding the way businesses would need to communicate with consumers, and remove other "disproportionate burdens imposed on businesses by existing legislation", the Council said. 

The Competition and Markets Authority (CMA) recently outlined a number of recommendations for "legislative and institutional reforms" in the UK that are aimed at better safeguarding consumer interests and improving public confidence in markets.