Out-Law Analysis 3 min. read

Consumer law reforms will impact UK regardless of Brexit

UK businesses should prepare for major changes to EU consumer rights laws, even if Brexit means the reforms might not be implemented in UK law.

The broad-ranging EU directive on the better enforcement and modernisation of EU consumer protection rules, which is expected to take effect in the middle of 2022, makes substantial changes to a number of existing EU laws concerning consumer rights, including in relation established unfair commercial practices, selling price information and unfair standard contract terms.

For instance, some of the changes are clearly aimed at protecting consumers from doorstep selling by unscrupulous businesses, or from misleading promotions which highlight a sales price that is only ever available for a very limited time and with a range of other strings attached.

Some of the reforms have focused specifically at introducing new consumer protections in the digital world. Those changes include revisions to rules impacting the supply of digital services, and increasing transparency obligations in respect of online reviews and endorsements, and in respect of paid-for search advertising too.

Significantly, the penalty and enforcement regime in relation to unfair contract terms and unfair commercial practices will change under the new directive, with businesses set to face much more onerous penalties under a much more harmonised framework across the whole of the EU.

In this respect, the directive provides for member states to levy fines of up to 4% of annual turnover, in the member states where infringement has occurred. If the company does not provide financial information, the regime provides scope to fine businesses up to €2 million.

This has the potential to be game-changing in the same way as fines for competition breaches or GDPR breaches are.

The directive sets out factors to guide national regulators on the appropriate level of fine to issue in individual cases. EU member states have to build those factors into their national penalties and enforcement framework. The factors include the benefit to business or losses avoided as a result of an infringement, whether the business is responsible for any previous infringements, and the penalties imposed in other member states.

While consumer bodies can currently bring an action or bring an issue to the authorities’ attention, there is no direct right of redress for consumers subject to an unfair commercial practice. Under the directive, however, consumers will have their own individual right of compensation, which might include a price reduction or termination of a contract.

The directive has yet to be formally written into EU law, but its publication in the Official Journal of the EU should follow promptly now that the reforms have been adopted by the Council of Ministers, following the earlier approval given by MEPs.

The formal publication of the new legislation in the OJEU should take place before the UK leaves the EU, but there remains a question over whether the new consumer laws will be written into UK law.

There is a two year transition period for implementing the new EU directive on the better enforcement and modernisation of EU consumer protection rules, and a further six months before they would apply. This means it will be the end of 2021 or beginning of 2022 before national governments of EU countries would be expected to have implemented the reforms in domestic legislation.

There is uncertainty over exactly when the UK will exit the EU. It is currently scheduled to exit membership of the EU by 31 January 2020 at the latest if no agreement is ratified on the terms of the UK's withdrawal before then. If a withdrawal agreement is finalised, there would be a transition period before the UK formally exits the EU. That period is currently envisaged to last until the end of 2020. The current UK government has said it will not look to extend that period. Other Brexit outcomes are possible depending on the result of the forthcoming UK general election.

With the EU (Withdrawal) Act 2018, the UK government legislated for the continuing effect of EU law, whether directly applicable as an EU regulation or implemented in domestic legislation where it stems from an EU directive, during the period that the UK remains an EU member.

As it stands, however, it would take the UK government of the day to opt-in to implement the new EU directive on the better enforcement and modernisation of EU consumer protection rules. In the absence of such a decision, traders that sell solely in the UK would not be subject to the reforms.

Regardless of what decision is taken in respect of the implementation of the new directive in UK law, however, UK businesses that sell in the EU would be subject to the new EU regime, and more specifically the domestic legislation and penalties and enforcement framework established in the individual EU countries into which they sell.

UK businesses would be best served familiarising themselves with the reforms and working on the assumption that they will be subject to them.

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