Consumer Protection

At a Glance

Despite the adoption of the EU Consumer Rights Directive in 2011, the lack of harmonization and the prescriptive nature of some pieces of consumer rights law continue to pose challenges to technology-enabled SMEs and their service providers. The Commission should address the situation by proposing further harmonization measures and guidance on the implementation of current legislation. Such measures should cover:

  • More clarification on the ultimate objectives behind requirements should be provided
  • Responsibility should be clearly attributed to traders when requirements lie on them, and not on online marketplaces
  • Legally mandated information should be made available to the consumer in a way appropriate to the channel, screen and device used
  • Dialogue-oriented policy design should be employed in this context, as the trader and/or commerce service provider is the best placed to appraise how the obligation would be best achieved with regards to the particularities of its business model, and of its different sales channels and interfaces.

Issue in Detail

As an online marketplace, eBay enables buyers and sellers across the globe to connect, find a match, establish trust and transact overcoming geographical distance, cultural differences and other trade barriers. Such technology-based trust mechanisms offered by the private sector can however never address all elements necessary to overcome lack of trust and must be complemented and supported by policy efforts. In the past, the lack of harmonization of consumer rights laws in different EU Member States undermined consumer trust and legal certainty for small businesses engaged in cross-border online transactions. The EU’s Consumer Rights Directive was a significant step towards more equal consumer protection across the EU. However, there is still a relatively high level of divergence between Member States.

This has led to a patchwork of different pieces of legislation that confuses businesses and consumers alike. Overlapping requirements, conflicting national implementations, and diverging enforcement have created a complicated environment for providing online commerce services.

Notably, numerous and inflexible information obligations required at several stages of the purchasing process lead to a disordered user experience. This risks overwhelming users rather than informing them. It also obstructs the merchant or service provider (e.g. the online marketplace where the merchants operates a webshop) from providing consumers with a user-friendly and simple experience.

The area of energy labeling offers several examples of problematic application of legal consumer information obligations:

  1. Requiring the display of legally mandated information in all advertising presented to a potential buyer. Such a requirement coupled with a wide interpretation of the term “advertising” create the untenable situation where the information must be made available to users at every instance on an online marketplace. This leads to a certain piece of information being presented to potential buyers numerous times on their way to the actual purchase.
  2. Stipulating in detail how consumer information must be displayed. Prescriptive legislation leaves no flexibility for implementation, which prevents valuable experimentation and the emergence of best-practices; it may (unintentionally) steer developments in a certain direction without it being the natural or in the longer run the best direction for users and/or the society; and, moreover, a rigid focus on exact adherence to legal instructions risks delaying or even hindering the introduction of new technologies.
  3. Creating market uncertainty through unclear and complicated technical definitions in the law. For example, the definition of “TV monitors”[1] in the context of the energy labeling framework puts into question whether other screens, which are increasingly used by consumers to watch content (such as computer screens), are also covered by the legislation.   It therefore creates confusion in the market for computer monitor / other displays.

To address this situation the Commission needs to act on two parallel tracks. Firstly and most urgently, the Commission must review the plethora of information requirements applicable in the context of consumer advertising and sale. Following such an inventory of all relevant legislation, the Commission should publish guidance and principles to help Member States with how consumer information obligations across the board apply to online and mobile commerce services. We propose the following as the baseline:

  • The objective is what matters

The European Commission should provide general as well as more specific clarification on the ultimate objectives behind information requirements within consumer protection laws and should give traders’ greater flexibility on how those objectives are best realized in specific instances.

To provide an example: Article 5(1)(a) of the Consumer Rights Directive (CRD) 2011/83 requires the display of the “main characteristics” of the product prior to the conclusion of the purchase. Court rulings in Germany have indicated that the definition of “main characteristics” (i.e. information that needs to be displayed on the confirmation page) depends on what has been displayed earlier in the buying flow.  As a result, it has proven difficult in practice for sellers to understand what information is actually required from them as well as for an online marketplace to technically display the required information on the page just before the order is placed. A preferred way forward would be leave it to the trader to decide what information should be provided when in order to enable consumers to make informed decisions. The trader’s decisions would depend on the type, context and stage of the transaction.

  • Clear attribution of responsibility

The European Commission needs to clarify the attribution of responsibility for adhering to legal consumer protection obligations. We have lately observed how national courts attribute responsibility to eBay for the failure by merchants, who are using the eBay marketplace, to comply with consumer legislation despite the addressee of the law being the merchant/trader. 

  • Recognize the particularities of different technologies, services and devices used for commerce

Consumers turn to multiple devices (and different channels) throughout the purchasing process. Mobile devices are becoming increasingly popular for shopping; illustrated by how today they are used in 50% of all transactions on eBay. Intriguingly, what makes a “mobile device” is not set in stone as new technologies from digital storefronts to wearables to interactive textiles gain traction. Screens will be both larger and public as well as smaller and attached to the user; moreover, the interface through which the purchase is made may not even have a screen but be a detached button, a physical space or a command. The way consumer information is displayed across these screens, devices and interfaces will and should vary so as to best serve the objective behind the information requirement. Even though individuals are comfortable buying high-value items on a smartphone, for example, we find that a “PC mindset” still lingers in laws and enforcement practices. Policymaking needs to firmly move into the mobile (or interface) era; and so at least for a passage of time, language along the lines of Article 8 (1) and (4) of the CRD recognizing the particularities (or limitations) of certain “means of distance communication” is required.

We therefore recommend that the European Commission provides guidance on the ultimate objectives behind information requirements. Such guidance should be accompanied by confirmation on the following issues: (1) traders’ information requirements are the sole responsibility of the traders, not of intermediaries such as online marketplaces (2) greater flexibility for business on how to achieve the objectives are to be encouraged; and (3) legally mandated consumer information, and not limited to the CRD, should simply be “made available to the consumer in a way appropriate” to the channel, screen and device used and that it is the trader and/or commerce service provider who is best placed to appraise how the particularities of certain channels, screens, devices and interfaces are most effectively leveraged to achieve the objective behind the information obligation in question.

In addition, the Commission must reform the EU regulatory approach in order to stimulate the digital economy going forward. To that end, new policymaking process must be explored including:

  • Develop and interpret policy through dialogue

Dialogue-oriented policy design should be employed in the context of consumer information requirements. Especially in the context of disruptive services and business models, the application and interpretation of legislative requirements are better shaped through a process of dialogue between market actors and regulators than through top-down commands that fail to recognize the valuable and relevant knowledge market actors sit on. A good example of what policy design based on dialogue can look like may be found in the context of certifying air products. In a sector where safety is of outmost importance, the competent regulator EASA (European Aviation Safety Authority) has not succumbed to prescriptive, “control and command”-type of regulation. Instead, the governing regulatory framework promotes dialogue through a combination of binding rules and non-binding standards. Inspired by EASA’s philosophy, we envisage a system within the consumer protection area where a basic regulation would set out the objectives; it would be complemented by non-binding soft law, developed together with stakeholders and describing “acceptable means of compliance”; the soft law would create a presumption of legal compliance to be recognized by national authorities; traders would have the option of alternative means of compliance where those demonstrably achieve the objectives; and mechanisms similar to those developed within the EASA system would be used to ensure consistency and coherence across the EU.

[1] “Television monitor” is defined as a product designed to display on an integrated screen a video signal from a variety of sources, including television broadcast signals, which optionally controls and reproduces audio signals from an external source device, which is linked through standardised video signal paths including cinch (component, composite), SCART, HDMI, and future wireless standards (but excluding non-standardised video signal paths like DVI and SDI), but cannot receive and process broadcast signals.