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News | 14 Nov 2022
Omnibus Directive and its impact on customer reality
Przemysław Pala
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One of the most vivid values of the European Union is to protect its citizens and force laws that will accomplish this task. On April 11, 2018, the European Parliament established a New Deal for consumers. That initiative was aimed at strengthening enforcement of EU consumer law in light of a growing risk of EU-wide infringements and at modernizing EU consumer protection rules in view of market developments.

 

The European Union’s other initiative was the Omnibus Directive. It was preceded by markets’ supervision and control of the entrepreneurs' legislation. It led to the detection of many examples of deception, fraud, and infringements in the member countries' national markets policies. The main aspects that it covers are changes in national markets and the digital sphere regarding prices, discounts, special offers, and protection of consumer rights as a result. It is vital to mention that individual consumers will have a right to compensation in case of unfair commercial actions. What’s next?

 

The schedule of the Directive implementation

omnibus directive implementation timeframe

The Directive came into effect on 7 January 2020, and member states were obliged to bring it into force until 28 May 2022. Even though it’s already half a year after the deadline, some countries still remain not ready: Poland, Italy, Ireland, Malta, Luxembourg, Slovenia, and Slovakia.

For example, in Poland, the documents are being discussed in the Sejm. It is foreseen that the enactment should take place this autumn. It sends a strong message to Polish enterprises to start adopting the main changes it carries along and be prepared for the new law reality. Although The Digital Polish Association is trying to postpone the implementation date to better adjust interpretations, it is the best time to act. What exactly will change?

 

Omnibus Directive changes in a nutshell

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Changes are bitterly welcomed by entrepreneurs and with a bit of relief by consumers. Undoubtedly it will strengthen consumer rights by enforcing strict regulations on entrepreneurs and modernizing the EU consumer protection rules. It will affect both - physical traders and sellers, but also digital ones - ecommerce, mcommerce, retail, etc.

 

All of them should be aware of what’s to come. Here you will find the main aspect prepared by EY (consulting global leader):

  1. Inform about the prior price in case of price reduction and take care of clarity;
  2. Check whether the reviews actually come from consumers of the purchased/used product/service. If a trader provides access to consumer reviews of products, there should be information about whether and how the trader ensures that the published reviews originate from consumers who have used or purchased the product;
  3. Apply regulations of the GDPR and consumer protection rights to contracts for the provision of digital content or digital services without the consumer paying a specific monetary amount, but in exchange for their personal data;
  4. Inform if the price presented is personalized on the basis of automated decision-making and profiling or not;
  5. Inform whether the third party offering the goods, services, or digital content through the online marketplace is a trader or not on the basis of the declaration of that third party to the provider of the marketplace. If the third party is not a trader, there is an obligation to inform that the consumer rights stemming from consumer protection law do not apply to the contract.

 

It doesn’t seem so scary and difficult at first sight. There are some dilemmas in the long run, though. Some people argue to which extent those regulations are applicable. The above-mentioned Digital Polish Association mentions 3 aspects of great concern:

  • Inaccurate translation of the Directive leading to the potential extension of entrepreneurs' obligations
  • Records of price reduction acknowledgments can negatively affect both - the consumers and retailers
  • Postulate about the extension of Directive enforcement because of the considerable number of regulations that entrepreneurs have to cover

 

Challenges for eCommerce market

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The European Union's Omnibus Directive is a set of regulations not only for physical branches and businesses but also for ecommerce that will greatly impact such businesses operating in the EU. Overall, the Omnibus Directive is a broad and far-reaching piece of legislation that will significantly impact ecommerce business managers operating within the EU.

 

Hence, this means that businesses must ensure that their systems comply with the new rules before this date. Failure to do so could result in hefty fines (more in the next paragraph). The Omnibus Directive is part of the EU's wider efforts to create a Digital Single Market, and it is hoped that it will make it easier for businesses to trade electronically within the EU. What's more, to protect the customers. The Directive is also intended to boost consumer confidence in ecommerce by ensuring that their rights are better protected.

There are a few key things that ecommerce businesses should take note of, such as the following: 

  • Ecommerce businesses will be subject to the same rules as other businesses operating in the EU. This includes obtaining consent from individuals for each specific purpose for which the data will be used
  • The maximum fine for companies that violate the regulations will be 4% of their global annual turnover or €20 million (whichever is greater)
  • Ecommerce businesses will need extra care to protect the personal data of customers under the age of 16
  • To create a clear price strategy in case of special marketing events like Black Friday. Many companies use unfriendly practices that fool customers and make them think they gain from bargains. In fact, some retailers raise prices just before the event and then quickly do discounts. Omnibus is made to fight, for instance, these practices.

As a result of the Directive, ecommerce businesses will need to review their practices and ensure that they comply with the new rules. This may require making changes to the way in which data is collected and processed.

 

Omnibus Directive sanctions - what to expect?

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There is a settled system of penalties and fines for those who won’t comply with the gamma of Omnibus  Directive regulations. Somehow this system is similar to the sanctions incorporated in GDPR rules.

 

What will sadden entrepreneurs and enterprises is the fact high fines of up to millions of euros for the lack of appropriate information about the prices, discounts, special offers, etc. As an example, the directive introduces fines of up to 4% of the annual turnover of the accused company/entrepreneur when there is evidence of any financial fraud. What’s even more concerning is that countries can individually raise fines in their national legislation. So to speak, any disobedience is planned to be punished, so the best scenario is to be well-informed and aware of the changes.

On the other side of the story, there is the gradation of fines and circumstances given by EY, which should always be taken into account, such as:

  • the nature, gravity, scale, and duration of the infringement;
  • whether there has been any action to mitigate damage;
  • any previous violations, including fines in other EU countries;
  • any financial gains or losses by the seller from infringements of consumer law;
  • whether the trader has any previous allegations made against them.

Entrepreneurs shouldn't be worried immediately. All they have to do is apply those regulations to their business and follow the EU rules. Here are our main tips for you:

  • To ensure compliance with the Omnibus Directive, businesses should assess their current data-handling practices and identify areas where changes may be necessary.
  • They should also consider working with legal advisors or other experts to help them understand the requirements of the law and develop strategies for compliance.
  • Finally, it is important to stay up-to-date on any ongoing developments related to the Omnibus Directive, as this law is likely to evolve and change over time.

 

Our Tips for Ensuring Compliance with Omnibus Directive

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To make it a bit easier for you all, we created a short list of general tips you should pay extra attention to:

  • Make sure your company has a data privacy policy in place.
  • Ensure all employees are aware of the policy and understand their responsibilities regarding data privacy.
  • Regularly review the policy to ensure that it is up to date with the latest changes in data privacy law.
  • Guarantee that any third-party vendors you work with are also compliant with data privacy law.
  • Create a process for responding to requests from individuals who want to access their personal data.
  • Regularly audit your systems and processes to ensure that they are compliant with data privacy law.

Having listed all the generic issues, we encourage you to implement them immediately in your businesses and secure yourselves with clear processes regarding new laws.

 

New reality thanks to the Omnibus Directive

Although the provisions implementing the Omnibus Directive into Polish law have not yet entered into force, entrepreneurs should certainly already take steps to prepare their businesses for the upcoming changes. As the above article has shown, only in the area of changes related to information about the prices of goods, the new regulations, although short and - it would seem - relatively simple, will significantly affect the operation of shops. 

 

And, of course, this is not the end of the changes for entrepreneurs under the Omnibus Directive. The cross-sectional nature of the proposed solutions shows that adjusting to the new requirements will not be possible without a thorough analysis of a given entrepreneur's activities and cooperation between legal departments and marketing and IT teams. 

In the context of pricing regulations, an entrepreneur should take into account aspects such as the sales channels and price information techniques they use, the customers they target, whether they are part of a capital group or a franchise network, etc., when planning changes to their business. In fact, the whole concept of sales policy needs to be rethought, if only to decide whether to introduce, for example, a loyalty program or a type of promotion that has not been used so far with the entry into force of the new legislation.

If you want to know more about e-commerce sphere, read these articles:

  1. Mobile app creation mistakes. What your eCommerce needs to avoid?
  2. There is no ecommerce without the mobile app
  3. Why doesn’t your ecommerce pay off?