Who: European Union
Where: EU
When: The new law is expected to come into force in early 2022
Law stated as at: 3 May 2019
What happened:
The EU is planning a series of wide- reaching updates to consumer law, referred to as the “New Deal for Consumers”. The latest draft, which is waiting for formal approval, also makes some changes to advertising law. In particular, certain commercial practices will be “blacklisted”. The practices that will be blacklisted include the following:
- not identifying ‘paid for’ search results as advertising;
- reselling tickets which have been acquired by using automatic systems in order to avoid limits on ticket sales to one individual;
- presenting reviews as from a consumer who paid for the product and actually used without conducting reasonable and proportionate checks to ensure this is the case; and
- misrepresenting “social endorsement” as from a consumer when it is not for the purposes of promoting a product.
Blacklisted advertising activities are automatically considered unfair and therefore banned outright. In most cases, breach of this ban is a criminal offence punishable by an unlimited fine and/or up to two years in prison for the offender. This can include officers of the company.
Why this matters:
Most of the practices added to the blacklist were already generally accepted as constituting misleading advertising. The one exception to this is the online reviews. The current law on online reviews suggests that online reviews must not be “fake”, in the sense that they must genuinely be written by a consumer, and any commercial interest must be disclosed. However, until now, there has been no obligation on online platforms to undertake appropriate due diligence to ensure that the reviewer paid for and used the product. It is not yet clear what a “reasonable and proportionate check” means in this context but it is certain that this will have wide-reaching implications for websites that publish a high volume of reviews as it is likely they will need to set up new processes to meet this legal obligation.
The change will also mean that, under the new regime, it will not be necessary for a prosecutor to prove that the practices were misleading and likely to induce a transactional decision. Rather, these become a strict liability offences – prosecutors will simply have to prove the practice happened. This is particularly significant as there are proposals at both a UK and an EU level to increase the sanctions for breaches of consumer law. For example, as part of the New Deal for Consumers, the EU is proposing fines of up to 4 percent of a company’s turnover in the affected member states or up to €20,000,000. In the UK, the Competition and Markets Authority, which enforces consumer law, is seeking the power to impose civil fines directly.
In practice, fines for breaches of consumer law are already increasing. In April this year, Warwickshire trading standards successfully prosecuted a butcher for misleading advertising and breaches of consumer law. The butcher will now have to pay nearly £500,000 as a result of the fines, as well as costs and a confiscation order.
