Commercial

New rules on European consumer sale and warranty terms effective from Jan 2022 need urgent actions

The changes introduced by new European consumer laws require significant amendments to terms and conditions and warranty terms on the sale of consumer goods, including digital goods and services, which will be effective as of January 1, 2022.

In the implementation of Directive (EU) 2019/771, EU Member States, including Italy, have to introduce several changes to their legislation on consumer protection. Below are the most relevant amendments:

Scope of application of the amendments to European consumer laws on the sale of goods

The amendments apply to sales contracts concluded between consumer and seller both online, through any means of distance communication, and through traditional marketing channels, analyzing aspects such as the conformity of goods/services to the contract, warranty terms, remedies in case of lack of conformity, the manner of exercising such remedies and conventional guarantees.

It follows that any company involved in a B2C business must take this into account.  However, even companies that have a B2B business with their goods/services then resold by distributors to consumers will need to analyze the impact of the changes because their distributors will require them to provide the warranties to protect themselves against consumers.

There are special applicable rules for digital goods and services that we analyze in the second part of this article.

The consumer warranty of conformity of goods to the contract is strengthened

The new EU consumer rules strengthen seller’s obligations regarding the suitability of the goods to consumers’ needs, the conformity of the goods to the description, to public statements (e.g., also advertisements and statements made during the sale might trigger obligations), or even the sample to be provided, the completeness of the material and accessories to be provided and the characteristics of the goods/services sold.

This circumstance is a significant change from the common law approach of providing goods “as is” without any guarantee or representation of conformity.  In addition, the changes are intended to prevent consumers from having to discover additional “hidden” costs to make full usage of the features of the sold goods.

Moreover, with respect to goods/services with digital elements, the seller becomes obliged to provide the consumer for a reasonable period of time with updates that are necessary to ensure the conformity of the good/service sold, including informing the consumer of the availability of such updates.

Seller’s consumer goods liability and warranty regime becomes more onerous

As under the previous consumer goods warranty regime, the seller is liable to the consumer for any lack of conformity existing at the time of delivery of the goods that becomes apparent within two years of that time.  However, in the case of the supply of digital goods and services lasting more than two years, this liability extends for the entire supply duration.  Conversely, in the case of used goods, the liability may be reduced to at least one year.

However, the consumer’s action to assert defects is time-barred in 26 months from delivery of the goods, unless the seller has fraudulently concealed the defects.

The presumption that a defect of the delivered goods already existed at the time of delivery is extended from 6 months to one year and for the entire duration of the supply in the case of digital goods and services unless this assumption is incompatible with the nature of the goods or the nature of the lack of conformity.  It creates, therefore, an inversion of the burden of proof on the seller about the presence of the defect at the time of delivery and therefore its responsibility.

The remedies available to consumers in case of a defect of conformity of goods remain unaffected with the right to either require the restoration of conformity, receive a proportional reduction of the price, or demand the termination of the contract with a refund of the full price.  However, it is expressly provided that the consumer may refuse to make payment of any part of the price until seller has fulfilled its obligations under the warranty.

The obligations arising from any conventional guarantee also become more onerous.  If the terms set forth in the conventional guarantee statement are less advantageous to a consumer than the terms set forth in the associated advertising, the conventional guarantee binds the seller in accordance with the terms set forth in the advertising relating to the conventional guarantee.  This applies unless the associated advertising has been corrected prior to the conclusion of the contract in the same or similar manner as in which it was rendered.

Special rules for the sale of digital goods and services to consumers

Regarding digital services and content, the EU Directive (EU) 2019/770 introduces further changes, which will again come into force on January 1, 2022.

The new provisions state that the seller has fulfilled the obligation to supply when

  • the digital content or any suitable means of accessing or downloading the digital content is made available or accessible to the consumer, and
  • the digital service is made accessible to the consumer or to a physical or virtual facility chosen by the consumer.

The obligations introduced for digital services and content are substantially similar to those in the above provisions concerning the sale of goods.  However, there are specific provisions concerning the modification of the digital content or service by the trader, which can only take place

  • if provided for in the general terms and conditions with a valid reason,
  • the change is made without additional cost to the consumer,
  • the consumer is informed clearly and understandably of the change; or
  • if the change adversely affects the use of the digital good or service, the consumer is informed, a reasonable time in advance on a durable medium, about how and when the change is made and about the possibility of withdrawing from the contract or about the possibility of retaining the digital content or digital service without such a change. In case of withdrawal from the contract, the consumer is entitled to receive a refund of the amount paid.

This last provision is onerous for digital goods and services management.  Companies must prove that the changes do not adversely affect consumers’ rights.

Consumer rights are mandatory

It is expressly stated that consumer rights cannot be waived.  Any agreement aimed at excluding or limiting consumer rights to the detriment of the consumer, even indirectly and through the indication of the legislation of a country outside the European Union, is null and void.

In addition to the nullity of the clause, it will be necessary to assess the possibility of possible actions for damages by consumers, also in light of the broader scope of the new form of class action provided for by several EU countries like Italy.  Moreover, as happened in the past, if the contractual terms do not recognize consumers their rights, in Italy, the antitrust authority could consider the conduct as an unfair commercial practice with a fine of up to € 5 million per breach.

What must companies do to comply with the new consumer protection rules?

As a consequence of these changes, we expect that the general terms and conditions of sale of both digital and physical goods and services will have to be modified.  Moreover, the obligations introduced by the changes to EU consumer protection rules also have operational consequences concerning the services that must be provided to customers and financial.

Time is short because the new provisions will come into force from January 1, 2022. So companies cannot afford further delays.

It may also be of interest the article “What is an NFT: speculative bubble or next digital revolution?“.

Photo by Headway on Unsplash

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Giulio Coraggio

I am the location head of the Italian Intellectual Property & Technology department and the global co-head of the IoT and Gaming and Gambling groups at the world-leading law firm DLA Piper. IoT and artificial intelligence influencer and FinTech and blockchain expert, finding solutions to what's next for our client's success.

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