Consumer Protection Issues During COVID-19
23 July 2020
The COVID-19 pandemic has completely transformed the way in which traders operate globally as business moved online during the strict lockdown periods which has led to an increased focus on the robustness of consumer protection law throughout the EU. Media coverage has widely reported the increase in consumer scams and illegal marketing practices from online selling. In addition, cancellation of services, travel and events has led to a ramp up of enquiries at Consumer Support Centres throughout the EU as consumers want to seek redress for their cancelled services while heavily affected industries have lobbied for changes to refund rules.
We look at some of the consumer protection issues that have become particularly relevant during the COVID-19 pandemic and review the recent guidance published by the Irish Competition and Consumer Protection Commission (CCPC). In addition, we review recent enforcement action taken by the Consumer Protection Cooperation Network (CPCN).
Amending consumer terms and conditions
The Unfair Contract Terms Directive, as implemented in Ireland by SI 27/1995 Unfair Terms in Consumer Contracts Regulations(Unfair Contract Terms Regulations) is one of the most significant aspects of consumer legislation as it provides that consumers will not be bound by a contract term if it is deemed to be unfair to them. This will typically apply where the term is contrary to the requirement of good faith or if it causes a significant imbalance of the parties’ rights and obligations under the contract, to the detriment of the consumer.
Schedule 3 to the Unfair Contract Terms Regulations provides a non-exhaustive ‘grey list’ of contract terms which may be found to be unfair. However, there has previously been some confusion as to other types of provisions that might constitute unfair terms. This has been an area of particular focus since the start of the COVID-19 crisis as many businesses are in a position where they are unable to provide their goods/services and are seeking to rely on protections in their terms and conditions, e.g. by providing vouchers instead of refunds.
On 15 June 2020, the CCPC published guidelines for businesses to ensure that consumers are adequately protected and are not bound by unfair terms in consumer contracts. It provides additional details around the types of circumstances where unfair terms may arise in contracts and some additional clarity for both businesses and consumers around the scope of what is and is not permissible during the current crisis.
Guidance on producing and selling face coverings in Ireland
On 2 June 2020, the CCPC published guidelines to assist traders in placing safe and legally compliant consumer face coverings on the market. This guidance explains the difference between PPE masks and face coverings and seeks to clarify some of the confusion which has arisen. Current advice by the Irish Government recommends that members of the public should wear a face covering in public where it is difficult to maintain a social distance of at least 2 metres, such as on public transport and in retail shops. PPE face masks are intended primarily for use in the healthcare sector.
The National Standards Authority of Ireland (NSAI) has set out the minimum requirements for the design, manufacture, packaging, marking and labelling of face coverings to be worn by consumers. Producers should be aware that face coverings should not be either explicitly or implicitly sold as PPE or medical devices. In relation to the marketing communications that accompany face coverings, the NSAI Guidance clearly states that the face coverings’ packaging, labelling or advertising must not contain claims that they protect, or are intended to protect the consumer from contracting COVID-19 as these claims are likely to mislead consumers and will be regarded as a misleading commercial practice under consumer protection law.
Consumer protection ‘common position’ during COVID-19
The Consumer Protection Cooperation Regulation 2017/2394 (CPC Regulation) came into effect in January 2020 and provides national authorities with stronger enforcement powers against traders and improves mechanisms for cooperation.
The CPC Regulation sets out the enforcement powers which every EU member state must give to their consumer protection authority, including:
- The ability to carry out test purchases and act as a ‘mystery shopper’
- Request information from domain registrars and banks
- Order online platforms to delist traders or search engines to delete entire websites or remove online scams
- Assist consumers in obtaining compensation from traders
Alongside the growth in online shopping, the Commission has recently encountered an increase in deceptive marketing techniques. In March 2020, the Commission issued the CPC Common Position on COVID-19 in consultation with consumer protection authorities, which outlines the most common scams, fraudulent claims and misleading commercial practices. The main issues identified include:
- Pressure selling techniques by using phrases such as “selling out fast” or are in “limited supply” in order to convince consumers to buy more and/or paying a higher price for products
- Misleading advertising relating to unsubstantiated claims being made that a product offers a consumer protection and or health benefits against contracting COVID-19
- Excessive pricing on products as consumer demand surges
The Unfair Commercial Practices Directive, which was transposed into Irish law by the Consumer Protection Act 2007, prohibits commercial practices which deceive consumers about the benefits or the results to be expected from the use of a product. For example, this would apply where a trader claims that a product can cure COVID-19 when this is unsubstantiated by evidence or where it is claimed that the product is only available for a very limited of time when this is not true.
The Commission aims to identify illegal practices, remove them and prevent similar ones from reappearing. On 23 March 2020, the Commissioner for Justice and Consumers, Didier Reynders, wrote to a number of online platforms and social media organisations to require their cooperation in taking down scams from their platforms. In response, these platforms and marketplaces have agreed to measures in collaboration with national authorities. The scale of these issues has been significant. For example, one online platform was required to remove more than 15 million listings.
Enforcement action taken by the CPCN
The CPCN have carried out online investigations or general ‘sweeps’ of online platforms/websites in a coordinated manner to identify breaches of consumer law across EU member states. The aim of these sweeps is to assess conformity of online listings, identify issues and to prevent future violations of EU consumer law. Recent examples highlighted prices and discounts in online shopping, delivery conditions and withdrawal rights. At the conclusion of the general sweep, each website is informed of consumer law issues and told to make corrections. The effectiveness of these sweeps cannot be overstated. For example, in 2018, the CPCN carried out a sweep on price transparency and drip pricing. Before the sweep, 45% of swept websites were compliant with EU consumer law and after the sweep 78% of companies complied with consumer law.
For cross-border online sales, the CPC Regulation introduced at the start of 2020 has stepped up the powers of national authorities in cross-border situations. Authorities will be able to request information from banks to detect fraud, carry out test purchases to check geographical discrimination or withdrawal rights and to order the removal of online content hosting systems.
Since the outset of the COVID-19 pandemic, consumer protection issues have come into much sharper focus as the regulators step up efforts to ensure consumers are not subjected to exploitative marketing efforts and are protected from sub-standard or dangerous products. The reform of consumer law has been one of the key pillars of the EU’s Digital Single Market reforms and the legislative reforms coming on-track over the next 18 months will have a transformative effect in this area.
Even without the enhanced legislative rules being in place, it is clear from the COVID-19 pandemic that EU consumer protection authorities will not tolerate opportunistic and exploitative conduct by traders. The increased focus on enforcement in the CPC Regulation will help strengthen coordinated enforcement across the EU member states. The CCPC has also responded to marketing and advertising practices and indicated that it is very alert to illegal commercial practices which may harm consumers, especially vulnerable consumers.
For more information and expert guidance in navigating these challenging issues, contact a member of our Commercial team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.