The Product Liability Directive (the PLD) was originally adopted in 1985 and established a European wide system of strict liability for people to claim compensation for damage caused by defective products. While this core piece of EU consumer legislation remains under review, the ongoing growth in online sales of products continues to give rise to questions about whether the existing EU product liability regime (including traditional concepts of contractual and tortious liability) can properly govern defective products sold via ‘online marketplaces’. Although a voluntary Product Safety Pledge for online marketplaces was introduced in 2018, and various large online marketplaces such as Amazon and eBay have signed up, other new and revised pieces of EU legislation are now placing a greater focus on strengthening protections for consumers shopping online. We take a look at some of the key developments while we continue to await an official proposal for an update to the PLD.

EU Market Surveillance Regulation

The EU Market Surveillance Regulation (MSR), which came into full force on 16 July 2021, aims to strengthen the current EU regime on market surveillance and also expressly extends to products sold online. However, related guidance issued by the European Commission clarifies that the MSR places no specific obligations on an online marketplace where it is only hosting the offer of a third-party seller. The MSR appears to align with the current regime provided for under the E-Commerce Directive (ECD) and reinforces the notion that an online marketplace is not required to monitor or vet sellers that are using it to direct sales activities to end users in the EU. However, there now appears to be an increasing push for stronger accountability for online marketplaces and online services more generally under further pieces of proposed EU legislation.

Draft EU Digital Services Act

In December 2020, the European Commission published the draft text of the Digital Services Act (DSA). One of the DSA’s aims is to reflect the vast changes in the online space since the ECD. The DSA will apply where recipients of services are based in the EU, regardless of the service provider’s place of establishment. It also:

• sets out due diligence obligations for online platforms, and ‘very large online platforms’ (which would also cover online marketplaces)

• obliges all providers of hosting services (including online marketplaces and other online platforms) to establish a mechanism for reporting illegal content and to state the reasons for content moderation decisions, and

• imposes specific obligations on all but the smallest of online platforms, including, for example, to:

  • set up complaint and redress mechanisms and out-of-court dispute settlement mechanisms, and

  • to ensure the traceability of business users via “know your business customer” obligations to ensure the traceability of sellers active on the platform

It further imposes additional obligations on very large online platforms with 45 million average monthly users or more, due to the “systemic” risks they are deemed to pose in terms of potentially spreading illegal content or harming society. This includes obligations to:

• meet risk management obligations

• submit to external auditing

• provide transparency of their content recommendation and ad targeting mechanisms, and

• share data with authorities and vetted independent researchers

Proposed General Product Safety Regulation

The European Commission also published a new draft Regulation on General Product Safety (the GPSR) on 30 June 2021. It is intended to substantially amend the existing General Product Safety Directive which has been in force since 2001.

The GPSR seeks to introduce specific new product safety obligations for online marketplaces given their place in the modern product supply chain. The GPSR would build on and be consistent with the DSA and would make some voluntary measures under the Product Safety Pledge mandatory. In addition, online marketplaces would also:

• be obliged to act with “due care” on product safety and to prevent the sale of dangerous products on their platforms such as setting up internal monitoring mechanisms for handling product safety issues and conducting additional due diligence for content hosted concerning the safety of products­

• be required to collect information relating to trader names, trademarks, addresses and other traceability information for all products listed on their platforms

• be required to establish a single contact point allowing for direct communication with market surveillance authorities on product safety issues and register a single contact point with the EU Safety Gate portal, and

• be obliged to respond to communications from the relevant market surveillance authority within binding timeframes eg two working days to act upon an order from a regulator referring to a dangerous product

Other Recent Developments

In the US, Amazon has recently announced its intention to resolve and pay for valid property damage and personal injury claims as a concession to customers affected by defective products sold by sellers through Amazon.com. This new scheme, which is an extension of the A-to-Z Guarantee return process that Amazon launched over 20 years ago, will be rolled out from 1 September 2021 onwards, and will generally be limited to claims under $1,000.

Meanwhile, the UK government recently carried out a consultation on the effectiveness of the UK’s existing product safety regime under the Consumer Protection Act 1987. The challenges raised by the huge growth in online selling was expressly identified as an important issue for consultation. The consultation phase has now closed, and an evidence paper is expected to be published by the end of August 2021.

Next Steps

Both the DSA and GPSR are still at the draft stage and will need to be assessed and discussed by the European Parliament and the European Council before they can be passed into law. Given the significant impact that they are expected to have on the EU liability regime for online marketplaces and other online platforms, interested stakeholders should closely monitor their progress to ensure they are up-to-date and prepared for whatever changes they ultimately provide for. Added to this, the outcome of the ongoing review of the PLD is expected to lead to important changes for the online sale of products in the EU and should also be monitored. The dynamic nature and global scope of online sales will also require stakeholders to carefully track ongoing developments in the US, the UK and any other jurisdictions where they have a significant footprint.

For more information on Product Liability & Safety, contact a member of our Product Regulation & Consumer Law team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.