European Commission proposal would grant new rights to consumers under the Green Deal

Other Authors     Kismet Johnson, Legal Consultant

The European Commission recently published a series of documents in the context of the Green Deal initiative. One of these is a proposal for a directive on consumer empowerment¹. With this proposal, the Commission seeks to deliver on its promise to ensure consumers have access to reliable, comparable and verifiable information on products to allow them to make more sustainable choices².

In this article, we look at the changes the proposal would bring. It is worth remembering that this is a complex area where different sets of rules – general and product specific – intersect. Furthermore, more initiatives are on the way, including a proposal on Green Claims³ –  scheduled for July 2022 – which is likely to introduce an extensive right of repair. The overall consumer-rights landscape is about to become a lot more complex as the Commission heralds its green transition.

How it fits into the consumer-rights landscape

The directive is due to amend two important EU consumer law directives: the directive on unfair commercial practices⁴ and the directive on consumer rights⁵.

• The directive on unfair commercial practices regulates what businesses can and cannot do when offering products to consumers. It prohibits any commercial practices, including advertising, that can materially distort the economic behaviour of the average consumer in relation to products, i.e., make them purchase products that they would not have otherwise purchased.
• The directive on consumer rights, on the other hand, determines what pre-contractual information must be provided to the consumer, including the existence of guarantees, in the context of both in-store and online trade.

The new proposal should therefore be read in conjunction with these directives, but also with the upcoming proposal on the substantiation of green claims and the revision of the directive on the sale of goods. The proposal for a regulation on eco-design and the Ecolabel directive are also particularly relevant in this context. Indeed, products bearing the Ecolabel shall be deemed to comply with the new consumer-empowerment and eco-design rules.

The Proposal

The consumer-empowerment proposal seeks to extend the requirements traders provide at the point of sale, expand the scope of misleading practices and ban certain practices. The Commission also provides definitions for some of the concepts it intends to introduce.

1.  Proposed Amendments to the Directive on Unfair Commercial Practices

• Somewhat helpful definitions: environmental claims, durability , etc.
  
  The proposal defines ‘environmental claim’ as “any message or representation, which is not mandatory under Union law or national law, including text, pictorial, graphic or symbolic representation, in any form, including labels, brand names, company names or product names, in the context of a commercial communication, which states or implies that a product or trader has a positive or no impact on the environment or is less damaging to the environment than other products or traders, respectively, or has improved their impact over time.”
  
  The definition is very broad and will likely cover any kind of statement that has anything to do with the environment.
  
  The proposal also provides definitions for ‘explicit environmental claims’, ‘generic environmental claims’ and ‘durability’, among others. But other important terms - such as social impact, sustainability – have not been defined.

• Expanding the scope of what is considered misleading
  
  Article 6.1 of the existing unfair commercial practices directive makes it a misleading practice to misrepresent certain key features of a product, such as its fitness for purpose, its origin or the results to be expected from use. The new proposal explicitly adds ‘environmental or social impact’, ‘durability’ and ‘reparability’ to this list.
  
  Behaviour mentioned under Article 6.1. is prima facie misleading; an assessment must follow to determine whether information provided by the trader is actually misleading in the specific circumstances of each individual case. It will only be considered misleading if it caused or would have been likely to cause an ‘average consumer’ to make a purchase which would not otherwise have happened.
  
  Article 6.2 of the existing unfair commercial practices directive provides two examples of behaviour which may be considered misleading: encouraging brand confusion and a failure to comply with codes of conduct to which the trader has undertaken to be bound. The new proposal adds another two, namely:

– making environmental claims related to future environmental performance of products that are not supported by clear commitments by the trader, as well as by objective and verifiable targets and an independent monitoring system to evaluate the progress towards the achievement of the commitments and targets;

– advertising products based on common features that are presented as distinctive while actually shared by all or the majority of similar products on a market, i.e. advertising the absence of a chemical or a material in a product where this chemical or material is actually never used in similar products.

An example of an environmental claim that is untethered to any independent system would be a claim promising carbon or climate neutrality by a certain date. Through such claims, traders may create the impression that consumers can contribute to a low-carbon economy via the purchase of the traders’ products. Such claims would only be considered acceptable if supported by clear and measurable objectives and independent monitoring. 

• Banned practices
  
  Unlike Article 6 and 7 misleading practices where a trader can ward of liability by proving an average consumer would not be misled, practices listed in Annex I of the directive are always considered misleading. The list of banned practices includes falsely stating that a product will only be available for a limited time, or using media content to promote a product where the content was paid for by the trader.
  
  The consumer empowerment proposal adds a number of practices to this list, including:

– displaying a sustainability label (trust mark or quality mark) which is not established by a public authority or based on independent third party verification system;

– making generic environmental claim that is not based on the so-called ‘recognised excellent environmental performance’ established in line with the relevant eco-labelling legislation or officially recognized schemes;

– making an environmental claim about an entire product when the claim only pertains to a part of it, and

– omitting to inform the consumer that a software update will have a negative impact on some features of a product, etc.

The ‘generic environmental claim’ is an interesting addition. Article 1 of the proposal defines it as ‘any explicit environmental claim, not contained in a sustainability label, where the specification of the claim is not provided in clear and prominent terms on the same medium’. The definition is a little obscure. Thankfully recital 9 of the proposal provides some examples of the statements the Commission has decided to target. These include ‘environmentally-friendly’, ‘climate neutral’ and ‘conscious’, to name just a few. But if a product fulfils EU Ecolabel requirements, it shall be considered compliant with the consumer empowerment directive⁶

2.  New information requirements introduced into the consumer rights’ directive

Articles 5 and 6 of the existing consumer rights directive provide a series of information requirements a trader must comply with when selling goods or services to consumers. This entails providing the consumer with details regarding the main characteristics of the goods or services, the price and the existence of a guarantee, among others. 

The new consumer empowerment proposal would add requirements pertaining to product durability and reparability. These entail, among others, that a consumer must now be informed of the existence of an extended commercial guarantee exceeding two years and covering the entire product.

Where digital goods are concerned, a trader must mention the minimum period during which software updates will be provided, if the manufacturer has made this information available. And finally, the reparability score is a new feature. It is defined as ‘a score expressing the capacity of a good to be repaired, based on a method established in accordance with Union law’. It is still to be determined which method should be used and how.

Observations

The intentions underpinning this proposal are laudable. On the one hand, European consumers are increasingly intent on doing their bit for the environment. For many, their scope of action is limited to the purchasing decisions they make. It is therefore important that these decisions are made on the basis of information that is accurate and verifiable. This is even more important bearing in mind the premium prices consumers pay for so-called environmentally friendly products. On the other hand, companies that go through the hassle and expense of certification should be able to expect a level playing field. They shouldn’t have to compete against traders who make grandiose claims they don’t have to account for.

It will be interesting to see how environmental claims that fall short are dealt with. On the one hand, new Article 6.1. of the unfair commercial practices directive makes environmental impact one of the characteristics in regard to which traders can mislead consumers. On the other hand, Annex I of the directive introduces new bans on certain environmental claims, including ‘generic’ claims. The question is whether an environmental claim will ever have a chance at redemption under Article 6.1 – where the average consumer test applies – or whether it will automatically be caught by the wide scope of Annex I. The Unfair Commercial Practices Guide⁷ states that – under Article 6.1. – traders should not make general and vague statements of environmental benefits. But surely these types of statements are now better dealt with under Annex I. In short, faced with so much uncertainty, it would seem that the safest way for traders to proceed would be to adopt EU-approved certification, such as the Ecolabel.

Making claims about a product’s social impact is another area to watch out for. A social impact claim is, for example, claiming that a disadvantaged group benefits from purchasing a product.  Most would agree social impact is quite a vague concept. The Unfair Commercial Practices Guide doesn’t mention social impact, let alone provide a definition. Searching for one, we came across a Study on Social Impact Assessment written by the Centre for European Policy Studies which concluded that ‘the term ‘social impact’ is potentially so broad that it means little to non-specialists’⁸. The OECD doesn’t seem to have had more success, writing in 2015 that ‘while there is a growing consensus about the broader framing of social impact investment, there is significant debate about [its] definitional scope’⁹. In short, we look forward to the Commission’s guidance on this matter. In the meantime, businesses who boast about the social impact of their products should proceed with caution.

Finally, as this is a proposal for a directive, Member States will have to transpose these measures before they become effective. This could lead to – temporary – divergences between different European markets.

How we can help

The Mayer Brown EU regulatory team has in-depth experience in consumer protection legislation, product advertising and claims. We work with a broad range of companies, industries and trade associations to stay abreast of legislative changes and to devise response strategies to sustainability challenges in an ever-shifting regulatory environment. Our team stands ready to advise on the practical implementation and potential implications of the proposal for a Directive on consumer empowerment and other related regulations that are part of the European Green Deal’s package of policy initiatives.