Latest update: Sept. 27, 2021
Traders who sell to consumers are required to follow and respect the rules and requirements set out in the consumer protection regulatory framework at EU and national level. These requirements are often to a certain extent harmonized throughout the EU to allow for greater free movement of goods and services within the European single market with the member states of the EU adding in some cases additional or more strenuous requirements. The regulatory framework grants consumers protection against unfair commercial practices and unfair contract terms which gives consumers rights such as the right to withdraw, and more. The rules cannot be limited or excluded – to do so would not be binding.
A good starting point is to define a consumer. A consumer is generally a natural person who purchases a product (good, service, digital content) for purposes which are not related to their trade, profession or business. As you can see a consumer can only be a physical person, not a legal person.
A trader is generally a person, whether a natural or legal – such as a company - person, who acts for purposes related to their trade, profession or business.
One of the central rights of a consumer is to receive certain information before entering a contract with a trader. This information is required in order for the consumer to make an informed decision about entering the contract. This information must be clear, legible and easy for a consumer to read and understand. Depending on the manner the contract is entered, the information may also be required to be given in a particular manner or form. In certain EU member states, the information must also be given in the national language of the country.
The information to be given depends on certain factors. One is how the contract is being entered with the consumer, whether it is being entered
Another factor affecting the information to be given is the topic of the contract, with certain business sectors being subject to specific requirements, such as consumer credit agreements.
Consumer protection law in the EU grants consumers the right to withdraw from a contract concluded at a distance or off-premises without giving any reasonwithin 14 days from the consumers receipt of the good or from conclusion of the contract for the service or digital content. This is often also referred to as the ‘cooling off’ period.
Traders must provide consumers with information about this right as part of the pre-contractual information. Traders must inform consumers that they have this right and in what situations, if applicable, the consumer will lose this right. Traders must also inform consumers as to how they can exercise this right, what the obligations of the trader and consumer are in the event the consumer exercises this right and provide the consumer with the so called, model withdrawal form.
Failure of the trader to do so will result in the consumer being granted a right to withdraw for 12 months from the end of the initial withdraw period or if the trader informs the consumer within 12 months from the period of time the right to withdraw began, 14 days after the day the consumer is correctly informed by the trader of their rights according to the law.
It is important to note that not all consumer contracts are accompanied by a right to withdraw. Firstly, the contract between the trader and consumer must have been concluded at a distance or off-premises. Secondly, the law provides a list of contracts which do not benefit from a right to withdraw, some of which include, goods that have been personalised for the consumer at the consumer’s request, e.g. a tailor-made suit jacket, supply of sealed goods which are not suitable to be returned for health and hygiene reasons and were unsealed following delivery (i.e. some cosmetics) and contracts concluded at public auction.
This is by no means a full list, the full list of exceptions can be found in the legislation (for SE: the act on distance agreements and agreements outside of business premises (Lagen om distansavtal och avtal utanför affärslokaler).
European and national law provide consumers with a legal guarantee for conformity of goods. This means that goods sold to consumers must correspond to what was advertised or sold by the seller. This is a mandatory guarantee but is not harmonised throughout the entire EU. EU law provides a minimum level of protection, a minimum of 2 years which national law can go beyond or increase. In Sweden, this has been used and the legal guarantee for conformity of goods is for a period of 3 years.
The legal guarantee gives consumers certain remedies in the case the product they have purchased does not correspond to what was promised by the seller. To bring the product into conformity the consumer may request the trader either repair or replace the product or, if this is impossible or disproportionate for the trader, for a reduction in price or termination of the contract. There are different rules in the different member states of the EU concerning a consumer’s free choice of these 4 options, which are important for traders to understand and prepare for.
It is important to pay particular note to the difference between the legal guarantee or statutory guarantee and a commercial guarantee, sometimes called ‘warranty’. A commercial guarantee is an additional guarantee to the legal guarantee, provided by the seller or often the producer of the good. It can cover other issues than that covered by the legal guarantee and can be offered free of charge or against a price. It is not uncommon to see producers offer free maintenance or repairs a licenced shops worldwide, for example. It is really important that the difference between these guarantees is understood by traders. A legal guarantee can under no circumstances, whether intentionally or unintentionally, be confused with or presented as, a commercial offering. This would be considered as an unfair commercial practice. Commercial guarantees must offer something more than that covered by the legal guarantee. Further where a trader offers a commercial guarantee, they must also inform the consumer of the legal guarantee, as required by law.
Please note that from 2022, there will be a change to the legislation governing legal guarantees. The legal guarantee will also, from that time, apply to digital content and services.
EU law provides strict rules to protect consumers from unfair commercial practices, which are practices, which when taken by a trader prevents consumers from making fully informed and free economic decisions. Commercial practices are defined very broadly and include acts, omissions, representations and commercial communications, such as advertising which impact a consumer’s economic decision to purchase or not, a good or service. The rules on unfair commercial practices apply regardless of how a trader sells and to all types of goods and services. The rules therefore apply to anyone, no matter what they’re selling. Such practices are banned across the EU. With the exception of financial services and real estate property, the rules on unfair commercial practices are the same across all EU member states.
The rules ban, misleading commercial practices – misleading actions such as misleading action based on false information, stating a food product does not contain additives but does or information that is factually accurate but presented in a misleading manner, and misleading omissions such as advertising a service or product at a certain price without informing of the additional charges applicable, aggressive commercial practices such as harassment or coercion and also lists practices which are in all situations considered to be unfair, the blacklisted commercial practices.
Please note that the rules on unfair commercial practices will be updated and amended in 2022.
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EU law further protects consumers by providing protection against standard contract terms which are unfair to consumers and provide an imbalance between the consumer and the trader which is to the detriment of the consumer.
The law concerns standard terms – terms which are not individually negotiated but drafted in advance - implying the consumer didn’t have the possibility to influence the terms. The law does not apply to contract terms which reflect mandatory legal requirements or contract terms concerning the price or remuneration (it is up to the consumer to decide whether they are getting value for their money) or subject of the contract (the nature or characteristics of the subject of the contract) as long as these terms have been drafted in plain, intelligible language.
The law provides a non-exhaustive list of terms which could be considered as unfair and also states that in the case a term is not clear, the interpretation to be used is that which is most favourable to the consumer.
Finally, in the case where a term in a contract is considered to be unfair, the term will not be binding but the contract should remain should it be possible without the unfair term(s).
As with many other pieces of law, the member states of the EU can adopt stricter rules than that laid out in the EU law. This means that the requirements can differ per country a trader sells in. Please also note that the rules on unfair contract terms will be amended in 2022.
While the rules governing consumer protevtion in the EU and member states can seem overwhelming, having a good overview of the legislative landscape can support traders in understanding their obligations, their rights and the processes they need to put in place to meet these requrements. Traders who do not fulfil the requirements can be subject to fines under a country’s national law, being required to afford consumers additional rights and not least a damaged reputation. We are more than happy to support and offer advice to traders of all sizes selling, or intending to, throughout the EU.