Digital consumer protection: current case law and European legislation

Contrary to intentions to cut red tape that have been expressed at national and European level, digital consumer protection law is becoming more and more complex. Mandatory consumer rights, extensive notification and transparency obligations and detailed requirements for standard terms and conditions (T&C) are increasingly challenging for businesses. Designing compliant digital business models requires expertise, diligence and continual updating. Failure to comply with legal requirements can result not only in the loss of a right and/or collective redress (such as class actions), but also potentially in heavy fines (only in German).

Recent developments in the law on withdrawal

When navigating the jungle of national and European consumer protection law, it is all the more important to be up to date on all relevant issues and follow the latest case law in every detail. One of the most important issues is and remains the statutory right to cancel distance and off-premises contracts (right of withdrawal). Only last year, the German legislator revised the requirements for withdrawal information (only in German) and published new model withdrawal information; now, it is only possible to limit the withdrawal period to 14 days by using withdrawal information based on this model (“presumed legality” (Gesetzlichkeitsfiktion) or “protection by model” (Musterschutz)).

In December 2022, the German Federal Court of Justice (Bundesgerichtshof) (FCJ) again made it clear that even the slightest deviations from the statutory model withdrawal information negate this presumed legality (FCJ, judgment dated 1 December 2022 – I ZR 28/22 (only in German)). The disputed information provided two options as to the parties to whom the withdrawal should be addressed. This made the information contradictory and generally unclear, as first the name and contact details of only one recipient were given in order to validly exercise the right of withdrawal (“You must contact us”), but later (“Please address your withdrawal to [...] or [...]”) the contact details of an additional recipient were given. The practical consequence of this is a clear recommendation not to deviate from the model wording, as even the slightest deviation poses a risk to the presumed legality of the instructions.

In October 2023, the European Court of Justice (ECJ) ruled that no new right of withdrawal arises when a distance subscription contract is automatically renewed after a free trial period (ECJ, judgment dated 5 October 2023 – C-565/22). This establishes the general principle that a consumer has only one right of withdrawal. However, when the contract is concluded, the business must inform the consumer in a clear, comprehensible and explicit manner that payment for the subscription will be due after the free trial period (“trial subscription”). The ECJ’s decision provides more legal certainty for businesses offering such subscription models.

EU consensus on withdrawal button

A change with far-reaching practical consequences is already looming on the horizon. In the future, the exercise of a right of withdrawal is to be simplified by a withdrawal function or button (only in German) on the user interface (website) of the provider. The European Council and the European Parliament have reached a consensus on this in their proposal for a Directive concerning financial services contracts concluded at a distance. It adds a new Article 11a to the Directive 2011/83/EU on Consumer Rights which, contrary to previous intentions, makes the new provision applicable to all online consumer transactions. In addition, according to Article 6, paragraph 1, point (h) of the Consumer Rights Directive, a new precontractual information obligation is to apply in relation to “the existence and placement of the withdrawal function”. However, the Directive does not provide for sanctions in the event of failure to provide this information or its incorrect provision.

Buttons have become a standard tool in digital consumer protection. The first one was the “order button” mentioned in Section 312j of the German Civil Code (Bürgerliches Gesetzbuch), which was designed to ensure that consumers understood that they were about to enter into a contract by using unmistakable labels such as “Order and Pay (zahlungspflichtig bestellen)”. At the national level, the German legislator went a step further in 2022 with its Act on Fair Consumer Contracts (only in German) (Gesetz über faire Verbraucherverträge) by introducing the “termination button” in Section 312k of the German Civil Code (Bürgerliches Gesetzbuch) (only in German). Many businesses still have problems with the implementation. In January 2023, a study by the Federation of German Consumer Organisations (only in German) (Verbraucherzentrale Bundesverband) concluded that 72% of the nearly 3,000 websites they surveyed had not implemented the termination button as required by law.

The situation is similar for the new requirements for termination clauses. In a comprehensive “market check” (only in German), Consumer Organisations and Bavaria’s Consumer Service Centre (Verbraucherservice Bayern) checked more than 800 companies and found a total of 167 violations at 116 companies, which were subsequently warned.

The scope of the future “withdrawal function” goes far beyond that of the termination button, as it covers not only recurring payment obligations, but also all consumer contracts concluded via online user interfaces, and thus also in particular all purchase contracts in electronic B2C transactions. Therefore, the importance of the practical implementation of this amendment should not be underestimated. It is advisable to start planning the technical implementation at an early stage.

Since the Council approved the European Parliament’s position on 23 October 2023, the Directive has been adopted. After being signed by the President of the European Parliament and the President of the Council, the Directive will be published in the Official Journal of the European Union and will enter into force on the 20th day following its publication. This is the start of the 24-month implementation period for the Member States. National laws will become applicable 30 months after the Directive enters into force. This means that businesses will likely have to provide consumers with compliant withdrawal buttons sometime in 2026.

Other current issues in consumer protection law

Directive (EU) 2020/1828 on representative actions has just recently been implemented. As of 13 October 2023, certain consumer protection associations have been entitled to assert the claims of a number of consumers against a company in collective actions (collective action for redress). However, the practical significance of the new representative action is not yet clear, as many questions remain unanswered.

Another European legislative proposal concerns the repair of goods. On 22 March 2023, the European Commission presented a Proposal for a Directive on common rules promoting the repair of goods, which in particular provides for a “right to repair” throughout the entire lifetime of certain products. According to the standard legislative procedure, the proposal has to be approved by the European Parliament and the Council. The Committee on the Internal Market gave its green light on 25 October 2023.

In addition, Directive (EU) 2019/882 on the accessibility requirements for products and services sets out specific requirements for making certain products and services accessible to people with disabilities. In order to comply with this Directive, the German legislator has passed the German Act to Strengthen Accessibility for People with Disabilities (Barrierefreiheitsstärkungsgesetz) (only in German), which will, among other things, ensure that websites and services are accessible in online transactions as of 25 June 2025.

Finally, consumer protection also plays an important role in the EU’s new Digital Services Act (DSA). As of 17 February 2024, Article 6, paragraph 3 of the DSA establishes the liability of online platforms towards consumers, even if the platforms themselves do not offer any products or services for sale, but an average consumer may assume that the platform is the other contracting party or at least supervises the company in question. In addition, Articles 30 to 32 of the DSA contain specific due diligence obligations for online platforms that enable consumers to enter into distance contracts with businesses.

 

This article is part of the "Update Commercial 2024". All insights and the entire report as a PDF can be found here.