New EU Consumer Protection Co-operation Regulation comes into force

Published on 02 June 2020

What does the revised EU Consumer Protection Cooperation Regulation (CPC) mean for traders and consumers?

The key takeaway
 
The CPC was introduced by the European Commission to ensure compliance with consumer legislation across the EU and increase legal certainty, especially for traders and consumers engaged in cross-border activities. It strengthens the powers of national authorities to detect irregularities and take speedy action against traders operating in the e-commerce environment. Authorities should now be able to act faster, save costs and operate via a single coordinated procedure.

The background

The CPC came into force on 17 January 2020. It is intended to address wide-scale problems such as the fact that almost 70% of cross-border consumer complaints relate to e-commerce transactions. The CPC improves the previous EU-wide cooperation framework which enabled national authorities to work together to address breaches of consumer protection law in cases where the trader and the consumer are in different EU countries. 

The development 

The CPC introduces the following solutions, to ensure that cross-border infringements of EU Consumer law are detected and dealt with: 
  • it connects the European national authorities responsible for enforcing consumer protection laws to form the ‘CPC Network’. The CPC Network enables authorities to share best practices and provides a mutual assistance mechanism (as introduced by the previous Regulation EC 2006/2004 and adopted in the CPC)
  • all national authorities gain a minimum level of investigation and enforcement powers to enforce EU consumer laws. National authorities are now allowed to order the takedown of websites, order the restitution of profits or damages to consumers, and request information from domain registrars, internet service providers and banks to identify the infringing trader
  • it provides for the right to take action against previous infringements, subject to a limitation period of five years and introduces the following two categories of infringements to allow for a more effective response from national authorities: 
– widespread infringements: Member States will be required to launch coordinated action in cases of infringements of EU consumer law affecting at least two Member States
– widespread infringements with a EU-wide dimension: the Commission will coordinate any necessary actions itself and liaise with the relevant national authorities in cases of infringements which affect at least two-thirds of Member States and two-thirds of the EU population
  • national authorities are required to alert the Commission and other national authorities if they suspect an infringement in their territory that may affect other Member States. Consumer and trader organisations will also be given the opportunity to alert the competent authorities and the Commission.

Why is this important?

National consumer authorities’ investigation and enforcement powers are now broad, including financial penalties for infringements covered by the CPC, which can be up to at least 4% of the trader’s annual turnover in the respective Member State or based on the trader’s worldwide turnover. However, the CPC does not stipulate an EU-wide penalty regime and therefore the same domestic penalty regimes will apply. National authorities also have powers to order websites or social media accounts containing scams to be corrected, obscured or removed. It can also request information from domain registrars, internet service providers and banks to track financial flows and find out the identity of those behind bad practices. However, such powers will be limited by a strict proportionality test. This means that the use of powers must be necessary to avoid the risk of serious damage to the collective interests of consumers and may only be used if no other effective means are available. 

Any practical tips?

It’s not just the GDPR which contains the potential for huge fines by national authorities. The CPC may prove to be a highly effective weapon in forcing traders to curb wrongful trading which occurs on a cross-border basis. EU-wide traders should pay close attention and check that their web-based activities don’t land them in (very) hot water.

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