Italian Consumer Law Update - Amendments to the Unfair Commercial Practices Directive

On 26 August 2022, the European Delegation Law 2021 (Law 127/2022, the "EDL") was published in the Italian Official Gazette. The EDL implements the Omnibus Directive (Directive (EU) No. 2019/2161) which is designed to modernise consumer protection rules and improve enforcement of these rules in the EU. The EDL will enter into force on 10 October 2022. 

Pursuant to Article 4 of the EDL, the Italian Government shall adopt legislative decrees to implement the necessary changes to the Italian Consumer Code within 12 months of the EDL entering into force.

Key takeaways 

• The Omnibus Directive introduces amendments to four Directives which offer protection to consumers when purchasing goods and services.
• A number of these changes reflect the growth in e-commerce, including expanding key definitions to cover digital services and digital content.
• One of the key goals of the amendments is to promote transparency by reducing the scope for misleading information. Key changes include ensuring: (i) consumers using online marketplaces understand with whom they are contracting, (ii) consumers have access to information about how rankings are determined and (iii) consumers understand whether reviews are written by genuine customers and if any contractual relationship may have influenced the review.
• The Omnibus Directive also introduces a blacklist of commercial practices that will be considered to be unfair, including commissioning fake reviews.

What is the Omnibus Directive? 

The Omnibus Directive is part of the New Deal for Consumers in the EU and aims to strengthen consumer protection, by amending the following four Directives:

• The Unfair Commercial Practices Directive (2005/29/EC).
• The Consumer Rights Directive (2011/83/EU).
• The Price Indications Directive (98/6/EC).
• The Unfair Contract Terms Directive (93/13/EEC).

In this post, we will provide a brief overview of the key changes to the Unfair Commercial Practices Directive by the Omnibus Directive.

Key changes to the Unfair Commercial Practices Directive

The Unfair Commercial Practices Directive defines the unfair business-to-consumer commercial practices that are prohibited in the EU. It applies to any act or omission directly related to the promotion, sale or supply of a product by a trader to consumers and protects the economic interests of consumers before, during and after a commercial transaction has taken place.

Definitions 

In line with the evolution of technology, the definition of "product" has been amended to include "digital services" (e.g. video and audio sharing services and other file hosting, word processing or games offered in the cloud, cloud storage, webmail, social media and cloud applications, etc.) and "digital content" (e.g. web-streaming of video clips). Similarly, the definition of online marketplaces now includes "software" and "apps" and is not limited to websites only. 

Misleading information 

The new provisions seek to enhance transparency in relation to information that may affect a consumer's decision-making process. The types of key information set out below must now be disclosed, particularly by online marketplaces:

• Contractual partners: Consumers using online marketplaces may not understand with whom they are contracting and how this may affect their rights and obligations. Accordingly, providers of online marketplaces must inform consumers whether the third party offering the products is a trader, based on the declaration made to them by the third party.
• Rankings: Traders who enable consumers to search for goods and services (e.g. travel, accommodation and leisure activities) offered by different traders or consumers must provide a general description of the main parameters which determine how goods/services are ranked, including the default main parameters used by the traders and their relative importance. There is no requirement to disclose the detailed functioning of the ranking mechanism or any algorithms. When a trader has directly or indirectly paid the provider of the online search functionality (e.g. online marketplaces, search engines or comparison websites) for a higher ranking within the search results, the provider of the online search functionality should inform consumers of that fact in a concise, easily accessible and intelligible form.
• Fake consumer reviews: When traders provide access to consumer reviews of products, they should inform consumers of whether there is a procedure in place to ensure that the published reviews are written by consumers who have actually used or purchased the products. If so, the trader must also inform consumers of how these checks are made and how reviews are processed (e.g. publication of positive or negative reviews only). Traders also need to disclose whether those reviews have been sponsored or influenced by a contractual relationship with a trader.

Blacklisted commercial practices 

The list of practices that will be considered unfair (the so-called "blacklist") includes:

• Providing search results in response to a consumer’s online search query without clearly disclosing any paid advertisement or payment specifically for achieving a higher ranking of products within the search results.
• Reselling event tickets to consumers if the trader acquired them by using automated means to circumvent any limit imposed on the number of tickets that a person can buy or any other rules applicable to the purchase of tickets.
• Stating that reviews of a product are submitted by consumers who have actually used or purchased the product without taking reasonable and proportionate steps to check that is correct.
• Submitting or commissioning another legal or natural person to submit false consumer reviews or endorsements, or misrepresenting consumer reviews or social endorsements, in order to promote products.

Comment

The new provisions are primarily designed to strengthen consumer rights in the online context and will greatly impact online intermediaries and traders. As will be discussed in a subsequent alert, the Autorità Garante della Concorrenza e del Mercato (Italy's consumer protection authority) will have enhanced powers, including the ability to impose significantly higher fines. The Italian authority has always been very active in consumer protection cases, and we expect this trend to continue in the future, with higher fines being imposed for the most pernicious conduct.