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Piercing the Internet’s veil under the New Deal (Dr Joasia Luzak, University of Exeter) - The Centre for European Governance

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Piercing the Internet’s veil under the New Deal (Dr Joasia Luzak, University of Exeter)

With its announcement of the New Deal for consumers in April 2018, the European Commission gave itself a tall order. At one point of time, the Roosevelt’s New Deal revolutionised the American economy, thus the joint name of the new proposals in European consumer law sounded promising.

Among the main objectives of these two proposals is strengthening of consumers’ rights online. The Commission aims to achieve it by focusing on ensuring more transparency in two aspects: on online markets and with regards to online search results. In this blog post, a question will be posed whether the proposed measures would actually manage to increase transparency on online markets (leaving the issue of online search results aside)?

The transparency that seems to be missing on online markets revolves around the uncertainty as to who is the other party in a transaction concluded online by consumers. It could either be another consumer or a professional party and there could be a third party involved, an online platform, whose status in the transaction may be uncertain, as well. If an online platform is just an intermediary, the contract is concluded between a party offering their goods or services through the platform and a consumer. Whether the consumer-buyer may enjoy consumer rights depends on whether the party offering their goods/services on a platform is a professional party. In any case, there may also be certain duties that an online platform has to meet towards consumers. Thus, to achieve online market transparency it needs to be clear:

  1. Who is the contractual party of the consumer and is it a professional party?
  1. Do consumer-buyers enjoy consumer protection?
  1. Who is responsible for provision of which consumer rights?

So far, especially the answer to the question, whether the counterparty of an online consumer in a transaction concluded through an online platform was a professional party, was not easy to obtain. In a Communication 356 final from 2016 year on collaborative economy the Commission indicated that some of the factors that would have to be considered when determining the party’s professional status were:

  • The frequency of providing goods/services (the more often this happened, the more likely the party was a professional);
  • The intent to profit (which would exclude such transactions as swapping houses for holidays or reselling ticket sat face value prices);
  • The turnover level (from a particular type of activity).

Further factors that should be considered in this assessment were identified by the Court of Justice of the EU in the judgmentKamenova (C-105/17). Ms Kamenova published eight adverts for sale of products on an online Bulgarian platform olx.blg. One of the adverts offered a watch for sale. Unfortunately, a consumer, who has purchased this watch was disappointed with the result, believing that the watch did not meet the product description in the advertisement. Ms Kamenova refused the return of the watch or its replacement. Consumer complained about this transaction and as a result of this complaint consumer authorities in Bulgaria determined that Ms Kamenova was in breach of a series of information obligations towards this consumer. These information obligations followed from the Bulgarian implementation of the Consumer Rights Directive. The Bulgarian court presiding over the case asked the CJEU whether indeed Ms Kamenova could be seen as a professional trader and, therefore, had these information obligations. The CJEU prescribed the evaluation of a professional character of a trader that would account for:

  • The organised character of the sale (possibly this could also pertain to the sales’ frequency);
  • The intent to profit;
  • The information asymmetry between the parties (did the trader have more information than the consumer about the sale?);
  • The registered character of the commercial activity of the seller;
  • The fact whether the seller pays VAT;
  • A position of a seller as an intermediary, and whether he was remunerated for his services;
  • The purchase of the goods with an intent to resell;
  • Limited quantity of the offer.

As we can see then, there is a list of factors, which list is also non-exhaustive, which will need to be evaluated in order to assess the professional character of the seller. It is not then easy for an average consumer going online to have clarity as to who is contractual party is. The Commission thought to change this state of affairs and drafted a new Article 6a that would be added to the Consumer Rights Directive. This week the text of the Commission’s proposal has been agreed on by the Council and will be analysed below,together with a new Recital 27, on whether it could ensure more online transparency.

When consumers would be concluding a contract on an online commercial platform, they would need to be informed whether the third party offering goods/services was a professional trader. In general, this disclosure should then inform consumers as to whether they can expect to be granted their consumer rights in this online transaction. The problem with the drafted provision is that it allows online platforms to rely on statements made to it by online traders, without having to verify them. On the one hand, it could be, and has been, claimed that online platforms would not have resources to verify whether a party presenting themselves as a consumer is not a hidden trader and tries to avoid having to comply with consumer protection rules. On the other hand, can we really expect consumer enforcement authorities to have more resources than online platforms do? As it will then be left to the enforcement authorities to ensure that there is some compliance sweep through online platforms controlling the veracity of suchstatements.

Further, the new provision requires consumers to be more explicitly and more transparently informed whether their consumer rights are applicable to the contract. More transparent disclosure means that such information cannot be hidden amongst other standard terms and conditions of the contract. Again, this provision could be beneficial to consumers, but the European policymakers do not cross their t’s. Namely, Recital 27 states that it is not necessary to enumerate/list these consumer rights that consumers may enjoy. A lot of consumers will hear a bell ringing then, but not know, to which church to go.

Consumers concluding contracts through online platforms should also receive information, which traders is responsible for granting them consumer rights – the online platform or the seller using it to offer his goods/services. Unfortunately, the proposal does not harmonise, which party should bear this responsibility and to what extent. To the contrary, it leaves it to the contractual agreements between the online platform and the seller to decide, who will be responsible, for which consumer rights. This means that consumers are likely not to have clarity, to which party and in which concluded online contract to go to with their specific claims.

Overall, the identified gaps and inconsistencies do not bode well for ensuring more transparency on online markets. But what can we expect from a proposal that sees as a solution imposing an obligation on traders to provide more information to consumers, when it has already been claimed many, many times that information obligations miss their mark.

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