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Consumer Protection Law will get teeth in 2022: GDPR-style fines on the horizon - Part I

2022 will be the year every company doing business in Europe will have to pay much more attention to Consumer Protection Law than they ever did before. In Germany, many breaches of Consumer Protection Law can be fined with up to 4 per cent of the company's yearly turnover as of 28 May 2022. Most other EU member states will adopt similar changes.

In this article, we will share some insights on our experience when guiding our clients through the EU regulatory framework commonly referred to as the "New Deal for Consumers", namely the "Omnibus Directive", the "Digital Content and Service Directive" and the "Sale of Goods Directive". These have been, or will soon be, implemented in the national legal systems of the EU Member States.

The changes are manyfold – in this article, we concentrate on issues which can trigger a high monetary fine – and we only present our "best of" selection, so the examples we list are by no means complete.

Part I: General Terms & Conditions:

It is an open secret that many companies based outside the EU did not care too much about the EU directive on unfair terms in consumer contracts – which has, at least on paper, very strict rules on what is permissible (or not permissible) in General Terms and Conditions ("GTC" - including, of course, Terms of Use, or End User License Agreements).

Even companies which cared (often companies based in the EU) tested the limits of what is possible.
True, in case of doubt, GTC clauses must be interpreted in favor of the consumer. And clauses which are too detrimental for the consumer are void.

But many companies took the risk and used clauses which were potentially void, as there was no real sanction other than that the clause was void, or that the clause would help the compa-ny in court less than the wording suggested (if a clause was void, it was simply replaced by the statutory regulations). However, even clauses which were not to be applied by the court had a certain effect – as they often dissuaded consumers to exercise their rights.

In 2022, this situation changes. With the EU Omnibus Directive, monetary fines can be imposed for clauses which are not permitted. The EU Member States have a certain discretion on how exactly they implement the directive. Germany has opted for a model under which a fine can be imposed for clauses which are on the "blacklist" of clauses which are always void (Sect. 309 German Civil Code).
Quite frankly: So far we did not see one single "general terms and conditions" document which did not contain at least a few clauses which are most likely an infringement of the "blacklist".

Many non-European companies, for example, use limitations of liability clauses which go way too far. A good indication which can be quickly spotted: If the limitation of liability is written all in capital letters, it is most likely drafted under US law, not adapted to German law, and void – and can, in the future, trigger a monetary fine.

If, on the other hand, the general terms and conditions have been adapted to EU law, or especially German law, the limitation of liability is possibly the one clause which has been really, really carefully drafted, and contains some wording on "cardinal obligations" (of course, apart from judges and lawyers, no one would have ever heard the word "cardinal obligation").
Still, with a high likelihood, there are other clauses which can trigger a fine, unless the general terms and conditions have been revised very recently.

One example are clauses which contain a penalty (or hidden penalty), e.g., clauses which make the consumer pay a fixed amount when he does not fulfill his obligations – often found in GTC in eCommerce (e.g., default with payment, incorrect payment information, chargebacks).

Other widespread examples are clauses according to which the consumer may not pursue his or her claims in a German court (but only before a certain arbitration court), or clauses requiring declarations by the consumer (e.g., a notice of termination) to be in writing.
One more opaque, but equally problematic prohibition concerns clauses which change the burden of proof or which make the consumer "confirm facts" – GTC which have been drafted under US law are typically full of clauses through which the consumer "acknowledges" something; these may fall under the "blacklist".

Coming soon, and due to recent changes in German law, this will also include clauses that automatically extend the term of the contract for a certain period (usually one year) or provide for an excessively long notice period - – such clauses can be found in the GTC of many companies with a long-term relationship with the customers.

That's just a few examples – the new game for invalid clauses is now open and called "spot them all".

TAGS

Terms and Conditions Consumer Contracts GTC Omnibus Directive

Contact us

Dr Andreas Lober T   +49 69 756095-582 E   Andreas.Lober@advant-beiten.com
Wojtek Ropel T   +49 69 756095-582 E   Wojtek.Ropel@advant-beiten.com
Lennart Kriebel T   +49 69 756095-477 E   Lennart.Kriebel@advant-beiten.com