EU New Deal regulations likely to result in more recalls

January 18, 2022

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By Julie Ross, International business development director

The European Union’s “New Deal”, the Enforcement and Modernisation Directive, boosts consumer rights protection and updates e-commerce and digital content regulations.

The directive also broadens the definition of product safety to include misleading marketing, enhanced transparency and cross-border infringements. Such a step can only lead to greater scrutiny and the potential for new infractions that likely will lead to more recalls.

Companies who operate in multiple member states need to be aware of new regulations related to misleading marketing. If a company produces even slightly different goods for sale in different member states, but markets these as the same product, this will constitute misleading marketing unless the company can objectively justify the difference. Such an infraction could lead to a product recall across multiple member states, which is not only logistically challenging, but is also much more costly.

Increasing transparency for consumers

Several of the rules in the directive address a lack of transparency in e-commerce — placing the burden on traders to ensure that consumers receive sufficient information to confirm the safety of a product and the identity of its supplier before purchasing it. These rules require that traders must verify the reasonable and proportionate steps they have taken to ensure the reviews on their site are genuine. This is intended to reduce the likelihood that a consumer purchases a fake or counterfeit product that has been falsely rated highly to give the illusion of a five-star product. Online marketplaces must also inform consumers whether they are purchasing an item from a private individual or a company, thus providing an additional check to ensure consumers are not unknowingly purchasing from private individuals who may be bad actors.

Finally, traders must now provide information on the criteria used to rank products in online searches, as well as disclose paid advertising and whether payments have been made to achieve a higher product ranking. If a company is not meeting these transparency criteria, the safety of its product may be unverifiable. That could result in a recall or the issuance of a consumer safety warning.

Other notable rules that may affect a company’s bottom line

The directive also includes new rules that allow for stricter penalties for cross-border infringements. Previously, penalties in member states varied significantly and were generally small, even for serious offences. Under the directive, national authorities can now impose a fine of up to 4 percent of the trader’s turnover, or up to €2 million when information on turnover is unavailable. Additionally, taking after the United States’ penchant for class action lawsuits, a new rule gives consumers the right to individual remedies, including ending a contract or obtaining a price reduction or financial compensation.

With the date for implementation behind us, there is little room for error in compliance. Companies should pay close attention to national and EU authorities over the next several months to see how they approach the enforcement of the directive. In the meantime, taking all necessary steps to ensure compliance and running through a mock recall to update your recall plan will help your company to avoid being among the first targets of enforcement.

Trusted by the world’s leading brands, Sedgwick has managed more than 5,000 of the most time-critical and sensitive product recalls in 60+ countries and 20+ languages, over 25 years. Whether you’re planning for — or currently facing — a product recall, market withdrawal or any other in-market product incident, our experts are on hand to support you. Visit our website for more.

Tags: bottom line, Brand protection, Brands, Compliance, consumer rights protection, consumer safety, counterfeit, digital content regulations, e-commerce regulations, European Union, international, Product recall, product safety, recall, traders, View on brands