Omnibus Directive – Pricing Transparency in the eCommerce Industry
Starting from Saturday, May 28th, 2022, businesses will have to fully comply with the EU Omnibus Directive or will be heavily fined. If you sell online, make sure to familiarize yourself and adjust your business in accordance with the updated guidance documents on the Omnibus Directive. In case you haven’t heard about this Directive yet, find the definition below as well as precise directions on how to comply and avoid fines.
What Is It?
Directive (EU) 2019/2161 of the European Parliament and of the Council aka Omnibus Directive is a part of the New Deal for EU Consumers Initiative that has been proposed to protect customers’ rights. More precisely, this Directive aims to modernize, supplement, and consolidate existing EU consumer laws.
As the digital world continuously and rapidly develops and upgrades, the EU consumer protection law required proper updates from time to time. Omnibus Directive was adopted by European Union on November 27th, 2019, and brought into force on January 7th, 2020. Each business that sells to the customers of the EU had to adopt the Directive by November 28th, 2021, and start full application of it by May 28th, 2022.
Specifically, four following directives of the consumer protection legislation were updated and modernized:
- Council Directive 93/13/EEC (unfair contract terms)
- Directives 98/6/EC (price indications)
- 2005/29/EC (unfair commercial practices)
- 2011/83/EU (consumer rights)
To whom does it apply?
The EU’s New Deal for Consumers protects consumers’ rights in the European Union. Omnibus Directive brought changes in terms of expanding and modernizing laws to keep up with the rapidly changing market. Therefore, whether your business is based and operates in the EU or based anywhere in the world but sells goods, services, or content online to the EU consumers have to comply with the Directive.
What does it aim for?
The Directive aims to update and upgrade the existing guidance on the Unfair Contract Terms Directive from 2019. The Directive has already been protecting consumers against unfair contract terms imposed by traders. The Omnibus Directive aims to fully explain the application of EU consumer law in light of the accelerated digital and green transition.
Some of the key sections processed and legally interpreted are obligations of online platforms and marketplaces, transparency of search results, protection from misleading reviews, data-driven personalization and dark patterns, obligations in the travel and transport sector, and so on.
How Does Omnibus Directive Affect Businesses?
As a business with an EU customer base, pay attention to the following main changes and new restrictions. Make sure to review and renew your pricing processes, terms and services, transparency practices, and methods of protecting consumers’ personal data before May 28th.
Digital Marketplace Transparency
The Omnibus Directive has established new sets of standards on market transparency and fairness, including clearly defined sections of consumer rights and instructions for filing a complaint following the standards. In addition, it must be clearly stated whether a seller is a private or business entity, which consumer protection provisions apply to which transactions, what is the responsibility of an online marketplace and what of the seller, and on which basis are search results ranked.
Omnibus Directive forbids submitting fake reviews, assessments, recommendations, or “likes” on social media. Businesses will have to comply with the restrictions and control the reviews they receive, to determine the fake ones. From now on deletion of negative reviews will be fined as well as the nondisclosure of paid search rankings. Transfering endorsements from one to another product will be prohibited. Also, businesses that calin that customer reviews have been verified if they haven’t will have consequences.
Interaction Between Consumers and Traders
Businesses are allowed to use any form of communication with their consumers as long as they can maintain written correspondence and the chosen method of communication is reliable and efficient.
This is the section most talked about in the eCommerce world. Regulations for transparent pricing and specific restrictions shook up the eCommerce industry.
This rule refers to those businesses that sell goods online. When announcing a sale or discount, the original price of a product has to be declared at least 30 days beforehand. This regulative aims to prevent price manipulations such as false advertising of discounted prices that are not even discounted. Also, a seller has to hold the base price still for at least 30 days before launching the sale.
There are exceptions to this rule, such as goods that expire quickly (groceries and dairy products) and discounted prices that target a limited number of people (loyalty offers).
Another type of situation where sellers have to be transparent is when discounts and special deals are based on automated decision-making. This means that a seller created an offer in accordance with a personalized profile of a buyer. For example, special birthday offers or offers based on recent purchasing history or age.
Omnibus Directive obliges eCommerce businesses that are using any sort of an eCommerce automated repricing tool to be transparent about it. Whether the price changes based on the seasonal period or consumers’ purchase history, if the change happened automatically (via software), businesses have to disclose it.
As already mentioned in the introduction, if a business does not follow the EU Omnibus Directive, a business will be heavily fined. Also, the actual penalty will be determined depending on the member state in question. In case of a Directive violation, a business will face penalties of up to 4% of the annual turnover of the EU member country in which goods and services were sold. In case of the Directive deviation or impossibility to determine the annual turnover, other EU members shall decide on a penalty.
All the businesses selling their goods, services, and content to the EU consumers have to make sure that their business meets the new standards in the areas of pricing, reviews, terms, conditions, etc., by Saturday, May 28th, 2022.
The key to all the Directive regulations is transparency. Make sure that every aspect of your business complies with the new set of rules concerning the protection of consumer rights.
Price2Spy Can Help
Once you get familiar with all the changes that will follow learn how Price2Spy can help regarding one of the important sections that will change – transparent pricing. In case you got worried about what will happen on the market, and how to keep the competitive advantage and good brand image, we recommend engaging a reliable and powerful e-commerce software.
As changes in legislation drive corporate responsibility, consumers are increasingly interested in the ethics of corporate business and demand transparency. Certain eCommerce shops already introduced a price comparison option and access to a full price history of a product. No matter your current pricing strategy, you will have to find a way to comply with the Omnibus Directive, convince consumers that you are comfortable with transparency, and stay profitable.
Due to all the changes that follow in the market, it will be harder than before to stay up to date with competitors’ and retailers’ daily price fluctuations. Therefore, we suggest letting the professional take over the implementation of your pricing strategy, continuous price monitoring, dynamic pricing, and instant repricing. Subscribe for a 30-day free trial and decide for yourself if Price2Spy could be helpful.
Price2Spy is an online service that provides comprehensive and suitable solutions for eCommerce professionals including; retailers, brands/manufacturers and distributors in order to stay profitable in the current competitive market conditions. If you want to learn more about what Price2Spy can do for your business, please start your 30-day free trial.