Having an e-commerce business in the EU allows you to offer your products to a large and solvent audience. In fact, in 2022, the number of e-commerce users in the EU reached a stunning 523 million. And yet, the EU market has its limitations.
In May 2022, the Directive of the European Parliament and of the Council (EU) 2019/2161 on the better enforcement and modernization of Union consumer protection rules, better known as the Omnibus directive, went into effect.
All the EU member states had to implement the Omnibus Directive and bring it to force until May 28, 2022. This directive sets rules that directly affect most e-commerce businesses.
What is the Omnibus Directive?
The Omnibus Directive aims to strengthen and extend the scope of EU consumer law by modernizing the EU’s consumer protection rules.
This directive is especially relevant for modern e-commerce businesses that use new-age e-commerce practices: paid advertisements, customer reviews, personalized product ranking, product boosting, etc.
So, what changes are most relevant to your e-commerce business?
How does the Omnibus Directive affect e-commerce businesses in the EU?
The Omnibus Directive impacts all the online traders that own digital shopping marketplaces and e-commerce businesses. It requires traders to increase the transparency behind the advertising, pricing, ranking, boosting, and other techniques they use.
Among many obligations, the few that directly effects e-commerce businesses are the following.
Prohibits the usage of fake product reviews
The regulation prohibits the usage of fake customer reviews in an e-commerce store. In addition, businesses that publish consumer reviews must provide their customers with information on how they ensure that these reviews come from legitimate consumers.
Prohibits the usage of fake discounts and sets clear pricing rules
Now, e-commerce businesses cannot offer random discounts that come into practice out of nowhere. When giving the discount, traders have to clearly state the prior price.
The previous price refers to the lowest price charged by the e-shop during a period of at least 30 days prior to the price reduction. In the case of a gradual price reduction, the previous price is the price prior to the first price reduction.
Requires transparent indication of product ranking algorithms
E-commerce businesses now have to transparently indicate the criteria they use to rank products.
If your consumers can search for products offered by different sellers, you must indicate the criteria that determine the ranking of the products provided to the consumer as a result of his search query.
For example, as a retailer, you must state the basis on which the products are ranked: price, ratings of customers, or a combination of several factors.
If the ranking of a product in search results is based on paid advertising or other payments received from the sellers, this information should also be clearly disclosed to consumers.
Example in Amazon.de
Requires transparent indication of personalized pricing
If you use personalized pricing methods in your e-commerce store, you now must inform the users about it.
That means you can still use personalized pricing methods (for instance, to increase the price based on a user’s visits to other websites, their search, or purchase history).
Yet, the regulation imposes an obligation to inform the consumer that the price of the goods or services listed may be increased specifically for him.
Therefore, as a retailer, you must inform the consumer each time that the price has been personalized through automated decision-making.
Note that individual consumers have a right to get direct compensation for unfair commercial practices of the entities.
That is why it is crucial to follow the requirements of the directive when working with shoppers in the EU.
After all, a 500-million market of buyers with high purchasing power is worthy of your business attention. Applying the correct practices to your e-shop will open up huge selling opportunities in the European Union market.