Broader Powers for Consumer Authorities, Part 2: Enforcement
4 February 2020
Authors: Sarita Schröder, Jessica Tressfeldt, Anna Räty and Liisa Vaaraniemi
In this blog post, we look at the key changes that have been proposed to the Finnish and Swedish consumer ombudsmen’s enforcement powers primarily due to the entry into force of the Consumer Protection Cooperation Regulation (Regulation (EU) 2017/2394, the “CPC Regulation”). Said regulation requires national consumer authorities in EU and EEA countries to cooperate to address breaches of consumer law involving traders and consumers in different countries. In a previous post, we summarised the key changes that have been proposed to the Finnish and Swedish consumer ombudsmen’s investigation powers in the same context.
Although not mandated by the CPC Regulation, it has been proposed in both Finland and Sweden that the consumer ombudsmen’s powers be broadened in the same way also with respect to purely national infringements. The proposed changes were intended to enter into force simultaneously with the CPC Regulation on 17 January 2020. However, they are still making their way through the legislative procedure in both Finland and Sweden, and it is currently uncertain when the amended legislation will enter into force in either country.
The CPC Regulation requires that where no other effective means are available to stop online infringements, the competent authorities should have the power to order, among other things, the removal of content, the restriction of access to an online interface, the explicit display of a warning to consumers when they access an online interface, or the deletion of a domain name and the registration of that domain name to the authority.
Sweden voted against the adoption of the CPC Regulation because it considered the abovementioned powers – with the exception of the power to order the explicit display of a warning to consumers – to be too far-reaching and disproportionate with a view to the aim of securing a high level of consumer protection, on the one hand, and the freedom of expression and information, on the other hand.
Now that the CPC Regulation has been adopted, Sweden must nevertheless adhere to it. However, in light of the way that the relevant provision of the CPC Regulation is formulated, the Swedish proposal concludes that the aforementioned powers are, in fact, alternative to one another. Thus, it suggests that only the power to order the explicit display of a warning should be implemented into national legislation in Sweden.
Neither the Finnish proposal nor the Statement of the Constitutional Law Committee of the Finnish Parliament expresses any similar qualms about whether the full range of online enforcement powers specified in the CPC Regulation should be implemented. However, according to the Finnish proposal, the threshold for using them should be relatively high. In practice, this means that the infringement should be objectively apparent and liable to cause serious harm to the interests of consumers. In addition, the powers should only be used when it is indispensable for putting an end to the infringement.
The CPC Regulation also requires that the competent authorities have the power to impose penalties, such as fines or periodic penalty payments (in Swedish: vite, in Finnish: uhkasakko), for infringements and for the failure to comply with any decision, order, or other similar measure.
In Finland, the FCO’s enforcement powers are currently limited to independently issuing or seeking a court-mandated injunction prohibiting a party, under penalty of a fine, from continuing or repeating its infringing conduct. There are no direct financial sanctions for an infringement before an injunction has been issued and subsequently breached. However, according to the Finnish proposal, the FCO should be conferred the power to petition the Market Court to impose administrative fines as a direct consequence of certain consumer law violations.
The CPC Regulation does not mandate any minimum or maximum level for monetary penalties. According to the Finnish proposal, the maximum amount of the fines would be 4% of the trader’s turnover for the financial year preceding the termination of the violation. Under exceptional circumstances, administrative fines could also be imposed on the directors of the entity that has committed the violation, or on other natural persons who effectively control that entity. In such a case, the maximum amount of the fines would be 4% of the person’s taxable income for the year preceding the termination of the violation – however, not more than EUR 40,000.
The proposed 4% maximum corresponds to the maximum prescribed under the directive on the better enforcement and modernisation of EU consumer protection rules (Directive (EU) 2019/2161) for violations that are widespread and that affect consumers in several Member States (see our earlier post for more information). However, pursuant to the Finnish proposal, the same level of fines could also be imposed for purely national infringements.
In Sweden, provisions enabling the Swedish Consumer Ombudsman (the “SCO”) to petition the Patent and Market Court to impose a so-called market disruption fine (in Swedish: marknadsstörningsavgift) have been in force for well over two decades now. According to said provisions, the fine shall be used for serious violations and special consideration shall be given to the nature, duration, scope, and propagation of the violation. The fine shall be set within the range of SEK 10,000 to SEK 10,000,000 (approx. EUR 1,000 to EUR 1,000,000), but cannot exceed 10% of the trader’s annual turnover for the financial year preceding the SCO’s petition. No changes have been proposed to said provisions, as the Swedish proposal concludes that the provisions meet the requirements set out in the CPC Regulation.
Revised Injunction Procedure in Finland
Finally, as a purely national matter unrelated to the implementation of the CPC Regulation, the Finnish proposal includes significant changes to the procedure relating to injunctions issued by the FCO.
Pursuant to the current legislation, the FCO may independently issue an injunction prohibiting a violation in cases that are not of significant importance with regard to the application of the law or otherwise. However, the FCO’s injunction is voided if the party subject to it opposes it in writing or orally within a deadline of at least eight days. In such a case, the FCO must bring the matter before the Market Court if they wish to have a new injunction instated.
According to the Finnish proposal, the injunction procedure should be reversed. This means that an injunction issued by the FCO would become permanent, unless the party subject to it brings the case before the Market Court within a 30-day deadline. The party subject to the injunction issued by the FCO would be obligated to abide by it for the duration of the proceedings, unless the Market Court decides otherwise.
The broadening of the consumer authorities’ investigation and enforcement powers will significantly increase the importance of consumer law compliance for businesses offering products or services to consumer customers, especially in Member States where such powers have previously been more limited. Our consumer law experts in Helsinki and Stockholm are on hand to provide further information on the new legislation and assistance in ensuring compliance with EU and national consumer protection rules.