Category: Business Insights / E-Commerce
The Omnibus Directive – is a revolution in e-commerce just around the corner?
Imagine you’re hunting for a certain product for a long time. Suddenly, while waiting for a perfect opportunity, the price, instead of dropping, increases… Or, when during the Black Friday promotion your laptop or smartphone isn’t any cheaper than when you bought it some time ago. Sounds familiar? We’ve all been there. Now, the rules of the game have changed. Here comes the Omnibus EU Directive.
The Omnibus EU Directive has been created to impose additional disclosure obligations on sellers. The new regulations are supposed to have a positive impact on consumer rights and eliminate both ill practices related to publishing fake reviews and artificially increased prices during promotional campaigns. The Omnibus Directive is to ensure fair price cuts and help customers make deliberate shopping decisions. The new law, however, forces some important changes on both product pages and entire websites. Let’s dive deeper into obligations that are imposed on online platforms and their owners.
The Omnibus Directive – key information and deadlines
The Omnibus Directive’s full name is Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers (OJ L 080, 18.3.1998, p. 27, as amended). The directive is also known as the Enforcement and Modernization Directive.
In the EU, the directive took effect on January 7, 2020. All member countries were initially obliged to implement all regulations that were necessary to implement the Omnibus Directive by November 28, 2021. However, due to delays in some European countries (including Italy, Ireland, Malta, and Slovenia), the deadline was changed. In Poland, the regulation has been in force since January 1, 2023.
The new law applies to all sellers in the legal sense. It means that every entrepreneur who is a direct party to the contract with the consumer should apply the directive. Consequently, the law doesn’t apply to many popular e-commerce platforms and marketplaces, as well as individuals selling online. There is one exception, though – marketplaces that sell on behalf of another business entity are subject to the Omnibus Directive.
Why was the Omnibus Directive invented?
The changes are a result of unfair practices used by many e-commerce business owners. The EU directive has been introduced to:
- Protect consumers adequately for today’s times.
- Enable fair competition for businesses in selling products and services.
- Ensure price transparency during promotional campaigns.
- Eliminate fake reviews on the Internet.
- Prevent fake price cuts – more and more often, e-commerce business owners have artificially increased prices to cut them afterward and imitate attractive discounts.
The Omnibus directive – how will it affect e-commerce?
The adoption of the new laws will for sure revolutionize the world of e-commerce. Of course, the law affects much more than just e-commerce businesses, but they are the ones that will face the most challenges.
Sellers have to inform about the price before the promotion
This is probably the most major change – online sellers will have to provide information about the lowest price of a product from the last 30 days before the promotion. If a product/service has been available for sale for less than 30 days, consumers should be provided with information about the lowest price so far. Many online stores have already brought this regulation into force. The main idea behind the regulation is to unify pricing policies and eliminate fake price cuts, especially when the demand rapidly increases (like during Black Friday campaigns or around Christmas time).
When sellers donn’t have to comply with the Omnibus Directive?
Are there any situations where online stores don’t have to inform customers about prices before the price cuts? Yes – the law doesn’t apply when changes in prices of given products are not promotion-related.
- Personalized promotions (e.g., related to loyalty programs).
- Products with short expiry dates/products that deteriorate quickly (such products require frequent price changes). In such cases, the store should provide information about the price before the promotion.
- Upselling campaigns (e.g., 2 + 1 product for free, etc.).
If a store owner wants to use a banner ad to inform about the sale price, they don’t have to put the lowest price from the last 30 days on it. However, they have to include such information on the product page.
No more fake reviews
We all know that recommendations are great sales drivers. However, it is crucial that reviews should be truly genuine and come from people who really tested the product. Now, following the Omnibus Directive, businesses can only collect reviews from real customers without any fabrication. To provide consumers with correct information, businesses must now reveal how they verify customer feedback. You can only post reviews marked as verified. Retailers have to report how they collect and verify reviews.
How to make it happen in real life, though? As one of the solutions, you can enable feedback only to logged-in users. This makes it possible to check if a person is actually a client who bought the product or service.
An interesting fact about fake reviews: fake reviews have been quite popular in Google My Business. This resulted in two businesses being fined in 2022 in Poland by UOKiK. They traded fake online reviews and some of these reviews were Google Maps and local SEO reviews.
Positive feedback in Google is one of the most effective ways to promote your business. Therefore, it’s crucial to make it right, in accordance with the law and Google regulations. The more positive opinions in Google, the better the credibility of your business and the greater visibility in organic search results.
Changes related to digital products
The Omnibus EU Directive is clear about the right to withdraw the contract when the service is still performed. Consumers will lose this right if they meet certain conditions. First, a consumer must be informed that they would lose the right to terminate the contract upon receipt before making the purchase. Secondly, the seller must confirm that the consumer consented to receive the digital product and accepted that they would lose the right to terminate the contract.
Wider contact information
So far, e-commerce business owners have been obliged to publish information such as the company address or e-mail address on their websites. Since the Omnibus Directive was implemented, they have also had to publish their phone numbers e.g., to make it possible for a customer to make a return or make a complaint or to check the order status. According to the directive, the phone number should be included in the Terms & Conditions, as well as in a visible place on the website.
Prices depend on customer profiling
Sometimes, businesses adapt pricing strategies according to customer behavior. Such a process, supported by automated algorithms, is called customer profiling which divides consumers into segments. The price may be increased or decreased based on the customer’s purchase history or their location at the right moment. In such cases, customers should be made aware of how profiling works and how the information is gathered and used.
Adjusting the third party in the service
This rule applies to paid advertisements. The seller should always inform consumers when the ad is a paid one.
Making it clear about the seller’s legal status
The directive covers all sales platforms – they have to make it clear to consumers if they are entrepreneurs, individuals, or individuals selling privately. This makes a huge difference as a buyer is subject to the Act on Consumer Rights when they buy a product from an entrepreneur and a buyer who makes a purchase from an individual isn’t subject to the Act.
What are the consequences of non-compliance with the Omnibus Directive?
The Omnibus EU Directive fines up to 4% of the company’s annual turnover if the breach took place, or up to at least 2 million EUR in the case where information on turnover isn’t available. Member states can also introduce even higher fines in their own legislation when they implement the directive.
Adjust your online store to new legislation
For most online stores, the biggest Omnibus-related challenge is the obligation to inform consumers about the lowest price 30 days before the promotion. So, how to make this easier? The biggest players in the CMS market have already launched some useful CMS plugins and this might be the answer. If you want to automate some tasks to stay compliant with Omnibus, the plugins may be a great help.
If you are a WordPress user with the WooCommerce plugin, you may try out a new WPDesk solution that will definitely help you stick to the Omnibus Directive. It’s a paid plug-and-play plugin that enables you to automatically display the lowest price of the product 30 days before the promotion. The plugin allows you to customize both the displayed content and the place where information is located, depending on your preferences.
If you are a PrestaShop user, you can use a solution similar to the WPDesk’s one – the plugin designed by X13, also allows to display the previous prices on the product page. It enables users to display historical prices on a monthly chart, without having to manually enter the numbers. On top of that, it is possible to only display the price information on the website during the promotion (or independently of the promotion).