Numerous innovations in e-commerce, consumer protection and sales law – keeping the Terms & Conditions etc. up to date

Innovations in e-commerce

The latest regulation of the German “Fair Consumer Contracts Act” passed in August 2021 came into force on 1 July 2022. It stipulates, irrespective of European requirements, the inclusion of a "termination button", as outlined in § 312k of the German Civil Code (BGB). Similar to the "order button" mentioned in § 312j para. 3 BGB, the long-term commitments (e.g. rental, fitness centre or utility contracts), which can be concluded online via a website, can now also be terminated – as either an ordinary or an extraordinary termination – using a termination button that must be permanently displayed on the website. The regulations contain many details to be respected such as how the button must be labelled. The new requirements also apply if the contract in question was concluded in writing (even if this was before 1 July) or it explicitly states that the contract must be terminated in writing via a letter or email. If the termination button is missing or not implemented correctly, the consumer can cancel "at any time and without observing a notice period", which could also be practical in the case of hotel and holiday home bookings. As always in consumer contract law, these special features of German law also affect foreign providers who (also) direct their activities to German consumers.

Another innovation in e-commerce is based on implementation of the “Modernisation Directive” (also known as the “Omnibus Directive”) (EU 2019/2161) in German law as of 28 May 2022 and affects operators of online marketplaces in the sense of the (not entirely clear) definitions in § 312l para. 3 and 4 BGB. As a result of § 312l para. 1 BGB together with Art. 246d of the Introductory Act to the German Civil Code (EGBGB), these (platform) operators are now, for the first time, required to provide various information to consumers related to, among other things, the ranking of offers (parameters and weighting), the entrepreneurial or consumer status of the provider, and the possible involvement of the operator in performance of the contract. The relationship between operator and provider has been fundamentally regulated by the “P2B Regulation” since July 2020 (EU 2019/1150).

Changes in consumer law, competition law and general terms and conditions law

However, the current legislative changes apply not only specifically to online trading, but also cover distance selling and direct sales in general. As a result of the aforementioned Modernisation Directive, regulations took effect on 28 May 2022 affecting the premature expiration of the right of withdrawal (revocation) for services and digital content (§ 356 para. 4 and 5 BGB), on the payment of return shipment costs (§ 357 para. 5 to 8 BGB), on the compensation for value after revocation (§ 357a BGB). These were revised along with a long list of obligations involving information that the entrepreneur is required to provide (Art. 246a § 1 EGBGB). The requirements for model cancellation forms (cancellation policies) have changed and, although these are minor changes, neglecting these is nevertheless a punishable offence. Online, mail order, and direct retailers should have their general terms and conditions and other texts reviewed. Care should also be taken in pricing (especially when offering discounts) as the Price Indication Regulation (“Preisangabenverordnung”) is also affected by the changes in the underlying EU legislation.

The Unfair Competition Act (UWG) has also undergone significant changes as of 28 May 2022 within the framework of implementing the Modernisation directive related to unfair commercial practices. These changes overlap and supplement the civil law obligations of entrepreneurs in their business dealings with consumers. These include information requirements on the ranking of search results, user reviews, product variants within the EU, entrepreneurial status, and transparency requirements for influencers.

Equally relevant for all consumer transactions (but possibly also for business transactions – so called “indicative effect”) are changes to the general terms and conditions law by the aforementioned Fair Consumer Contracts Act, which took effect on 1 October 2021 and 1 March 2022, respectively. For example, including a prohibition of assignment in the terms and conditions, which makes the collective enforcement of consumer claims by legal-tech providers more difficult, is only permitted to a limited extent (§ 308 No. 9 of the BGB). Furthermore, automatic contract extensions beyond a basic term of up to two years may only continue for an indefinite period (not a fixed duration) and have a contractual period of notice not exceeding one month (§ 309 No. 9 BGB). The "confirmation solution" originally planned for contracts concluded by telephone, on the other hand, was justifiably not implemented; instead, only energy supply contracts now need to be concluded in text form (§ 41b para. 1 of the Energy Industry Act.).

Sales law reform and digital products

Essentially all manufacturers and distributors of goods and digital products are affected by the sales law reforms that came into force at the beginning of the year. These are based on the controversial EU Directives on the sale of goods (EU 2019/771) and digital products (EU 2019/770) first proposed in 2015. These directives have, without need, fully replaced the 1999 Directive on the sale of consumer goods that served as the basis for the thorough modernisation of the German Law of Obligations in 2002. Basically, not only the artificial distinction between conventional goods (including those with digital elements) and digital products (digital content and services), with their different warranty regime, raises new questions that are in some cases exacerbated by the complicated incorporation of the directives into the German Civil Code. Fundamentally new digital phenomena such as non-fungible tokens (NFT) and smart contracts, on the other hand, remain unregulated.

Irrespective of the distribution channel, the new regulations in §§ 475a ff and 327 ff BGB concentrate on the consumer contract and in particular on digital goods and products. The burden of proof for the absence of defects is now borne by the seller for one year (previously six months), and for goods with digital elements this even extends up to two years beginning with the transfer of risk or supply (§ 477 BGB). The provisions on manufacturer and vendor guarantees (§ 479 BGB), as well as numerous other details (e.g. on "paying" with personal data, § 312 para. 1a BGB), have also been changed. The frequently discussed obligations of the seller to provide updates and information related to digital goods and products is particularly challenging (§§ 474b para. 4, 327f BGB). Although these obligations apply directly "only" in the final sale to consumers, dealers can generally only meet them by designing the contracts appropriately up the supply chain to the manufacturer. Finally, changes in the definition of material defects (§ 434 BGB), subsequent performance (§ 439 BGB), in particular in the case of "installation and removal" cases and supplier recourse (§§ 445a, 445c, 327u BGB), require a review of the purchase and sales conditions not only in the consumer contract (B2C) but also with regard to B2B.

Significant consequences for violations

If the new requirements are not implemented or are not implemented correctly, significant consequences are to be expected. In addition to the previous warnings by competitors and consumer associations and (possibly also collective) claims for damages under civil law, an individual claim for damages by the consumer has now also been added to the UWG (§ 9 para. 2 UWG). In addition, in the event of a "widespread infringement" of consumer interests (with or without a “Union dimension”) as defined in § 19 UWG in accordance with the CPC Regulation (EU 2017/2394), fines of up to EUR 50,000.00 or up to 4% of the annual turnover of larger companies (i.e. those with an annual turnover of more than EUR 1.25 million) can be imposed. The same applies with regard to the new Art. 246e EGBGB for infringements of certain consumer protection provisions of the (EG)BGB (or corresponding provisions of the law of another Member State applicable to the contract), such as the use of invalid GTC clauses, incorrect information, or a failure to confirm the contents of the contract or simply a delayed delivery.