SELDIA is keeping busy as ongoing regulation cycles continue in Europe
By: David Bland
“The Commission is focusing on digital fairness and clarifying further environmental
claims and green product claims. There are proposals on due diligence and the circular
economy that just came out or are about to come out. This is going to impact all companies
operating in Europe, direct selling companies included.” — Laure Alexandre, Executive Director,
SELDIA.
The direct selling companies of the European Union (EU) are preparing for adjustments and adapting to new rules as the implementation of a major consumer protection directive coincides with the significant disruptions resulting from the economic downturn, the war in Ukraine, and continued fallout from the COVID-19 pandemic.
As the EU’s member states continue the process of transposing, adopting and applying the new directives from 2020’s landmark Enforcement and Modernization Directive, known as the Omnibus Directive, the European Direct Selling Association (SELDIA) is busy working with member organizations and government representatives to ensure a smooth transition and to provide guidance for direct sellers.
As a major component to the European Commission’s “New Deal for Consumers” adopted in early 2018, the Omnibus Directive updates and enhances four pieces of existing EU legislation addressing unfair commercial practices, consumer rights, unfair contract terms, and price indications. The deadline for EU member states to implement the new Directive was November 28, 2021, followed by a May 28, 2022, deadline for applying the measures through national legislation.
Some Countries Delayed in Omnibus Implementation
Laure Alexandre, executive director of SELDIA, tells SSN that major overhauls such as this are not always completed quickly and without delays at the member state level.
“Seven countries are still late in their transposition and adoption. Formal notice letters were sent, and the Commission is pushing them more under infringement procedures. But, with COVID-19, election cycles and everything else going on, there is some rationale as to why the legislative agenda in some countries was simply too busy to get a complete overhaul of their consumer law over the line on time. Yet, the delays in transposition do not stop the Commission from working on new initiatives, which may review or reopen parts of the Omnibus already,” Alexandre says.
The Green and Digital Transitions
The implementation of the Omnibus is happening as the groundwork is being laid for a twin transition package called the “Green and Digital Transition.” European leaders believe that the ongoing updates to consumer law will not be ultimately successful without incorporating the quickly evolving digital marketplace as well as addressing the existential threat to Europe and the world posed by environmental degradation.
“The overarching direction with the Commission is the Digital Transition and the Green Transition,” says Alexandre. On the Green Transition side, there is a proposal for a Directive on Empowering Consumers. It aims to deal with unfair practices, which the Omnibus touched on, and claims regarding environmental benefits of product and services.
“The Commission is focusing on digital fairness and clarifying further environmental claims and green product claims. There are proposals on due diligence and the circular economy that just came out or are about to come out. This is going to impact all companies operating in Europe, direct selling companies included.”
As is commonly seen across Europe as the EU attempts to bring the diverse member states under the umbrella of new rules and directives, not all companies embrace the regulations as easily or enthusiastically as others.
“Some companies have embraced the change before it was mandatory or in fashion. It is part of their ethos, who they are and how they work,” remarks Alexandre. “Others came to it because of consumer demand and competitive advantages or benefits. And the other part is going to have to come to it now because regulation is coming in, whether impacting the supply chain, the type of product they can market, or through taxation.
“Europe has the ambition to be the first climate neutral continent with a resource-efficient economy and is enacting strong environmental policy for it,” says Alexandre. “So, there’s no surprise about the fact that if your company is not environmentally accountable and your products are not sustainable, responsibly sourced, recyclable, reusable, compostable, then the European market is going to become very complicated for you.”
The EU promulgated the Green and Digital Transitions at the end of 2020, as part of the 2021-2027 multi-year financial framework. Most of the costs will be funded by bonds mutually underwritten by the governments of the European Union.
According to the European Commission website, the Digital Transition will be based on three pillars to “ensure that Europe seizes the opportunity and gives its citizens, businesses and governments control over digital transformation.”
- Technology that works for the people
- A fair and competitive digital economy
- An open, democratic and sustainable society
The objectives of these three pillars include protecting from cyber threats, ensuring Artificial Intelligence (AI) is developed in ways that do not abuse people’s rights, strengthening the responsibility of online platforms and ensuring fair competition of all companies in Europe.
Digital Fairness
The European Commission is currently conducting impact assessments and analyses of parts of the Omnibus Directive to determine whether additional action is needed to provide protection and digital fairness for consumers.
SELDIA’s Alexandre explains that the review process is a near continuous cycle that direct selling advocates are monitoring to ensure that the channel’s interests are being represented.
“Parts of the Omnibus are getting looked at. For example, the Price Indication Directive prescribing how you display prices, reductions and percentages off implementation is being further discussed,” she says. “So is everything to do with what is called ‘digital fairness.’ Because everything moved online so quickly in terms of consumer purchasing and habits, and because the Omnibus was negotiated in 2018 and adopted in 2019 before the pandemic, the Commission is looking at whether the rules are adapted to consumers and business practices of today.
“The reviews and studies part of the impact assessment are starting now. And once that is done, then the Commission is going to draft a proposal. It usually takes them about a year. By Q4 2023, we might get the study results and then a review of digital fairness rules for consumers for 2024.
“They might decide to address only bits of it and do partial reviews. But, once you start opening directives, it’s a Pandora’s Box and it might trigger further changes. SELDIA has work guaranteed for sure. Regulation is a never-ending cycle,” says Alexandre.
DMA/DSA Update
As reported previously in SSN, the European Commission presented a legislative package in December 2020 called the Digital Services Act (DSA) and the Digital Markets Act (DMA) that will have far reaching implications for businesses in Europe, including direct sellers.
The DSA seeks to regulate online content involving product marketing or services by covering ISPs, social media platforms, and messaging services, among other components of the e-commerce marketplace, while the DMA focuses on unfair business practices, maintaining competition standards, and ensuring the openness of important digital services and platforms.
While the DMA is finalized, the DSA is now in the final phase of implementation, according to Alexandre.
“The DMA, the Digital Markets Act is finalized. The trilogues between Commission, Parliament and Council have concluded. We’re just waiting to see the final text. With the Digital Services Act, there was a bit more discussion in trilogues on a few items, like targeted and political advertising, etc. But it should all be done before the end of the year. Once published in the official journal, both will come into force 20 days after publication.
“They will be directly applicable across the EU 15 months after entry into force or from 1 January 2024, whichever comes later,” confirms Alexandre. “For very large online platforms and very large online search engines, the DSA will apply from an earlier date, that is four months after their designation. We’re very much in the last phase and the outcome will be the European digital rule book.”
Regulators and company executives in the U.S. are monitoring the implementation of the EU’s DSA and DMA closely, as many of the large digital gatekeepers are American companies.
Alexandre observes that communications between the governments are proceeding now with less tension than during the previous U.S. administration.
“There is a long tradition of bilateral dialogues between the U.S. and EU. But the conversation was more complicated under the Trump Administration. Now with the new Biden Administration, the dialogue is starting again with data, privacy and DSA/DMA at the center of it,” she says.
Direct Marketing and Door-to-Door Sales Safe for Now
One specific marketing area under Commission scrutiny, and of interest to direct sellers, is direct marketing—including telephone prospecting and door-to-door sales. While these regulations are still being worked out at the member-state level, Alexandre confirms that an outright ban on the practices will not happen.
“Consumer protection regulation is enacted country by country. Hence the importance of having efficient national direct selling associations. We are monitoring national developments with our local members,” she says. “Telephone prospection and direct marketing were also challenged in some countries, maybe more so than door-to-door sales.
“We’re waiting to see how regulation evolves in Central and Eastern Europe as they were the ones raising consumer protection issues with door-to-door practices and companies not respecting their obligations in the first place. But an overarching European ban of door-to-door sales has been avoided,” says Alexandre.
Harsh Realities of 2022 Affecting European Direct Sellers
While direct selling retail sales in the EU grew by 3% in 2021, the slowdowns from the pandemic, inflationary trends and the war in Ukraine are proving so far, in 2022, to have significant negative impacts on many European direct sellers—in both operations as well as distributor morale.
“Simply put, the outlook is not favorable, and our members are coping with it as best they can,” observes Alexandre. “I’m hearing a variety of feedback from our members, big and small, global or European-based. You have problems of supply chain disruptions which, after COVID, are now happening because of the war in Ukraine. Companies with manufacturing facilities in Europe have been particularly impacted, maybe more so than the U.S.”
According to Alexandre, all of this boils down to lower morale among the European workforce as well as independent sellers. Uncertainty about the future, anticipation of high inflation, and rising energy prices directly impact consumer interest in making purchases and lower demand for most items other than essential goods.
“As Europeans, we have been more directly impacted. The consequences of the war and pandemic are very present in our lives. If you combine all factors, whether economical and geopolitical, or impacts on personal and mental health, it is not conducive to a positive outlook or realistic hopes for dynamic growth in the coming months.
“The length of the war and how the winter will pan out, both in terms of energy crisis and pandemic resurgence, is going to be critical.”
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