To date, online marketplace operators that do not sell products themselves have only been liable in exceptional cases for defective products that they have distributed. These alleged gaps in EU product liability law shall now to be closed by the planned new Product Liability Directive.
Who is liable under the current Product Liability Directive?
Under the Product Liability Directive currently in force (PLD 85/374/ECC, the 'Current PLD', implemented in Germany in the Produkthaftungsgesetz), the following actors can generally be held liable:
- the producer of a product
- the quasi-producer: anyone who appears to be the manufacturer by affixing its name, trademark or other mark to the product
- the importer of the product (whoever imports a product into the European Economic Area (EEA) in the course of their business with a view to selling)
- the supplier.
And what about the online marketplace operators?
Some stakeholders/commentators have argued that the almost 40-year-old Current PLD is not suitable for advancing digitalization. Currently, online marketplace operators are only liable in exceptional cases for defective products sold through their platforms. In a world in which European customers can purchase products from all over the world at the click of a mouse via online marketplaces, they assert that liability can no longer be limited to the market participants that prevailed almost 40 years ago.
EU Commission introduces proposal for a new Product Liability Directive
The EU Commission is seeking to address this and, from its perspective, to restore one of the declared protective purpose of the Product Liability Directive – i.e. to ensure that consumers who are injured by defective products are not deprived of the ability to bring a strict liability claim, even when the product manufacturer is based in a non-EU/EEA country.
On 28 September 2022, the EU Commission published a proposal for a new Product Liability Directive (the New PLD) to replace the Current PLD. The New PLD would make it easier for, operators of online marketplaces as well as fulfilment service providers to be held liable.
Liability of the online marketplace providers
With regard to the liability of online marketplace operators “a provider of an intermediary service using an online interface, which allows consumers to conclude distance contracts with traders for the sale of products”, the proposal for the New PLD builds on the liability provisions for online platforms according to the Digital Services Act (DSA), which was enacted on 16 November 2022 and came into force in all EU states from 17 February 2024.
Under the DSA, when online platforms perform the role of manufacturers, importers or distributors in respect of a defective product, they should be liable on the same terms as economic operators. In cases in which online platforms play a mere intermediary role in the sale of products between traders and consumers, they shall be covered by a conditional liability exemption under the DSA.
However, the DSA establishes that online platforms that allow consumers to conclude distance contracts with traders are not exempt from liability under consumer protection law in cases in which they present the product or otherwise enable the specific transaction in question in a way that would lead an average consumer to believe that the product is provided either by the online platform itself or by a trader acting under its authority or control. Hence, in this case it could be possible to hold them liable, in the same way as distributors under the New PLD.
Additionally, under the proposal for a New PLD, an online marketplace operator that allows consumers to conclude distance contracts with traders and that is not a manufacturer, importer or distributor shall be liable where (i) the claimant requests the online marketplace operator to identify the economic operator or the person who supplied the distributor with the product; and (ii) the online marketplace operator fails to do so within one month of receiving the request.
Liability of the Fulfilment Service Provider
The New PLD also introduces liability of the so called ‘fulfilment service provider’. By definition, this includes any natural or legal person offering, in the course of commercial activity, at least two of the following services: warehousing, packaging, addressing and dispatching of a product, without having ownership of the product.
The New PLD points out that the fulfilment service providers play an increasingly significant role as economic operators enabling and facilitating access to the Union market for products from third countries.
Therefore, it should be possible to hold them liable, but given the subsidiary nature of that role, they should be liable only where no importer or authorised representative is based in the Union.
According to the New PLD, the fulfilment service provider is to be held liable regardless of fault if neither the manufacturer, importer nor authorized representative is established in the Union. Looking at the business model of many online marketplace operators, this will likely result in a substantial increase in liability risks for online marketplace operators. In purely intra-European cases, however, it remains the case that the fulfilment service provider cannot be held liable - even if another economic operator cannot be found.
Would an EU product liability law be applicable to a non-EU platform?
Yes. The EU product liability regime applies when a product is made available on the market in the EU. This is the case when the product is offered for sale online or through another form of distance selling and the product offer is addressed to consumers in the EU. An offer for sale is considered to be addressed to consumers in the EU whenever the online trader directs its (sales) activities in any way to one or more EU Member States.
What next in the UK?
The UK Government has so far not produced draft legislation similar to the EU's New PLD.
However, the OPSS, the UK's national product safety regulator, is in the midst of a wide ranging product safety review specifically focused on whether the existing legal framework is fit for purpose in the 'digital age' - particularly light of emerging technologies and new models of supply.
Like the EU Commission, the OPSS is placing significant emphasis on the role of online marketplaces and fulfilment centres. As part of its on-going review, the OPSS published a consultation in August last year. It did note feedback from stakeholders that online marketplaces often take a reactive approach to safety and that there are recurring problems such as online marketplaces withdrawing unsafe products only for them to be re-listed several days later.
The OPSS consultation suggests that the UK Government is somewhat reluctant to add online marketplaces as an additional class of economic operator which would be subject to specific obligations/face liability in all circumstances. Instead, the text suggests that this should be the case where online marketplaces are in practice fulfilling the role of one of the economic operators which fall within the existing legislation, such as the importer. In other words, the UK Government might be more likely to clarify the current definition of importer, to ensure that online marketplaces are captured where they are actually fulfilling this role.
However, in relation to product safety, the OPSS is proposing some additional obligations specifically targeted at online marketplaces. These include increased product monitoring and providing consumers with more information at the online point of sale - our previous article sets out full details on this.
We await detailed proposals/draft legislation from the OPSS/UK Government to see precisely how the new regime will take shape.
Outlook
The text of the New PLD was provisionally agreed by the co-legislators at the end of last year and was published in January 2024. The text will need to be formally adopted by the European Parliament and the Council.
On this basis, the New PLD could come into force in mid-2024. A two year transition period has been proposed meaning that the Directive would need to be implemented in Member States by 2026.
Despite this, online marketplace operators are well advised to act now to adapt their internal processes to the anticipated changes to product liability law, including with regard to product monitoring and documentation, in order to mitigate the risk of product safety incidents taking place and being held liable for these should a consumer bring a claim. We are happy to support you in this transition.
