EU Proposes Huge Fines for Manipulative Online Sales Practices

Companies using manipulative online marketing tactics to pressure consumers into spending more or targeting children with personalized advertising could face fines of up to 6 percent of their annual global turnover under a European Union proposal.

The EU said that the Digital Fairness Act proposal allows EU authorities to “tackle unfair practices in digital markets more effectively.”

The proposal would also require greater pricing transparency, restrict addictive design features and gambling-like practices targeting minors, tighten rules on influencer marketing and personalized advertising, and make digital subscriptions easier to cancel.

It also includes a ban on manipulative marketing tactics called “dark patterns,” when companies fake that a product is almost sold out to pressure consumers into buying.

The revision of the Unfair Commercial Practices Directive will give the Commission direct powers to investigate large-scale cases with a major impact on consumers across the Single Market, with fines of up to 6 percent of a company’s worldwide annual turnover.

“We are not making it harder to do business, we ​are making it harder to do business unfairly,” EU justice chief Michael McGrath told a press conference on Wednesday.

Henna Virkkunen, executive vice-president for Tech Sovereignty, Security and Democracy, said: “Our laws must keep up with the way people live, shop and do business today. This reform will make everyday life simpler, fairer and safer for consumers, while giving businesses the clarity and confidence they need to thrive.”

The proposals need to be negotiated and approved by the European Parliament and EU member states before they can become law.

Finance Watch, which campaigns for the ​public ⁠interest in financial services rulemaking, said the proposed legislation does not go far enough.

“The proposals on dark patterns go ⁠in the ​right direction, but they lack ambition ​to sufficiently protect consumers in financial services,” said Peter Norwood, senior research and advocacy ​officer at Finance Watch.

CCIA Europe, which represents a broad cross-section of communications and technology firms, said that the proposed law “creates an enforcement maze.”

In a Nov. 11 statement, Albane Vannier, policy manager at CCIA Europe, said that the Commission’s “expanded definition of ‘vulnerable consumers’ remains vague, dynamic, and subjective.”

She said that businesses “need far more clarity on how they are expected to identify consumers’ vulnerabilities without compromising their privacy or risking GDPR liability.” 

“The Digital Fairness Act creates an enforcement maze. Having multiple national and EU authorities oversee very similar practices under different EU laws is a recipe for inconsistent enforcement and unnecessary compliance costs,” she added.

The U.S.-based tech industry trade association and advocacy group Chamber of Progress said on Nov. 11 the proposal’s restrictions on digital design features risk adding regulatory burdens, rather than addressing demonstrable consumer harm.

“There’s some good stuff here, but some overreach as well. Are we all really being exploited by discounts and product suggestions?” Chamber of Progress’s Vice President for Europe Kay Jebelli said.

“This alphabet soup of digital regulation flies in the face of promised simplification and harms our competitiveness, making it especially difficult for the smallest challengers.”

The Digital Fairness Act ​is the latest in Europe’s growing framework of digital regulations.

Laws such as the Digital Markets Act regulate large digital platforms, including American companies such as Alphabet, Amazon, Apple, Meta Platforms, and Microsoft.

Separately, the Digital Services Act requires major online platforms to address illegal content and certain systemic risks.

However, last month, the U.S. ambassador to the European Union warned that European companies could face “devastating” retaliation from Washington if Brussels restricts American tech rivals.

“If the purpose is to make the United States less competitive, I think that that’s not a legitimate goal,” Ambassador Andrew Puzder told The Financial Times on Oct. 19.

“You don’t make European companies more competitive by making U.S. companies less competitive.

“We have best-in-class products in this area. They’re reliable products, they’re trusted products. We don’t need some kind of synchronised mediocrity.”

Reuters contributed to this report.