As a Regulation, this legislation will be directly applicable, leaving little room for disparities across EU countries. The Regulation is relevant for any economic operator which is in any way involved in the sale of products onto the EU market; even those who are not themselves established within the EU will need to comply with the new rules.
The Regulation must now be endorsed at European Council level before it comes into force.
In depth - what we can expect from the reform
The new regulation aligns the existing GPSD with the latest developments in digitalisation, in line with the EC's New Consumer Agenda of 2020. The Regulation looks set to make a number of changes to the existing product regulatory landscape, including:
- Responsible Person
The Regulation contains a requirement for a "responsible person" to be established within the EU before products can be placed on the EU market, likely with a view to ensuring that there is always an EU entity that can be held accountable for any product related issues. That responsible person will have various obligations, including for ensuring the safety of the product it is responsible for and for continuing to ensure that the product complies with appropriate technical documentation. The Regulation also requires that details of the economic operator are included on the product or on its packaging, for the ease of consumers.
- Online Marketplaces
The EC considers that growth of e-commerce has decreased the effectiveness of the GPSD. This is particularly relevant in circumstances where 73% of consumers bought products online in 2021 (compared to 50% in 2014). Accordingly, the Regulation recognises that providers of online marketplaces play a crucial role in the supply chain, allowing economic operators to reach a greater number of consumers, and therefore also in the product safety system. As such, the Regulation seeks to regulate this area by including specific requirements in respect of online marketplaces and online sales.
In particular, the Regulation includes various requirements for providers of online marketplaces to, for example, (i) identify and register a single contact point for market surveillance authorities; (ii) publish safety warnings when publishing online adverts; and (iii) directly notify affected consumers who bought through their interfaces a product which is subject of a product safety recall or where certain information has to be brought to the attention of consumers to ensure the safe use of a product. Online marketplaces also have obligations to inform market surveillance authorities, via the Safety Business Gateway, about dangerous products that they have made available on their online interface, and to report accidents as set out in further detail below.
- Accident Reporting
Whilst earlier drafts of the Regulation required reporting of an accident related to the safety of a product by an economic operator within two business days, the final version of the Regulation has rowed back from this position, instead mandating reporting of an accident via the Safety Business Gateway without undue delay from knowledge of that accident. Whilst the Regulation does not provide any definition of 'accident', it does outline a relatively high threshold for the severity of such accident to warrant a notification. A report would need to be made in respect of an accident that "resulted in an individual's death or in serious adverse effects on that individual's health and safety, permanent or temporary, including injuries, other damage to the body, illnesses and chronic health effects".
The Regulation sets out separate accident reporting obligations for online marketplaces, with a different threshold for the making of a report. In particular, a report must be made in respect of an accident which has resulted in a "serious risk or actual damage to the health or safety of a consumer, caused by a product made available on their online marketplace and inform the manufacturer thereof". This comparatively lower threshold for the reporting of accidents could lead to some inconsistencies in terms of which accidents are reported by economic operators vs. online marketplaces.
- Product Recalls
The improvement of the effectiveness of product recalls across the EU has been a key objective for the EC in the reform of the GPSD. Accordingly, the Regulation sets out granular requirements for the conduct of product recalls, details which we would generally expect to see in guidance rather than legislation itself.
Under the Regulation, all economic operators (including manufacturers, distributors and importers) will have an obligation to act to recall dangerous products, with online marketplaces also being obliged to cooperate to ensure effective product recalls. Detailed provisions as to the contents and form of the recall notice have also been included, presumably for standardisation purposes.
- New Technologies
The Regulation seeks to ensure that the EU's product safety regime can be applied effectively to 21st century developments and can respond quickly to new and emerging challenges, including those posed by connected products, software updates and downloads as well as the evolving functionalities of AI-powered products. To address this issue, the Regulation adopts newly improved definitions; for example, 'product', now expressly includes a reference to items which are interconnected to other items.
The Regulation also includes a list of points for consideration when assessing the safety of products, including:
- The effect of the product on other products, including the interconnection of those products
- The appropriate cybersecurity features necessary to protect the product against external influences, including malicious third parties, where such an influence might have an impact on the safety of the product, including the possible loss of interconnection
- The evolving, learning and predictive functionalities of the product
The Regulation also addresses responsibility for product safety where a substantial modification is made to a product; the person performing that substantial modification will be considered a 'manufacturer' of that product.
Whilst previous drafts of the Regulation asserted a maximum penalty equating to at least 4% of a company's annual turnover in the relevant Member State, the version which has been endorsed by the European Parliament states that penalties must be "effective, proportionate and dissuasive", but leaves to the discretion of member states the decision as to what penalty would be appropriate.
The European Council will now also need to formally endorse the Regulation before it is published in the EU Official Journal and enters into force. The Regulation will apply eighteen months after such publication. Realistically therefore, the earliest we can expect the Regulation to apply is early 2025.
Following Britain's exit from the EU, and assuming that the new Regulation is not replicated in the UK during its own review of its product safety regime before it comes into force in the EU, companies selling products on both the UK and EU markets could find themselves in the difficult position of being required to comply with two (different) sets of requirements.
Every company involved in the sale of products to the EU market must now ensure they are prepared for this new era of product safety in the EU. For further information on these developments and how they may affect your business, please do not hesitate to get in touch with any member of our team.