In May of this year, the new Consumer Protection Act will enter into force, completely replacing the previous Act of the same name from 2014, which has undergone only two significant amendments. According to the Republic of Croatia Government, the main reason for adopting the new Consumer Protection Act is the implementation of Directive (EU) 2019/2161 from 27th November 2019. No less important, the reasoning for adopting the new Act also lies in the continuous development of digital tools, which is why it was necessary to include a digital segment of the conclusion of contracts in the legislation to a greater extent than was the case so far.
The new Consumer Protection Act was published in the Official Gazette no. 19/22 on 11th February 2022. It will enter into force on 28th May 2022, on the application date of the Directive mentioned above. This delay of entry into force will allow traders sufficient time to adapt their business activities to the new obligations prescribed by the new Act.
The Consumer Protection Act represents an umbrella law regulating consumer relations. It is supplemented by the secondary application of the Obligations Act, as a general law regulating contractual relations, and the Services Act and the Electronic Trade Act as special laws.
The main novelty is the extended scope of the new Consumer Protection Act to digital services. They are now defined as services enabling the consumer to create, process, store, or access data in digital form; or as a service that allows the sharing of or any other interaction with data in digital form uploaded or created by the consumer or other users of that service, such as video and audio sharing services and other file hosting services, cloud storage, e-mail, social media and cloud applications.
In addition, the new Act introduces the definition of the online marketplace as a service using software, including a website, part of a website, or an application, operated by or on behalf of a trader, which allows consumers to conclude distance contracts with other traders or consumers and definitions of functionality, interoperability, compatibility, and commercial guarantee.
These novelties are accompanied by recent amendments to the Obligations Act regarding the trader's responsibility for material deficiencies and commercial guarantee, which provisions are primarily applied to the performance of contracts and liability for material deficiencies. For more information on this topic, see the Article by Nebojša Vitez, a lawyer and partner in the law firm Porobija & Špoljarić.
In the sphere of digital services, the scope of the new Act is extended to consumer contractual relations, including the contracts based on which the trader supplies or undertakes to supply digital content or digital service to the consumer. The consumer, on the other hand, does not pay the price but provides or undertakes to provide personal data to the trader, except where the trader exclusively processes the personal data provided by the consumer to supply the digital content or digital service or for allowing the trader to comply with legal requirements to which the trader is subject and the trader does not process those data for any other purpose.
Many novelties have been introduced concerning pre-contractual information and the conclusion of distance agreements. The obligation to provide pre-contractual information has also been extended to the internet market provider.
Regarding the performance of the contract, the most significant novelty relates to the costs of expertise concerning the existence of a material deficiency at the moment of passing of risk. In contrast to the provisions of the former Act, according to which the trader bore the costs of expertise without exception, the new Act stipulates that the trader pays these costs in advance. Ultimately the cost is borne by the trader or consumer, depending on the result of the expertise if the lack occurred within the prescribed period, which differs depending on the type of contract. On the other hand, if the material deficiency or the non-compliance of the digital content or digital service with the contract occurs after the expiry of the prescribed period, but no later than two years from the date of the passing of risk to the consumer, the costs of expertise shall be paid in advance by the consumer and finally borne by the trader or consumer, depending on the result of the expertise.
Finally, the new Consumer Protection Act also enacts more numerous and stricter penalties for traders for infringements of the provisions of the Act.
This novelty is the consequence of the transposition of the Directive mentioned above, which, according to the Republic of Croatia Government, provided for the imposition of effective, proportionate, and dissuasive fines for traders in cases of cross-border infringements involving a violation of the consumer rights of a large number of consumers when penalties will be imposed dependant upon the annual turnover of the trader in question.
The new Act prescribes fines ranging from HRK 10.000,00 to HRK 200.000,00 instead of HRK 100.000,00 for infringements committed by a legal entity. Furthermore, the Act foresees a new category of offences that have caused damage to collective interests and rights of consumers in at least three Member States of the European Union, for which the prescribed fine may amount to up to 4% of the trader's annual turnover. Should the damage manifest as caused to consumer collective interests and rights in at least 2/3 of Member States together comprising at least 2/3 of the Union population, the prescribed fine shall range from 2 to 5% of the trader's annual turnover.
In conclusion, consumer protection is a complex, strictly regulated area. This is even more so, given the legal nature of provisions governing consumer contracts, since the consumer cannot waive or restrict his rights under the Consumer Protection Act or other laws that protect consumer rights and because the contractual provisions, which are less favourable for the consumer than those laid down by the applicable laws, are considered null and void. The new Consumer Protection Act extends its application and imposes new obligations for traders. At the same time, high and strict penalties are foreseen for violations of provisions or non-compliance with new obligations.
Therefore, we recommend that traders thoroughly study the provisions of the new Act in the period until its entry into force, prepare themselves for its implementation, and harmonise their business activities in order to minimise potential responsibility for infringements.
By Dora Stazic, Junior Associate, Porobija & Spoljaric