The European Commission recently published its proposal for a new Directive on common rules promoting the repair of goods (proposed R2R Directive). The proposed R2R Directive would amend the legal guarantee under the Sale of Goods Directive (SGD) such that it would prioritise repair over replacement, establish a new obligation for producers to offer repairs for certain products outside of the legal guarantee and implement measures to help consumers find repairers and better compare repair offers. In this blog we take a look at the proposals, and why they matter for companies doing business in the EU. We think this could represent a significant shift for businesses both producing and retailing consumer products in terms of how products are designed, supplied and the after-sales experience.
What’s being proposed?
The proposed R2R Directive focusses on the post-sale stage of a product’s lifecycle and sits alongside other legislative proposals currently working their way through the EU legislative procedure, including: (1) the proposed Ecodesign for Sustainable Products Regulation focussed on the production phase; and (2) proposed Directive on Empowering Consumers in the Green Transition focussed on providing information at the pre-sale phase (see our blog here). Taken together, these are intended to establish the so-called right-to-repair in the EU.
The proposed R2R Directive takes a multi-pronged approach:
- Repair remedy against retailers within the SGD legal guarantee: a consumer can seek a remedy from the retailer where a product is not in conformity with the contract of sale under the legal guarantee established by the SGD. Under the current rules, the consumer can choose between a repair or a replacement. The proposed R2R Directive would amend the SGD to make repair the default option. There are a few important points to note:
- Scope of products: the amendment would apply to all products subject to the legal guarantee under the SGD, which includes all tangible products, including those with digital elements (so that extends to digital content or digital services incorporated or interconnected with goods in a way that their absence would prevent the good from performing its function).
- Responsibility for repair: the repair obligation would apply to the retailer, not the manufacturer. That has the potential to lead to practical difficulties where the retailer is a third party and is not in a position to carry out repairs: for example, because they do not have access to spare parts, proprietary tools or detailed product repair manuals. Given these barriers, retailers may seek to offer replacements in lieu of repairs, wherever possible, and reallocate repair obligations to manufacturers under supply contracts, where replacement is not possible.
- Potential exemption: a repair does not need to be offered if it is more expensive than a replacement. This is a potentially useful exemption, which should guard against imposing repair obligations where costs are disproportionate. However, it is currently unclear how repair costs should be calculated. That’s important because the calculation could vary significantly depending on whether, for example, costs of repair just cover components and repair time, or if they extend to other costs – such as the administration of processing repairs, the cost of retrieving a product, or even the cost of establishing a repair program where one does not exist already. If a broad approach is taken to the calculation, then replacement may be a more proportionate remedy in many cases.
- Repair remedy against producers outside of the legal guarantee: in addition to the repair remedy against retailers, the R2R Directive would establish a new obligation on the producer to repair certain defects upon request by a consumer where the legal guarantee does not apply (for example, where it has expired or the damage is excluded (e.g. accidental damage)). Key aspects of this new obligation include:
- Scope of products: this new obligation would apply to products covered by repairability obligations under certain EU laws listed in a proposed Annex – which currently lists certain ecodesign regulations applying to white goods (including household washing machines, household dishwashers and fridges), electronic displays and mobile phones and tablets (among others). However, as the scope of products for ecodesign is broadened, we should expect that the scope of products should broaden here as well.
- Scope of repairs: the types of repairs correspond to the repairability requirements under the relevant EU laws listed in the Annex (e.g. the components covered and the periods of time that spare parts need to be available etc.).
- The producer can charge a cost to carry out the repair: as currently drafted, there is no “reasonableness” requirement. The explanatory memorandum notes that where the “producer repairs against a price, such repair services could become an additional source of revenue and the producer would have an interest to reach an agreement on the price with the consumer in order to conclude a contract. The competitive pressure from other repair actors are likely to keep the price acceptable for the consumer. The producer may also have an interest to perform the obligation for free as part of a commercial guarantee on durability of its products”.
- Exemption where the repair would be impossible: the Recitals note this would apply where repair would be factually or legally impossible, and indicate that purely economic reasons (such as the costs of spare parts) may not be a sufficient reason. The Q&A document also gives the example of where products are damaged in a manner in which repair is technically impossible.
- The producer can sub-contract the repair: the proposal expressly allows this.
- New requirements to provide consumers with certain information: about the existence of the producer’s obligation to repair and on repair services.
- Where the producer is located outside of the EU, the obligation to repair is to be carried out by other entities in the EU: in order of priority, the authorised representative (if there is one), the importer (if there is no authorised representative), or the distributor (where there is no importer and no authorised representative in the EU).
- New obligations for repairers and Member States: to make it easier for consumers to access repair services. These include:
- Standardised European Repair Information Form: required to be provided by repairers to consumers when they request a repair. The aim is to bring transparency to repair conditions and price, and make it easier for consumers to compare repair offers. The conditions offered for the repair in the form (e.g. the price) cannot be changed for 30 days (unless agreed otherwise).
- Online matchmaking repair platform: to be set up by Member States to make it easier for consumers to find repairers, retailers of refurbished goods and purchasers of defective goods to be refurbished, and to request completed European Repair Information Forms (among other things).
Alongside the proposed new rules, the Commission will also facilitate development of a voluntary European quality standard for repair services. One of the aims is to help consumers identify repairers that have committed to meet certain repair standards.
Why does this matter?
- The proposal is designed to change market practice is Europe. The Commission wants to extend product lifecycles and end what it perceives to be a “throwaway” culture of consumer goods by ensuring that, when products go wrong, repair will be the norm. Whilst there are clear environmental benefits to such an approach, these need to be balanced against product safety and liability considerations, especially in circumstances where repairs are being carried out by third parties.
- Businesses in scope of the new obligations need to plan how they will comply. This is likely to require considering how products are designed for repair, revisiting supply contracts to address provisions for repair, strategic planning to ensure spare parts are available and putting in place procedures for how repairs are carried out – for example, whether to offer repairs in-house or through a network of independent repairers.
- There is an increased class action risk. The legislation would be added into scope of the new Representative Actions Directive that would enable class action style claims where the new obligations have not been complied with. In our view, it’s very likely we’ll see class actions in relation to right to repair. We’ve already seen regulatory enforcement and claims in relation to early obsolescence, which raise similar issues, and there are some very active consumer organisations promoting right to repair who may look to bring test cases. So, we expect to see class actions against organisations who do not meet obligations under right to repair legislation – either following on from regulatory enforcement, or as a means to challenge the approach taken by businesses in the EU (for example, where they prioritise replacement over repair on the basis of cost). This kind of activism is part of the EU’s push to empower consumers to drive the green transition.
- The new rules could have retrospective effect – applying to products placed on the market before the new-requirements kick-in. The trigger under the new rules is not when a product was placed on the EU market, but rather when the sales contract or the repair contract was concluded. Amendments to the legal guarantee to prioritise repair over replacement would apply to sales contracts concluded after the 24-month transition period ends. The new obligation on producers to repair certain products outside of the legal guarantee would apply to contracts for the provision of repair concluded after the end of the 24-month transition period.
- Even if a product is not currently in the proposed scope of the new repairability obligation on producers (outside of the legal guarantee), it might be added into scope in the future. The Commission is planning to introduce repairability requirements for a far greater range of products under the proposed Ecodesign for Sustainable Products Regulation (beyond electrical products) and has also indicated that it is planning to add more products into scope of the R2R Directive over the coming years. In addition, amendments to broaden the scope of products could be proposed by the Parliament or Council as the proposed R2R Directive works through the EU legislative process and could be agreed in the final text.
What are the next steps?
The Commission’s legislative proposal is undergoing an 8-week feedback period open to industry, other stakeholders and the public. Feedback currently closes on 25 May 2023. Feedback received during this process is usually published on the Commission’s website and is also summarised by the Commission and presented to the European Council and Parliament to consider as they review the proposal. The proposal will then make its way through the ordinary legislative process involving the Council and Parliament each separately reviewing the proposal before meeting in trilogue negotiations with the Commission to attempt to reach agreement on the final text.
The timing on when the new rules could start to apply depends in part on whether agreement can be reached in trilogue negotiations before the European Parliament elections next year. If provisional agreement can be reached before the elections (which would be a very ambitious timetable), we’d estimate that the new rules could start to apply when the 24-month transition period ends around Q3 / Q4 2026.
Where can I find out more?