The European Commission has taken a crucial step towards greater consumer protection with its latest Proposal for a Directive of the European Parliament and of the Council on liability for defective products (No. 52022PC0495). This initiative is primarily aimed at establishing uniform rules in the Member States, ensuring the proper functioning of the digital and circular economy and helping those harmed by defective products to obtain fairer compensation.
The proposal comes in response to the need to adapt regulation to the challenges of the digital world, artificial intelligence and new forms of distribution through online platforms.
Among the most significant changes, the aim is to clarify and broaden the scope of application of the regulation, defining precisely who the affected parties are and the damages that can be compensated. The notion of “economic operators” is introduced, which refers to any natural or legal person who makes a product available on the European market; in the case of a manufacturer from a country outside the European Union, the importer of the product will be considered an economic operator. The Directive also extends product liability to related services and software.
In the digital age in which we live, the liability of manufacturers for defective products, and the obligation to repair damages caused by act or omission, and to compensate persons harmed by these damages, has been significantly extended to cover not only physical defective products, but also software, digital services and digitally manufactured files. However, an exception to the above is made for open source software that is not offered or made available by commercially active entities.
In addition, the proposal provides that manufacturers’ liability will be engaged for up to 10 years after the date of release of the product, addressing issues such as software updates, cybersecurity risks and data loss. In addition, a new exemption from liability is introduced for micro or small companies developing software. This exemption protects such companies if, at the time of launching their software on the market, they were considered micro or small enterprises, as long as another economic actor is liable for damages caused by such software.
Following a joint report by the Legal Affairs and Internal Market and Consumer Protection Committees, Parliament adopted its position on the revised rules in October 2023. MEPs will now enter into negotiations with the EU Council on the final form of the legislation, scheduled for the first half of 2024 with implementation in 2026.
In conclusion, the new proposed Product Liability Directive marks a significant milestone for manufacturers, notably expanding product liability to digital products and services, implying that manufacturers must assume greater due diligence and liability at all stages of the product lifecycle. This includes not only the initial creation and distribution of the software or cloud service, but also the ongoing provision of services, software updates… This extension not only implies a greater regulatory burden, but also requires a comprehensive review of product development practices, processes and business responsibilities.
