Update on product compliance: The EU Market Surveillance Regulation applies from 16 July 2021

1. Background

As part of its Single Market Strategy, the European Commission aims, among other things, to expand the single market for goods by increasing efforts to keep non-compliant products out of the EU market. In its Communication of October 28, 2015, the Commission announced in this context that it would "introduce an initiative to strengthen product compliance by (…) intensifying compliance checks and promoting closer cross-border cooperation among enforcement authorities, including through cooperation with customs authorities" (page 19 of the Communication). After extensive consultations, the Regulation was finally adopted on June 25, 2019 (Official Journal of the EU of 25.06.2019, L 169/1). It aims to ensure a high level of safety, health, consumer and environmental protection, mainly by strengthening market surveillance, increasing the control of goods imported into the EU internal market and imposing additional requirements on economic operators. In this context, the legislator is also focusing on e-commerce, as online sales of non-compliant (e.g. unsafe or incorrectly labelled) products, for which a responsible source cannot be identified, is seen as a major source of unfair commercial behavior and safety concerns. On a national level, the German Market Surveillance Act (Marktüberwachungsgesetz – MÜG) also comes into force on July 16, 2021, and implements the relevant provisions from the Regulation for the non-harmonised non-food sector into German law (Sec. 1 (2) MÜG).

2. The Market Surveillance Regulation in a nutshell

The Regulation follows an industry-neutral and cross-sectoral approach and concerns a large number of goods, product categories and product groups. Specifically, it covers all products subject to one of the product-related harmonisation laws defined in Annex I (Art. 2 para. 2 of Regulation (EU) 2019/1020). Amongst other things this includes toys, batteries, cosmetic products, textiles, personal protective equipment or medical devices. Furthermore, the catalogue contains a wide range of e.g. packaging or substance related provisions as well as type-approval and road traffic regulations. However, in accordance with the lex specialis principle, more specific provisions of the referenced harmonisation legislation always take precedence. The Regulation also explicitly does not impede more specific measures of the market surveillance authorities under the Product Safety Directive 2001/95/EC (Art. 2 (3) of Regulation (EU) 2019/1020).

The Regulation was published on June 20, 2019. Under Article 44 certain rules directed at authorities applied as from January 1, 2021. In contrast, obligations on economic operators only apply from July 16, 2021 (Art. 44 of the Regulation). Therefore, products that are placed on the market in the EU from that date onwards - i.e. are supplied for the first time for distribution, consumption or use on the Union market in the course of a business activity, whether in return for payment or free of charge (Art. 3 No. 2, 1 of Regulation (EU) 2019/1020) – fall under the Regulation.

"Economic operators" are included within the scope of the Regulation. Such are, in particular, required to cooperate with market surveillance authorities regarding risk prevention measures (Art. 7 (1) of Regulation (EU) 2019/1020) and can be subject to comprehensive official actions (see below). The circle of economic operators defined in the legislation is very broad: it includes manufacturers, authorised representatives, importers, distributors, fulfillment service providers or any other natural or legal person who is subject to obligations in connection with the manufacture of products, their making available on the market or their putting into service in accordance with the relevant harmonisation legislation of the Union (Art. 3 No. 13 of Regulation (EU) 2019/1020). The explicit inclusion of fulfilment service providers - i.e. natural or legal persons who offer at least two of the following services in the course of their business activities: warehousing, packaging, addressing and shipping of products in which it has no ownership rights (with the exception of postal, parcel delivery and other freight services, Art. 3 No. 11 of Regulation (EU) 2019/1020) - closes currently existing responsibility gaps in the supply chain.

Notwithstanding any more specific obligations arising from the harmonisation acts, certain goods covered by one of the 18 European regulations and directives mentioned in Article 4 (5) – for example toys, construction products or personal protective equipment – may only be placed on the market if an economic operator established in the European Union is responsible for tasks stipulated by the Regulation (Art. 4 (1) of Regulation (EU) 2019/1020). Depending on the product, this may include the obligation to verify and keep available EU declarations of conformity and technical documents, to transmit any documentation required to demonstrate conformity, to inform market surveillance authorities in case of identified product risks and/or to ensure necessary corrective actions in case of non-compliance. Further, new labelling obligations are introduced for the aforementioned products. Under Art. 4 (4), information on the responsible economic operator, including contact details, must be indicated on the product or on its packaging, the parcel or an accompanying document. The definition of placing a product on the market is also broad, meaning the first making available (...) on the Union market (Art. 3 No. 1), whereas such “making available” means the supply of a product for distribution, consumption or use on the Union market in the course of a commercial activity, whether in return for payment or free of charge (Art. 3 No. 1 of Regulation (EU) 2019/1020). In the context of e-commerce, a product offered for sale is already considered to be “made available on the market” if an offer is targeted at end users in the Union, which should always be the case if the economic operator directs, by any means, its activities to a Member State (Art. 6 of Regulation (EU) 2019/1020).

In order to comply with and enforce the harmonised EU acts as well as the Regulation itself, the authorities must ensure effective market surveillance and carry out inspections (Art. 11 of Regulation (EU) 2019/1020). To this end, they are provided with extensive powers. This ranges, for example, from ordering product recalls (Art. 19 of Regulation (EU) 2019/1020) or corrective and risk mitigation measures (Art. 16 (3) of Regulation (EU) 2019/1020) to comprehensive information and disclosure claims against economic operators. In addition, the Regulation stipulates rather "unusual" measures that may be applied by the authorities, such as carrying out mystery shopping or reverse-engineering activities (Art. 14 of Regulation (EU) 2019/1020). In relation to online trade, "online interfaces" (essentially sales platforms) may also be ordered by regulators to display mandatory warnings or to remove certain content (Art. 14(4)(k) of Regulation (EU) 2019/1020).

The German Market Surveillance Act (MÜG) additionally introduces new administrative offences (Sec. 21 MÜG) and criminal offences (Sec. 22 MÜG) at national level in order to implement the "effective, proportionate and dissuasive" sanctions required by the usual EU jargon (cf. Art. 41 of Regulation (EU) 2019/1020).

3. Outlook

Although the Regulation itself does not impose any technical requirements on products, manufacturers (or their authorized representatives), importers and traders as well as fulfilment service providers will, in practice, be confronted with significantly intensified market surveillance and possible measures being taken by the competent authorities. On the other hand, it can be assumed that compliant economic operators will benefit directly from the Regulation, as the (online) distribution of non-compliant competing products from non-EU countries will be restricted more effectively. In particular, operators of business models such as dropshipping or involving fulfilment service providers, as well as suppliers from non-EU countries, who sell their products online directly into the European Union, will have to consider potential implications under the Regulation.