25 Feb 2019
Sweden Investigates E-commerce Consumer Goods Including Toys and Jewellery
The Swedish Chemicals Agency (SCA) has undertaken a first of its kind investigation into electronic products, toys and jewellery sold via e-commerce marketplaces. It announced that its report of December 2018 found that 38% of the products contained substances in concentrations exceeding permissible levels set by EU legislation. Eleven of the sales companies marketing the products were Swedish, another eight companies were from other EU Member States and nine companies were domiciled in non-EU countries. The non-EU companies were mostly Chinese and had the highest incidence of non-compliance. The SCA designated enforcement of EU rules in non-EU jurisdictions as a special challenge for regulatory authorities. What may be of particular interest to Hong Kong traders is that the SCA discussed how EU product standards may be enforced vis-à-vis non-EU companies.
The SCA purchased and inspected 47 electronic products, 32 toys and 27 jewellery products marketed via different e-commerce platforms. A total of 24 electronic products were found to contain concentrations of substances exceeding permissible EU standards. 20 products contained lead and 10 products contained cadmium as part of their soldering. Five products also contained short-chained chlorinated paraffins (SCCPs) as part of their soft plastic components, such as cables. Among the 32 toys, 10 contained impermissible concentrations of prohibited substances. Nine contained phthalates, two contained SCCPs, one contained cadmium and one contained nickel. Six jewellery pieces contained high concentrations of cadmium. Another three jewellery pieces contained cadmium and/or lead, but these were imported into the EU before the bans on these substances had entered into force.
The SCA also found that 22 electronic products and 12 toys lacked correct CE marking, and that 37 electronic products and 14 toys lacked properly stated contact details. These are required by the EU product safety laws, implemented in all EU Member States, applicable to these products.
The SCA was able to make a comparison from among 87 of the products purchased depending on their origin, since these had been purchased in representative quantities. The report found that 35% of products purchased from Swedish sales companies contained impermissible concentrations of banned substances. The same statistic for other EU sales companies was 23%. The SCA reasoned that the higher rate of non-compliance among Swedish companies when compared to other EU providers was due to the fact that the EU sales companies tended to be larger and the products in the sample from these producers were of a better quality. Non-EU sales companies had the highest rate of non-compliance, of 43%.
The report identifies the growing popularity of e-commerce sites, and the increasing ease with which non-EU companies can market their products to European and Swedish consumers, as a challenge for regulatory agencies. The SCA contacted eleven foreign sales companies selling non-compliant products and received replies in just six cases. For two companies located in the EU which did not respond, the SCA contacted the relevant national regulatory agency. For companies located outside the EU, three out of seven did not respond.
The report explores how EU product standards can be enforced against producers outside the EU if necessary. The SCA suggested that one option would be to contact the payments-provider of the online seller so as to hinder the sub-standard products from being sold in the EU. Another suggestion was to contact the website’s domain name provider to block the seller’s website. These approaches were not used in the present survey since the dangers posed by the products concerned were not considered sufficiently acute. Furthermore, such enforcement could be considered extra-territorial in nature. It is nevertheless clear that all products marketed and sold in the EU must adhere to EU product standards.
The SCA did contact the e-commerce platforms which advertised and marketed the products, and informed these companies which products were non-compliant. Replies were received from all Swedish platforms and from some foreign ones. It is not clear, however, whether these entities should be defined as distributors of the product or whether they fall under another legal definition, according to the SCA. The SCA called for greater cooperation between e-commerce platforms and regulatory authorities in general and noted the agreement (the “Product Safety Pledge”) that was entered into last year between the European Commission and the four largest e-commerce platforms in the EU: Alibaba, Amazon, eBay and Rakuten. This Product Safety Pledge is titled a “Voluntary commitment of online marketplaces with respect to the safety of non-food consumer products sold online by third party sellers”.
In the future, it is possible that EU regulators will take a more aggressive stance. It is already the case that many globally connected businesses adopt their general business and product standards to the standards prevailing in their largest markets. A recent example of this from another sector is the EU’s General Data Protection Regulation (GDPR). This has caused companies to update their personal data processing requirements for offices and businesses regardless of whether they are located in the EU or not. Given that the EU is a world leader in implementing stringent product standards in its large consumer market, it is clear that EU regulatory agencies are now looking at the challenges posed by online marketing. Thus, product standards compliance could see a similar development.
All Swedish companies which were contacted by the SCA voluntarily stopped their distribution of the products concerned. For seven Swedish companies, one Danish company and one Finnish company which had been found to sell non-compliant products, the SCA referred the companies to the relevant prosecutorial authorities.