EUROPEAN COMMISSION Brussels, 30.6.2021 SWD(2021) 168 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposal for a Regulation of the European Parliament and of the Council



on general product safety, amending Regulation (EU) No 1025/2012 of the European Parliament and of the Council, and repealing Council Directive 87/357/EEC and Directive 2001/95/EC of the European Parliament and of the Council





{COM(2021) 346 final} - {SEC(2021) 280 final} - {SWD(2021) 169 final}



Table of contents 1.Introduction: Political and legal context 2.Problem definition 2.1.What are the problems? 2.1.1. Product safety challenges linked to new technologies 2.1.2. Product safety challenges in the online sales channels 2.1.3. Ineffective product recalls 2.1.4. Market surveillance rules are complex and not fully effective 2.1.5. Inconsistent application of product safety rules for food-imitating products 2.1.6. Problems related to the legal form 2.1.7. Regulatory burden and costs of the GPSD (REFIT problem) 2.2.What are the problem drivers? 2.3.How will the problem evolve? 3.Why should the EU act? 3.1.Legal basis 3.2.Subsidiarity: Necessity of EU action 3.3.Subsidiarity: Added value of EU action 4.Objectives: What is to be achieved? 4.1.General objectives

4.2.Specific objectives 5.What are the available policy options? 5.1.What is the baseline from which options are assessed? 5.2.Description of the policy options 5.3.Options discarded at an early stage 6.What are the impacts of the policy options? 6.1.Impacts of Option 1 6.2.Impacts of Option 2 6.3.Impacts of Option 3 6.4.Impacts of Option 4 7.How do the options compare? 8.Preferred option 8.1.Preferred option – Option 3 8.2.REFIT (simplification and improved efficiency) 9.How will actual impacts be monitored and evaluated? Annex 1: Procedural information Annex 2: Stakeholder consultation Annex 3: Who is affected and how? Annex 4: Analytical methods Annex 5: Evaluation report

Annex 6: Effects of the COVID-19 crisis in the context of the policy options and their expected impacts Annex 7: SMEs Test Annex 8: Effectiveness of recalls of consumer products Annex 9: Cooperation activities under GPSD Annex 10: Standardisation procedure Annex 11: Summary of replies to the open public consultation Annex 12: Stakeholders opinions on the benefits of the different options Annex 13: Minutes from the EU workshops addressing the sale of illegal goods online Annex 14: Minutes from the EU Workshop on strategies to maximise the effectiveness of product recalls Glossary Term or acronym Meaning or definition AI Artificial Intelligence Charter Charter of Fundamental Rights of the European Union CSN Consumer Safety Network DSA Digital Services Act EEA European Economic Area EU European Union FIPD Council Directive 87/357/EEC concerning the safety of food-imitating products GPSD Directive 2001/95/EC on the general safety of products (General Product Safety Directive) ICT Information and Communication Technology IA Impact Assessment IoT Internet of things MSA Market surveillance authority OPC Open Public Consultation Pledge Product Safety Pledge REFIT Regulatory fitness and performance check Safety Gate/RAPEX EU Rapid Alert System on dangerous consumer products SME Small and Medium Enterprise Subgroup Sub-group on AI, connected devices and other challenges for new technologies to the Consumer Safety Network GPSD Study The study commissioned by the Commission to support the evaluation and impact assessment of the GPSD revision and conducted by CIVIC consulting TFEU Treaty on the Functioning of the European Union



1.Introduction: Political and legal context This report aims at assessing the impacts of a revision of the Directive 2001/95/EC on general product safety (GPSD). It analyses also the impacts of a possible integration of the Directive 87/357/EEC concerning the safety of food-imitating products (FIPD) into the GPSD. The objective of the GPSD is to ensure EU consumers are protected from dangerous products and to ensure the proper functioning of the Single Market. The GPSD provides the general EU legal framework for the safety of non-food consumer products and requires that all products placed on the market be safe. The non-food consumer products include all products (including in the context of providing a service), which are not food stuff and are intended for consumers or are likely to be used by consumers, and are supplied or made available to them in the course of a commercial activity, be they new, used or reconditioned. As illustrated in the Table 1, the non-food product safety framework is mainly made up of two sets of legislative instruments: ·Union Harmonisation (hereinafter harmonised) legislation: Regulation (EU) 2019/1020 on market surveillance and compliance of products together with the product-specific safety legislation, such as the toys or the machinery directive form ‘harmonised legislation’ (legislation setting common rules across the EU for specific sectors)

·The GPSD: As lex generalis, it applies to non-food consumer products to the extent that there are no specific provisions with the same objective in rules of Union law governing the safety of the products concerned, such as EU harmonised legislation for specific categories of products. Therefore it fully applies to non-harmonised consumer products and also partially to the consumer harmonised products for aspects not covered by the harmonised legislation. As such, it provides a “safety net” for consumers and aims to ensure that EU consumers are protected against any safety risks of consumer products, including future ones. Table 1: General overview of the Product Safety Framework Product Safety Framework Products Areas Non-food Food Non- Harmonised Harmonised General Food Law Regulation Regulation (EC) No 178/2002 and Regulation (EC) 1935/2004 on food contact materials Non-consumer Consumer Non-consumer Obligations of economic operators National Law under the mutual recognition Regulation GPSD Sector specific Union harmonisation legislation + GPSD as safety net Sector specific Union harmonisation legislation Market surveillance on the internal market Regulation (EU) 2019/1020 +Ability for market surveillance authorities to take “more specific measures” provided for in GPSD Regulation (EU) 2019/1020 Safety Gate (RAPEX) Regulation (EU) 2019/1020 and GPSD Regulation (EU) 2019/1020 and GPSD Customs control for products imported to the EU Regulation (EU) 2019/1020 Regulation (EU) 2017/625 The GPSD, as a safety net, is complementary to harmonised legislation in two ways. First, it applies in its entirety to consumer products falling outside the scope of harmonised legislation (e.g. furniture, childcare articles, clothes). Secondly, it applies partially to consumer products covered by harmonised legislation (e.g. toys or cars) as long as aspects of product safety covered by the GPSD are not covered in the harmonised legislation (for example, until very recently EU legislation for cars did not include provisions on product recalls, that were subject to the GPSD). The concept of safety under the GPSD always covers levels of protection for the safety and health of persons, i.e. the dangerous product under the GPSD poses a risk to the health and safety of consumers. These risks can materialise in different ways but to be covered under the GPSD the risks always have to relate to health and safety of consumers. Other types of safety such as material damages are not covered unless they are linked to the safety and health of consumers. Regarding market surveillance, there are also two different systems in place: one for harmonised products (Regulation (EU) 2019/1020) and another under the GPSD for non-harmonised products and risks falling under the scope of the GPSD.

The GPSD does not cover pharmaceuticals, medical devices and food products. The safety of food products is regulated separately under the General Food Law Regulation (EC) No 178/2002. The food products have their own regime, including an alert system (RASFF). However, the Regulation (EC) No 1935/2004 on food contact materials can interact with the GPSD when it comes to products containing such materials (e.g. reusable lunch boxes). Unsafe products containing food-contact materials products might be subject to safety alerts in both alert systems, RASFF for food and Safety Gate/RAPEX for non-food products. The GPSD provides for the obligations of economic operators in the product safety field, in particular the general obligation for producers to place only safe products on the market. It contains rules on the power and obligations of Member States and on market surveillance. The GPSD establishes provisions on the application of the general safety requirement and on the adoption of European safety standards supporting the legislation, which provide presumption of safety and therefore facilitate the compliance with the safety requirement under the GPSD. The GPSD includes obligations for Member States and the Commission to inform consumers about dangerous products and contains the legal basis for the EU Rapid Alert System (Safety Gate/RAPEX), which enables quick exchange of information between EU/EEA countries and the Commission on measures taken on unsafe non-food products posing a risk to consumers. Finally, the GPSD also establishes cooperation on product safety between the Commission and Member States authorities competent for product safety in the context of the Consumer Product Safety Network ‘CSN’. Directive 87/357/EEC (Food-Imitating Products Directive, ‘FIPD’) sets out rules for the safety of food-imitating products, i.e. products which can be confused with foodstuffs, while not being food-stuffs. The FIPD has been originally adopted to address divergence in national provisions on products which, appearing to be other than they are, endanger the safety or health of consumers. The measures taken against unsafe food-imitating products by Member States are also notified in the Safety Gate/RAPEX. The scope of this initiative covers therefore all non-harmonised consumer products, food-imitating products and also partially also harmonised products for aspects not covered by the harmonised legislation. However for some aspects the analysis also includes harmonised products, where data could not be dissociated between the harmonised and non-harmonised products. The Commission has adopted guidance to clarify some of the aspects of the GPSD. The Commission Notice on the market surveillance of products sold online (2017/C 250/01) provides guidance for the enforcement of EU legislation on the safety and compliance of non-food products sold online. The Notice also sets out good practices for the market surveillance of products sold online and for communication with businesses and consumers. On 9 November 2018, the Commission also revised the guidelines for the functioning of Safety Gate/RAPEX (originally adopted in 2004 and revised for the first time in 2010). ECJ Jurisprudence does not bring particular element helping interpreting the provisions of the GPSD, most of it being linked either to access to documents or to non-applicability in the presence of harmonised legislation. At international level, very different approaches to product safety can be distinguished: Few jurisdictions, such as Canada and more recently Brazil (in 2019), have adopted a safety regulatory framework which includes a general safety requirement, similar to the EU “safety net”. This approach is usually considered in international fora as the best way to ensure that regulators have an appropriate legal basis to order corrective measures against all types of dangerous products, notably when facing emerging safety issues that are not subject to any regulation yet. In some jurisdictions such as the United States (US) or New Zealand, liability rules play a major role to complement product safety provisions and private enforcement is a key aspect of such systems. The US system also relies on a sophisticated injury data collection scheme and deterrent penalties incentivising businesses to inform as soon as possible the consumer product safety agency about dangerous products they are responsible for. In China, governmental approvals (be it certification, license, registration or individual approval) are required for many products and groups of products before they can be placed on the market. Fora for multilateral product safety cooperation, such as the OECD and UNCTAD, provide opportunities to learn about and get inspiration from other jurisdictions’ best practices and new regulatory developments. Political context The Commission announced the revision of the GPSD in its Work Programme 2020 and confirmed it in the Adjusted Commission Work Programme 2020 published on 27 May 2020, as one of its REFIT (Regulatory Fitness and Performance Programme) initiatives under the headline objective “A New Push for European Democracy”. This revision is also one of the legislative proposals mentioned in the Communication of the Commission on New Consumer Agenda , published on 13 November 2020. In the field of new technologies (including artificial intelligence ‘AI’), the Commission published a Report on safety and liability implications of AI, the Internet of Things and Robotics accompanying the White Paper on AI in February 2020. The report highlights the need to include clear provisions in the EU product safety legislation, including the GPSD, to explicitly address safety risks linked to products incorporating new technologies (connected products and AI). The other EU institutions have also highlighted the importance of product safety policy. The European Parliament adopted a resolution on addressing product safety in the Single Market on 25 November 2020 which also emphasised the need to revise the GPSD. In its Presidency conclusions on The Charter of Fundamental Rights in the context of Artificial Intelligence and Digital Change , the Council stated that while these technologies may enhance the market surveillance of product safety on the EU market, they may also pose new challenges to consumer protection in the product safety area. The Council Conclusions on Shaping Europe's Digital Future of 9 June 2020 mention that digital economy is to be characterised by a high degree of trust, security, safety and choice for consumers. Finally, the review builds on the results of the Evaluation of the GPSD and the FIPD, conducted back-to-back to this Impact Assessment (‘IA’) in order to assess the performance of GPSD in line with the Commission’s Better Regulation rules (see Annex 5). The Evaluation showed the necessity to adapt the GPSD to address product challenges related to e-commerce as well as the rapid development of new technologies, and to ensure better enforcement and more efficient market surveillance for consumer products, including by aligning the systems for harmonised and non-harmonised products. Furthermore, the Evaluation also showed the necessity to modify some of the provisions of the GPSD to improve its effectiveness. For example, legislative changes are needed to improve the effectiveness of product recalls, as well as the treatment of food-imitating products. The Commission already proposed to revise the GPSD with the 2013 Product Safety and Market Surveillance Package. This 2013 Package - made up of two proposed Regulations, one on product safety (COM(2013)078), the other on market surveillance (COM(2013)075), aimed at enhancing product safety rules and creating a single set of market surveillance rules for harmonised and non-harmonised products. The 2013 Package was blocked in the inter-institutional process as the Council did not agree on a common position because of a proposed provision on the mandatory marking of the origin of industrial products (the “Made in” provision). The proposals were finally withdrawn by the Commission in September 2020. Legal context The legal framework relevant for the safety of consumer products has evolved with the adoption of several legal acts: With the adoption of Regulation (EU) 2019/1020 on market surveillance and compliance of products, the legal framework for market surveillance of harmonised products has changed and has been adapted in particular to the challenges linked to the online sales. The market surveillance of non-harmonised products, also initially included in the 2013 Product Safety and Market Surveillance Package, remained unchanged. The differences between the two market surveillance frameworks have been therefore perpetuated with the adoption of Regulation (EU) 2019/1020, except for the provisions on products entering the EU market, which apply to all products covered by Union harmonisation law under Regulation (EU) 2019/1020. This Regulation widened the difference between the regime applicable to harmonised and non-harmonised products, in particular by envisaging new powers and cooperation instruments for market surveillance authorities (‘MSAs’) and introducing some new features such as the “responsible person”, according to which any economic operators that wants to sell its products into the EU market has to be represented by an economic operator in the EU (applicable not to all harmonised products but only to some of them).

In the standardisation area, the Commission adopted Regulation (EU) 1025/2012 on European standardisation, which provides the general framework for the adoption of European standards for products and services (to help assessing conformity with Union legislation), identifies Information and Communication Technology (‘ICT’) technical specifications, and allow financing for the European standardisation process. It also sets an obligation for European Standardisation Organisations (CEN, CENELEC, ETSI) and National Standardisation Bodies on transparency and participation. The adoption of the new Regulation (EU) 2019/515 facilitates the application of the principle of mutual recognition according to which, where no harmonised rules exist at European level, products lawfully marketed in one Member State can be sold in other Member States regardless of complying or not with the national technical rules of these Member States. Links with other legal initiatives The GPSD initiative has the following links with other recent and ongoing proposals: Digital Services Act (DSA): The DSA presented by the Commission on 15 December 2020 includes a new set of horizontal rules to regulate the responsibility of online intermediaries, including online marketplaces. The DSA proposal aims to establish new obligations for online intermediaries inter alia in relation with how they handle all types of illegal content hosted on their websites (e.g. unsafe products, counterfeit products, hate speech, etc). The DSA establishes the general horizontal obligations for online intermediaries and leaves room for legislation in relation with specific types of illegal content (such as product safety) to be more specific. For example, the DSA provides the general framework for the notice-and-action system, but without providing the details on the timeframe or the procedure, which could then be set up in the revised GPSD (GPSD would provide a specific timeline and detailed procedure for such notices of unsafe products). The GPSD may also regulate other product safety aspects of online sales beyond the role of online intermediaries, such as the role of sellers and the powers of market surveillance authorities. Artificial Intelligence (AI) horizontal framework: The new legislative proposal for AI horizontal framework lays down harmonised rules for the placing on the market, the putting into service and the use of artificial intelligence systems (‘AI systems’) in the Union, consistent with a high level of protection of the public interests, in particular health and safety, and fundamental rights and freedoms of persons. It lays down specific requirements with which high-risk AI systems must comply and imposes obligations on providers and users of such systems (for example, regulating inter alia safety aspects of AI applications in products such as machinery or lifts). Consequently, and with respect to product safety, it will establish specific requirements for certain AI applications, and the GPSD would apply as a safety net for products and safety aspects not covered by the AI horizontal legislation, and therefore complement it. The scope of the initiative is such that it is likely that some AI applications would remain not covered (e.g. some consumer products such as vacuum cleaners). The revised GPSD would therefore need to provide a legal basis for withdrawing such products from the market to ensure an effective protection of consumers. Delegated acts under the Radio Equipment Directive (RED): the RED establishes the possibility for the Commission of adopting delegated acts in relation with several aspects, including protection of personal data and fraud for specific categories of radio devices. The Commission is working on several delegated acts that might partially address the issue of products presenting cybersecurity risks. However, it will not be possible to cover all possible consumer products via delegated acts, for instance, devices connected by cable. Such gaps might be covered by a revised GPSD in its role of safety net. Directive on Security of Network and Information Systems (NIS): The recent proposal for a NIS 2 Directive , presented by the Commission on 16 December 2020, lays down obligations for all Member States to adopt a national strategy on the security of network and information systems. However, it does not include minimum cybersecurity requirements for consumer products, so it does not provide any legal basis for authorities to take action against products presenting such risks. The Cybersecurity Act (Regulation (EU) 2019/881) introduces an EU-wide cybersecurity certification framework for ICT products, services and processes. However, it does not include minimum cybersecurity legal requirements for ICT products. The GPSD is therefore complementary to these initiatives to fill these gaps. Circular Economy: According to the new Circular Economy Action Plan , products placed on the EU market should be more sustainable and designed therefore to last longer, to be easier to repair and upgrade, recycle and reuse. It is essential that repaired, upgraded, recycled or reused products continue to meet product safety requirements. According to the Eco-design directive (Directive 2009/125/EC), safety and health have to be taken into account in the choice of a specific design solution; however safety issues related to the end products are not specifically addressed. The Sustainable Product Policy Initiative (which intends to replace the Eco-design directive and extend its scope) will notably aim at correcting the fact that many products cannot be easily and safely reused, repaired or recycled. In case some safety aspects related to products in the circular economy (such as refurbished appliances or clothing made from recycled plastics) are not specifically addressed by initiatives from the Circular Economy Action Plan and do not fall under harmonised legislation, the safety net function of the GPSD comes into play. 2.Problem definition 2.1.What are the problems? The Evaluation and the stakeholder views show that the GPSD appears overall to have met its objectives of ensuring a high level of safety of consumers, while ensuring an effectively operating internal market for goods; however, still too many unsafe products reach or remain in the hands of consumers. On the EU Single Market there should not be obstacles and barriers to the free movement of goods, which enables unsafe goods to circulate within the EU. Concerning the trend in the safety of products, the evaluation showed that the notifications of dangerous products by market surveillance authorities (‘MSAs’) in the Safety Gate/RAPEX increased, from 2005 to 2010, from around 540 to 2000 notifications/year and then fluctuated between 1 550 to 2 100 notifications/year (30% of which concerned non-harmonised products). Also the number of follow-up measures reported in Safety Gate/RAPEX has steadily increased since data started to be gathered in this respect by the European Commission in 2011. Some encouraging signs, such as improvements in product safety perceived by consumers and a plurality of stakeholderscan be observed; however, available data show that unsafe products are still available on the EU market. The share of dangerous products found by MSAs in inspections represents between 2% and 16% of total consumer products inspected, with a median value of 4%. Unsafe products on the EU market affects consumers as well as economic operators that play by the rules as they suffer from lack of level playing field with “rogue operators” from inside and outside the EU not observing EU product safety rules. Unsafe products represent an important cost for consumers and society. The GPSD Study supporting the GPSD Evaluation and IA (hereinafter ‘GPSD Study’) estimates the consumer detriment due to unsafe products today in the following way: -Consumer detriment linked to product-related injuries and premature death: The total detriment to EU consumers and society from product-related injuries and premature death to be EUR 76.6 billion per year. This is the sum of detriment caused by non-fatal product-related injuries and the cost of premature death where a consumer product is involved (e.g. accident with tools, strangulation, electrocution, or fire) occurring outside of work-related locations. This figure includes health care utilisation costs, productivity losses, loss of quality of life, cost of premature death linked to injuries due to consumer products (both harmonised and non-harmonised) in the EU. The analysis based on previous research and interviews with product safety experts concluded that 15% is a reasonable and cautious estimate for the proportion of this total detriment that was caused by unsafe consumer products, or could have been prevented through better design, instruction or a safety device. These 15% of accidents could have been prevented if the products were safe. On this basis, the preventable detriment suffered by EU consumers and society due to product-related accidents can be estimated at EUR 11.5 billion per year. -Consumer detriment linked to the loss of value of unsafe products In addition to the above injury related detriment, the GPSD Study estimates that the consumers also suffered financial costs of a total value of EUR 19.3 billion in 2019 arising from the fact they have purchased unsafe products that they would not have purchased if they knew these products were unsafe (hereinafter ‘consumer detriment linked to the value of unsafe products’). The estimation is based on the fact that the value of unsafe non-harmonised products per year is estimated at EUR 3.9 billion for online sales channels, and EUR 15.4 billion for brick-and-mortar shops and other offline sales channels, for a total of EUR 19.3 billion. This detriment is reduced due to recalls (under current low recall effectiveness scenario) by approximately EUR 0.4 billion per year, assuming that consumers are compensated fully for all non-harmonised products they returned to producers in response to a product recall. This detriment relates to non-harmonised products covered by the GPSD and is based on the assumption that the loss in consumer welfare is at least the price to which the product was purchased.

The presence of unsafe products on the EU market affects therefore both EU consumers (final users of products) who bear the risk of accidents, injury or death caused by dangerous products and related costs and Member States who bear increased health expenditure costs resulting from health treatment of injuries caused by dangerous products. The circulation of unsafe products on the EU market also creates a problem for the Single Market: it does not only contravene the principle of free circulation of goods (only safe goods are allowed to circulate in the Single Market), but it also risks to create distortions of competition on the EU Single Market. Economic operators compliant with EU product safety rules face compliance costs in comparison with non-complaint operators. At the same time, the presence of unsafe products on the EU market puts in danger the health and safety of EU consumers, which also undermines consumer’s trust and confidence in the EU Single Market. Trust is an essential engine of consumers’ consumption and therefore the growth of the EU economy. The Eurobarometer data indicate a decrease between 2016 and 2018 in confidence of consumers in the safety of products sold in the EU. Also, in the open public consultation (‘OPC’) a large majority of respondents (71%) expressed that current EU safety rules for non-food consumer products covered by the GPSD could be improved in specific areas to be more adequate to protect consumers. 2.1.1.Product safety challenges linked to new technologies At the time of the adoption of the Directive the number of consumer products incorporating new technologies was scarce. This is not the case anymore. The scenario is likely to evolve with the increasing use of AI, impacting the whole EU market. Moreover, there were 14.2 billion connected devices in 2019 worldwide, a figure that is estimated to go up to 25 billion by 2025, of which 4.9 billion estimated to be in Europe. The application of the GPSD to new technology products, such as connected devices or AI-powered products, is not crystal-clear and the safety of these products is not fully covered by other EU legislation. The GPSD does not explicitly address the fact that new technologies, in particular AI and goods with digital elements, can impact product safety. In the OPC almost half the respondents considered the safety of products involving new technologies not to be adequately regulated (47%). The Evaluation showed that this can be problematic, as the development of new technologies mean that some of the provisions of the GPSD are not well adapted to respond to its objective of ensuring that all products (including those incorporating new technologies) must be safe for consumers. As such, new technologies pose challenges to the concepts and definitions used under the GPSD. New technology-based products also bring new risks to consumers’ health and safety or change the way the existing risks could materialise. These new risks, such as cybersecurity threats, might be possibly present in consumer products and this remains not explicitly covered in EU legislation for the moment. Besides, the applicability of software updates for product safety is still not regulated under EU legislation either (lack of clarify of the responsibilities of economic operators when for example an application is downloaded into a product modifying its safety features). A typical example is when a product becomes dangerous by not possessing a minimum level of cybersecurity, leaving it open to hacking by a malicious party; that was the case of a passenger car notified in the Safety Gate/RAPEX. The radio in the vehicle might have had certain software security gaps allowing unauthorised third party access to the interconnected control systems in the vehicle. If these software security gaps were exploited by a third party for malicious purposes, a road accident could have occurred. The Sub-group on AI, connected devices and other challenges for new technologies to the Consumer Safety Network (‘the Subgroup’) highlighted that the lack of explicit mention in the GPSD of cybersecurity risks affecting safety (‘cybersafety’) posed a challenge for the protection of consumers and legal certainty for businesses. Another example relates to consumer’s personal security that can be endangered by third party accessing their information, as illustrated in another notification in Safety Gate RAPEX of a smartwatch for children. The Icelandic authority argued that this product would not cause a direct harm to the child wearing it, but lacking a minimum level of security, it can be easily used as a tool to have access to the location of the child. As one of the product’s intended function is to keep children safe through localisation, a consumer would expect that it would not pose security threats to children that may affect their safety by them potentially being tracked and/or contacted by anyone. As measures regarding this product were notified to Safety Gate/RAPEX, authorities in the Member States took follow-up actions. However, the Evaluation showed that many of those authorities were unsure whether the GPSD was applicable to such risks due to the lack of explicit provisions in this respect. The Sub-group also raised the fact that it is unclear under which legal or policy instrument such personal security risks should be tackled so that consumers are effectively protected against such threats. In addition, the Subgroup stated that there is evidence that new technologies can have an impact on the mental health of consumers; e.g. connected products as a cause of depression, loss of sleep, altered brain function and myopia or early blindness in students and children. It was also noted however that some mental health challenges linked to products do not originate from new technologies, they were prevalent before digitalisation. The subgroup also expressed that it was unclear if mental health risks are covered under the current definition of safety of the Directive, and that mental health harm intrinsically caused by a product itself should be covered. Moreover, it is not clearly stated to what extent the definition of “product” includes software, whether it is sold with the product or associated with the product later on. This might impact the safety assessment of the given product. New technologies also pose challenges related to the notion of placing a product on the market. For example, products including new technologies can evolve and their safety features may change via software updates or machine learning after they have been placed on the market. Many of the problems linked to new technologies are crosscutting, so the Commission has adopted or is working on a number of proposals in relation to those issues. In some cases specific risks linked to new technologies can be tackled by EU harmonised legislation. While such proposals may partially address the gaps identified, there are some aspects that remain or will remain not covered and for which action is still needed in the context of this initiative. The Commission is currently developing a delegated act under the Radio Equipment Directive and assessing whether the provisions of that Directive referring to the combination of radio equipment and software should apply to certain categories of products covered by that Directive, as well as to standalone software uploaded onto connected products that communicate via certain radio modules. The Commission is also reviewing the Machinery Directive to address those types of risk having an impact on safety, for example protecting the machinery against malicious third parties or lack of connectivity. However, despite this, there are still some gaps in addressing safety risks of consumer products containing new technologies not already covered by other EU legislation. Home appliances connected to the Internet by cable e.g. will not be covered under the delegated acts of the Radio Equipment Directive, so cybersecurity risks of such products will not be covered by such delegated acts. In addition, in view of the highly innovative potential of the new technology sector, it is difficult to foresee the safety features and risks of these new technology products. Finally, the Subgroup also mentioned that one of the common characteristics of AI and Internet of things (‘IoT’) products is the presence of software that can change/evolve over time. This challenges the traditional meaning of the concept of placing on the market of the GPSD. Therefore, the Subgroup recommended that a possible GPSD revision should clarify that products should be safe over their whole expected lifespan, and should explore the introduction of the concept of ‘substantial modification’ affecting the safety of the product after a product was once placed on the market. This problem affects all consumers purchasing new technology products and causes particular difficulties to vulnerable consumers that are not familiar with new technologies, in particular small children and the elderly. The lack of legal certainty regarding the application of consumer product safety rules to new technologies may create regulatory costs to businesses (especially SMEs) developing and producing new technology products and undermines their efforts to design innovative and cyber-safe products. 2.1.2.Product safety challenges in the online sales channels While the GPSD applies to consumer products regardless if they are sold offline or online, the increasing use of e-commerce has negatively influenced the relevance and effectiveness of the GPSD, creating new challenges for the safety of consumers. Online sales increased steadily since the GPSD’s adoption: in 2002 only 9% of Europeans purchased online, while over 70% of them shop online today. Furthermore, one out of five companies in the EU nowadays sells online.This trend has been amplified by the COVID 19 crisis and related lockdowns: in the EU-27, retail sales via mail order houses or the Internet in April 2020 increased by 30% compared to April 2019, while total retail sales decreased by 17.9% (see Evaluation Annex 5). In addition, many of dangerous COVID-19 related products (e.g. dangerous masks, hand sanitisers) have been found online (by 22 October 2020 they represented 16% of all COVID-19 notifications in Safety Gate/RAPEX from the beginning of the COVID-19 crisis). Furthermore, 39% of respondents in the OPC expressed that safety rules for products covered by the GPSD were not adapted to online trade and among respondents who experienced a product safety incident within the last 5 years, 70% bought this product online. First, the GPSD does not provide for sufficiently effective instruments for online market surveillance by MSAs. They lack e.g. powers to acquire product samples under covert identity or block websites proposing dangerous products. This creates inefficiencies in the market surveillance of non-harmonised products sold online, and therefore insufficient action against such products. This affects the consumer trust in online sales. While such instruments exist for the harmonised products covered by Regulation (EU) 2019/1020 on market surveillance, the fact that the latter is not applicable to non-harmonised products will create an uneven level-playing field between these two categories of consumer products in the Single Market once this Regulation will apply. This means that an authority could be entitled to take more effective actions online against a toy bed (a toy being a harmonised product) as opposed to a baby’s crib, which falls under the GPSD. Second, new online business models and actors, such as online marketplaces hosting third party sellers, have become prominent and product safety rules for these economic operators are unclear under the current GPSD. Among European businesses selling goods online, 40% have been using online marketplaces to reach their customers in 2019.The GPSD does not establish clear legal obligations for product safety for business models that do not fall under the existing categories of producer, importer or distributor. The online marketplace does not fit to these categories. This affects both consumer protection and safety of products sold online and the related consumer’s trust, creates inefficiencies in online market surveillance and creates an uneven level-playing field between the economic operators selling offline and those selling online in the EU.

This has been addressed partially through voluntary action: in 2018 several online marketplaces signed voluntary commitments to improve the safety of products sold online: the Product Safety Pledge (hereinafter ’the Pledge’). The current eleven signatories committed, among others, to react within two days when a government informs them about an unsafe product offered on the platform, to cooperate with national authorities and to fight against repeat offenders. As the Evaluation has highlighted, while these voluntary commitments reflect some progress related to the cooperation between the signatories and authorities, it is challenging to analyse the effectiveness of the Pledge due to a suboptimal reporting system from the signatories. The Pledge has positive impacts, as it has set the grounds for an increased cooperation framework between online marketplaces and market surveillance authorities. However, authorities and stakeholders have signalled in the GPSD Study that as long as the Pledge remains voluntary, the infringement of those commitments cannot be penalised by authorities. It is also challenging to analyse how effective the Pledge is in appropriately ensuring the safety of products sold online, since the Key Performance Indicators (KPIs) are calculated only on certain commitments. From this aspect, the Pledge did not help to get information on specific issues such as on emerging risks of new technologies or improved recalls. The monitoring reports also showed that there has been a divergence in the way online marketplaces calculated the KPIs, making it difficult to extract conclusions from those numbers and properly monitor the effectiveness of the commitments of the Pledge. Finally, there are also many players on the market that have not decided to adhere to the voluntary commitments, creating an uneven level-playing field between online marketplaces targeting EU consumers. Therefore, while the Pledge sets out a very useful mean of cooperation between online marketplaces and national authorities, its effectiveness is limited by the limited range of signatories and by its voluntary nature, limiting enforcement. Finally, via online sales, EU consumers also purchase more frequently products offered directly by operators established outside the EU: the proportion of purchases from sellers outside the EU increased from 17% in 2014 to 27% in 2019. Around 150 million small consignments are imported free of VAT into the EU each year. In 2017 there were 150.000 private consignments coming from China to individual EU consumers per day. This is problematic: first, direct imports make it more complicated to control the safety of the product before it enters the EU market since it is directly delivered in individual packages to the consumer without possibly being handled by any economic operator in the EU subject to products safety obligations under the GPSD. Second, national authorities have difficulties to engage with the trader in case of safety concerns, if the trader is not represented in the EU but is based in a third country. Article 4 of Regulation (EU) 2019/1020 on market surveillance creates an obligation, in case a product is sold in the EU, to have an economic operator in the EU for certain tasks linked to market surveillance of products’ safety and compliance, but its applicability is limited to certain categories of harmonised products. If the product safety is not evenly enforced between EU and non-EU operators, this creates an uneven level-playing field between these operators. A study provided by Eurocommerce indicates that the cost difference between products produced in accordance with EU rules and standards, and produced without taking account of the EU rules may be important for some products. While these conclusions cannot be extrapolated to the overall market or to all products, they give an indication of the possible detriment due to the presence of rogue traders from third countries. The Evaluation has also compiled evidence pointing to the fact that the control of the safety of products sold online is more problematic than the one for unsafe products found in brick-and-mortar shops. For example, data coming from the Safety Gate/RAPEX for the period 2018-2019 show that the share of notifications of unsafe products in which one of the four traceability information items was missing was between 29,2% and 57,3% (depending on the item) for products 'sold online' and considerably lower (between 12,6% and 35,7%) for products sold offline. None of the traceability information was found in 12,8% notifications of products sold online, while it was only 0,5% for the unsafe products sold offline. These problems affect also economic operators. EU producers face an uneven playing field between them and non-EU producers if those do not comply with EU safety rules and therefore do not bear the compliance costs of the EU product safety legislation. Online marketplaces targeting EU consumers also do not have a level-playing field since the signatories of the Pledge bear additional costs and administrative burden compared to non-signatories that do not take the steps outlined in the Pledge. In the area of online sales, the product safety obligations of online market places are not spelled out in any EU legislation and current market surveillance provisions relating to products imported from outside the EU are tackled only for certain harmonised products under Regulation (EU) 2019/1020. Besides, there are also traceability problems with products offered online (the traceability of the online chain is often deficient and there is a gap between the product information available to the consumer for a product sold online and offline). The DSA aims to partly tackle these issues by introducing the “Know-Your-Business-Customer” principle (KYBC) and traceability provisions when it comes to the online sales via certain online marketplaces, leaving scope to the revised GPSD to tackle traceability issues for all online sales. 2.1.3.Ineffective product recalls Article 5 of the GPSD requires that when a product already sold to consumers turns out to be dangerous, it needs to be recalled (as a measure of last resort) to protect EU consumers. But the GPSD does not set any specific rules regarding the modalities of recalling unsafe products and evidence suggests that the proportion of products successfully recovered from consumers remains generally low, as recognised by a recent OECD report (even though it varies considerably depending on factors such as channel of sale and product type). For instance, one Member State indicated that the return rate rarely exceeds 10%, except when products have been purchased online Another national authority estimated that around 80% of products that have relatively low value and short lifespan remain in consumers’ hands. The EU-wide societal cost of recalled products remaining in consumers’ hands have been estimated at approximately €378 million in 2019 due to healthcare costs, productivity losses and losses of quality of life. The GPSD Study also estimated that the value of recalled products that remain with consumers is today EUR 1.3 billion. The consequences of delayed and ineffective recalls are also exemplified by the deaths and injuries caused by recent examples of recalled products such as faulty airbags (estimated to have caused 35 deaths and 300 injuries worldwide) and baby sleepers (associated with 59 baby deaths in the US). The recall procedure is not fully harmonised in the EU, which leads to different practices, depending on national provisions and economic operators involved. As an example, fewer than half of EU/EEA countries have established codes of good practice or guidelines on recalls, and only few of these documents set out requirements as to the content and channels of recall information or remedies for consumers. The evaluation has identified this as a significant shortcoming, suggesting that existing requirements are in themselves currently not sufficient to ensure effective recalls, leading to two problem areas. First, many EU consumers are not aware of ongoing recalls of products they own. It is often difficult to reach the owners of the recalled product. Apart from motor vehicles (whose registration with public authorities is mandatory), registration schemes are only available for few higher-value product categories like domestic electric appliances and communication devices, and even there no link is typically made between registration and safety. In addition, economic operators are hesitant about using customers’ information collected for other purposes (e.g. in the context of online sales or loyalty programmes) in the event of a recall because of legal uncertainty about the compliance with the General Data Protection Regulation . Also, there are no comprehensive public sources of recall information for consumers. For instance, in most EU/EEA countries, the recalling company has no obligation to put the recall notice on their website or social media and not all Member States’ authorities publish recall information on their websites, in addition to reporting recalls to the Safety Gate/RAPEX. Second, consumers may not return a recalled product even if they are aware of the recall. According to recent surveys, more than a third of EU consumers continue using a recalled product despite seeing a recall notice. This may be caused by recall notices being unclear and/or minimising consumers’ perception of risk. For instance, the analysis of existing recall announcements showed that over half of them used terms and expressions, which could downplay risk, such as ‘voluntary/precautionary recall’, ‘potential concern/problem’, ‘in rare cases/in specific conditions’ or highlighting that there have been no reported injuries. Also the procedure for consumers to return the recalled product may be complex and burdensome and the remedies offered may not be sufficiently attractive and timely. In a recent consumer survey, recall process taking too much time and effort was the second-top reason for not responding to a recall (after the product being cheap). The stakeholders especially affected by insufficient recall effectiveness are socially disadvantaged, younger and less safety-conscious consumers (who have shown to be less responsive to product recalls and less likely to register their products) as well as consumers living in remote areas (for whom returning the recalled product can be costly). Diverging national requirements (e.g. on recall communication and remedies) also result in an uneven level-playing field for companies. 2.1.4.Market surveillance rules are complex and not fully effective Following the adoption of Regulation (EU) 2019/1020, the market surveillance rules differ for harmonised and non-harmonised products. This Regulation is applicable to the non-harmonised area under GPSD only regarding the provisions for customs controls. The market surveillance rules under this Regulation apply only to harmonised products and differ from those for non-harmonised products in several aspects: responsible operator in the EU for products entering the EU market, online market surveillance tools (mystery shopping, blocking websites), strengthened market surveillance rules (e.g. Single Liaison Office, cross-border mutual assistance). The Evaluation has also identified coherence problems resulting from the fact that there are two different sets of market surveillance rules, for harmonised and non-harmonised products. One good example is toys (e.g. doll’s bed) and childcare articles (e.g. baby’s bed), that might be conceptually very close and targeting the same consumers, but are however regulated differently: a toy is a harmonised product regulated by Directive 2009/48/EC, a baby’s bed is a childcare article, which is a non-harmonised product, falling under the scope of application of the GPSD. Therefore, market surveillance authorities have different powers for these two products: for example they can carry out online investigations under covered identity for a doll’s bed, but not for a baby’s bed, as explained above. This has also clear implications for the effectiveness and efficiency of the GPSD as it may lead to market surveillance inefficiencies and thus higher presence of unsafe products on the EU market in the non-harmonised area. Ensuring coherence between these rules is important both for market surveillance authorities (they have difficulties to apply different rules according to the products, e.g. since they do not have the same market surveillance tools for harmonised and non-harmonised products in online sales) and for economic operator who might deal, at the same time, with both types of products: different rules complicate and make more expensive the business activity. The Evaluation identified also several additional problems for market surveillance of product safety: -Market surveillance and customs authorities lack appropriate instruments to enforce product safety rules for non-harmonised products, in particular in online sales, such as blocking websites, mystery shopping.

-Products are difficult to trace throughout the supply chain. In particular, products such as laser pointers, lighters, jewellery, or decorative articles, that fall within the scope of GPSD and are not subject to sector-specific harmonisation rules, are more likely to lack relevant information items that are essential to trace them in case they are notified to Safety Gate/RAPEX. -The process for adopting voluntary safety standards for the GPSD products is complex and not sufficiently efficient. It requires a three step process involving comitology. This could be simplified and streamlined. -There are differences in the GPSD implementation across Member States. (e.g. the traceability requirements differ between Member States). -There is a lack of a mechanism at EU level to solve divergent positions of Member States regarding the risk assessment of a specific product, which causes a difference in the treatment of some consumer products inside the Single Market. The number of notifications to the Safety Gate/RAPEX that were subject to disputes between Member States has been on average 30 per year. -The deterrent effect of the GPSD might not be effective enough. A plausible explanation for this suggested by several stakeholders might be that the sanctions and penalties for product safety infringements, that are not harmonised across Member States, remain low. This creates a problem in the context where all products cannot be controlled by the national authorities, in view of their huge volumes and need to facilitate trade and free movement of goods. -The market surveillance system under the GPSD appears to be operating under considerable resource constraints. Market surveillance authorities have indicated limited staff/financial resources for market surveillance and enforcement most frequently as a key factor influencing negatively the level of achievement of their tasks. - The difficulty of taking enforcement actions against economic operators outside the EU. This is particularly relevant as the growth of online sales have resulted in an increase of direct imports; around 150 million small consignments are imported free of VAT into the EU each year. Uneven and, in some cases, insufficient enforcement actions can harm EU consumers, since they are exposed to more dangerous products, but also risk to distort competition for EU businesses and create obstacles to free movement of goods. National market surveillance authorities suffer from higher administrative costs as a consequence of cross-border inefficiencies and investigation costs if the relevant operator or the product to be traced are difficult to find. Discrepancies in the GPSD implementation create an uneven playing field between Member States and additional regulatory burden for businesses active across the EU. The fragmentation of the market surveillance rules between harmonised and non-harmonised products may also create regulatory burden both for national administrations and EU businesses. The complexity of the market surveillance legislation creates higher costs for economic operators (additional costs of complying with different national market surveillance and product safety rules for businesses operating in more than one Member State). The current standardisation process for non-harmonised products also creates unnecessary administrative burden at EU level and undermines the efficiency of the standardisation process under the GPSD. 2.1.5.Inconsistent application of product safety rules for food-imitating products The legal framework providing rules on safety issues linked to food imitating products is set out in Directive 87/357/EEC (FIPD). This Directive was adopted before the GPSD was created the horizontal legal framework for safety of all non-harmonised products, and it aimed at harmonising the divergent pre-existing national rules on food imitating products. Such separation of rules according to a specific aspect of a product creates regulatory complexity for national administrations and economic operators. As reflected in the Evaluation, the number of Safety Gate/RAPEX notifications of food imitating products is a small percentage of the total. Between 2005 and 2015, a total of 258 notifications (around 17 per year on average) relate to food imitating products. Moreover, it seems that the product category “Food-imitating products” was only used up to 2015; afterwards, the products have been categorised according to their use (cosmetics, clothing, etc.): since 2015, 71 notifications mentioning products not complying with the FIPD have been submitted under other categories such as cosmetics, kitchen/cooking accessories, stationery, or decorative articles. Despite that, the number of notification for food-imitating products remain low. The aspects related to the imitating nature of the product were incorporated in the risk assessment of the product itself, but not in a systematic manner by all Member States. Indeed, the safety provisions of the FIPD are applied differently between Member States, which have diverging positions on substantial issues, in particular whether all food-imitating products should be banned per se or measures against these products should be based on a risk assessment under this Directive. Indeed, the FIPD was adopted before the GPSD, which sets out the principle of the necessity of risk assessment before taking appropriate measures against dangerous products and some Member States started to apply to food-imitating products the GPSD logic while others maintained the primary interpretation of the FIPD as a ban of these products. Such different application of this Directive leads to an uneven treatment of these products across the EU and risks to create distortions of competition in the Single Market. The stakeholders impacted by this problem are businesses producing such products, due to the lack of clarity of rules, and also European consumers, who are differently protected against these products. National market surveillance authorities also suffer from higher administrative costs due to complexity of the rules. The low number of notifications related to food-imitating products in the Safety Gate/RAPEX also raises a question whether a separate legal regime for these products remains justified. 2.1.6.Problems related to the legal form The current legal form, a Directive, creates several problems linked especially to the implementation and national differences regarding the date and/or manner of transposition. Several problems have been encountered in the application of the GPSD, such as the application of provision on the corrective measures to be adopted in case of a dangerous product found on the market (Article 8 of the GPSD): the measures to be adopted and the type can vary consistently among Member States national transposition legislation entailing different treatments in different Member States, bringing eventually to fragmentation in the internal market. Even more relevant, in practice, is the different transposition of the provision on traceability (Article 5 of the GPSD): the requirements contained in this article are transposed differently, for example as far as the indication of the batch of a product or the way and location of the identity and details of the producer are concerned. 2.1.7.Regulatory burden and costs of the GPSD (REFIT problem) To summarise, several of the aspects of the current GPSD developed above create unnecessary regulatory burden for MSAs and companies: discrepancies between market surveillance procedures for harmonised products and non-harmonised products, market surveillance inefficiencies between Member States due to diverging assessments and actions taken against products, lack of clarity inter alia about the scope of GPSD, sub-efficient standardisation procedures, different implementation of safety rules for food-imitating products, differences in GPSD implementation, and lack of resources for MSAs to implement the rules. 2.2.What are the problem drivers?

The figure below summarises the main drivers for the general problem and the five specific problems identified above: Figure 1: GPSD General problem tree The underlying drivers (causes) for the identified problems are multifaceted: Table 2: Nature of problem drivers Problem area Drivers nature Drivers’ action General problem of unsafe products occurring on the market Market failure Under classical economic rationale, the producer’s objective is profit maximisation and therefore to produce the given product at the best price; in the absence of any safety regulation, it may tend to sacrifice the product quality and safety by choosing cheaper components and undergoing less safety verifications. The market price of a dangerous product does not reflect the real cost for the consumer and for the society, in particular the costs of injuries linked to a dangerous product. Therefore, the market does not take into account the negative externalities of dangerous products in terms of reduced public health and increased public health expenses and such market outcome is therefore not optimal for the society. However it also has to be taken into account that it is important for some companies to produce products that are safe for consumers, as their reputation is at stake and they may lose the consumers’ trust in their brand. Asymmetry of information Information is needed for markets to operate efficiently. Buyers need to know about the quality and safety of the product to assess its value. The consumer does not know exactly in which way the product has been produced and its exact components, while the safety of a product can be verified including by undergoing a proper laboratory test, which is of course impossible for an individual consumer to do in advance. Consequently, most of the times consumers cannot verify the product safety when buying a product and take this into consideration in their choice; therefore they may make the wrong choice and buy unsafe products, which leads to sub-optimal societal outcomes. Split markets In the markets where actors have different and not aligned objectives and the information is imperfect (as explained above), socially desirable actions are not undertaken and regulation can then redefine the characteristics of products to be placed on the market, as it is the case for product safety legislation. New technologies Regulatory failures The GPSD does not provide enough legal certainty about the coverage of the specific features of new technology products, such as software updates or the evolving nature of some products. Some new types of risks linked to new technologies (such as cybersecurity risks affecting safety) are not explicitly covered, which leads to legal uncertainty. Consequently, the current GPSD does not efficiently play its role of safety net for new technology products. Online sales Regulatory failures When the GPSD was developed, online sales were still at an early stage and therefore the GPSD’s provisions do not properly address the challenges of the current online environment. The GPSD does not set out specific obligations related to product safety for the online marketplaces, while these play today an important role in the online sales. Also, the GPSD does not provide for effective investigation tools for online sales. Finally, E-commerce allows for an important increase of direct imports from economic operators located outside the EU. While the GPSD creates product safety obligations for any products being placed on the EU market, regardless of their place of origin, it is very difficult to enforce against traders established outside the Union and offering their products to EU consumers. There are therefore enforcement difficulties allowing the entering of non-harmonised consumer products on the EU market without having an economic operator responsible for these products in the EU. Recalls Regulatory failures Recall procedure as such is not defined under the GPSD. In particular, there are no minimum requirements on the content and channels or recall communication or remedies that consumers are entitled to. In some countries, requirements are more prescriptive than in others, leading to varying levels of consumer protection. One major deficiency is the lack of legal basis for using existing customers’ data for recall purposes. Market failures (companies fail to act effectively) Companies may fear the negative reputational impact and other costs created by a recall and thus avoid communicating clearly about possible safety issues and delay recall measures and/or underplay the risk when the product turns out to be dangerous . Almost half (47%) of industry respondents to a European Commission’s survey indicated that they did not have a written procedure in place in case the product needs to be recalled (even though safety-conscious companies were likely overrepresented in the survey). Also marketing literature suggests that most companies engage in a passive recall strategy rather than a proactive one. Behavioural biases (consumer inertia) Consumers do not always act in a rational way in response to recalls. Biases such as information overload and framing effects mean that if recall notices are lengthy and unclear, consumers may ignore them, especially if they are time poor. Over-optimism may result in consumers underweighting the risk posed by a recalled product, while inertia and endowment effect relate to the fact that consumers have an inherent preference for status-quo, which in the case of recalls means keeping the product. Market surveillance Regulatory failures At EU level, the market surveillance rules for harmonised and non-harmonised products are not only set up in two different legal texts, but also the applicable rules differ in several aspects for these two categories of products, which creates regulatory complexity for national administrations and businesses. Furthermore, implementation issues stem from the fact that the GPSD is a Directive and as such is not directly applicable in the EU and, as the Evaluation shows, is transposed differently across EU Member States. The GPSD also does not sufficiently harmonise the provisions on the product traceability, which are therefore defined at national level and prove to be insufficient. The GPSD does not tackle the disputes on the risk assessment between Member States, and the standardisation procedure under the GPSD is not efficient enough. At national level, the main driver for enforcement problems is lack of resources dedicated to market surveillance by Member States. Also, the current level of penalties and sanctions does not create a sufficient deterrent effect for economic operators to prevent the placing of unsafe products on the market. Food-imitating products Regulatory failures The uneven application of product safety rules for food-imitating products stems from the fact that the rules are formulated in such a way that it allows a very different application across EU Member States, some categorically banning all food imitating products, some others performing a risk assessment before deciding on the measure. The fact that these rules are set out in another piece of legislation than the rest of the product safety rules creates unnecessary regulatory complexity for national administrations and businesses and leads to incoherent measures on the Single Market. 2.3.How will the problem evolve? Some of the identified problems will remain and even likely get worse: in particular those linked to online sales and new technologies. There is a clear increasing trend in online sales in the EU. The COVID-19 crisis and the repetitive lockdowns are accelerating e-commerce, as well as imports of consumer products from outside the EU. There is also an increase of new technology consumer products being available on the EU market. Therefore, the magnitude of problems linked to these new digital challenges is likely to increase. At the same time, digital developments offer also opportunities for more efficient market surveillance by using new technology tools, for example to identify already recalled products online. Online sales may ease the identification of customers, which is particularly important in recalls. Also, connected products may be easier to recall and fix or switch off remotely. The new Regulation (EU) 2019/1020 will only have a limited effect on the market surveillance for products and risks covered by GPSD since only its provisions on customs (Chapter VII of this Regulation) apply to these products. Some other problems will also continue to exist and are likely to remain the same or of the same magnitude in the absence of EU action, in particular the fragmentation, complexity and ineffectiveness identified in the market surveillance rules. These problems are mainly linked to regulatory failures of the legal framework itself and would get worse only if there is an increased trend of non-harmonised consumer products circulating on the EU market. Problems linked to lack of resources mostly relates to the political priorities and resources of the Member States. 3.Why should the EU act? 3.1.Legal basis The legal basis for this initiative is Article 114, with due regard to Article 169, of the TFEU . The GPSD has for object ensuring product safety and improving the functioning of the internal market. GPSD aims at ensuring a high level of consumer protection, by contributing to protect the health, safety of European consumers and promoting their right to information. The EU has no exclusive competence on product safety, which is a shared competence. Therefore, the subsidiarity principle does apply.

3.2.Subsidiarity: Necessity of EU action The GPSD harmonises the general product safety requirement in the EU. Ensuring safety of products in the Single Market cannot be achieved sufficiently by Member States acting alone for the following reasons: -Data show unsafe products are spread across the EU: unsafe products can be found in all Member States. -Products circulate freely across the Single Market, including the dangerous ones. When a dangerous product is identified in a certain country it is very likely that the same product could be found in other Member States too, not least following the exponential growth of online selling. This is demonstrated by the number of follow-up actions taken by Member States in their country after the notification of a dangerous product in the RAPEX/Safety Gate; while in 2011 there were 2100 follow-up measures, in 2019 more than 4400 of such measures were notified to Safety Gate/RAPEX. -Different rules on product safety at national level can create uneven costs for businesses to comply with product safety legislation and therefore can cause distortions of the internal market when /if companies want to operate across borders. -According to Article 169 of TFEU, in order to promote the interests of consumers and to ensure a high level of consumer protection, the Union shall contribute to protecting the health and safety of consumers. If there are different rules concerning product safety and its market surveillance, EU consumers will not be protected against dangerous products in the same way across the Member States. -The identified problem drivers mostly do not have any national or sub-national specificities (problems linked to digital challenges, recalls and food-imitating products). Problem drivers for market surveillance have partly a national dimension concerning the lack of resources, level of penalties and availability of market surveillance tools, which can differ from one Member State to another. The objective of products safety cannot be sufficiently achieved by the Member States acting alone, given the need for a very high degree of cooperation, interaction and coherent action of all the competent authorities in all Member States across the Single Market to ensure the same high level of protection of consumers and enable effective action on the Single Market where products circulate freely. Member States cannot ensure cooperation and coordination by acting independently. The GPSD establishes the cooperation and coordination between Member States: via the EU Safety Gate/RAPEX, Member States inform each other about measures taken against dangerous products. They also take follow-up actions in their territory if the product alerted is present there. Moreover, authorities consider the implementation of EU coordinated market surveillance activities on product safety extremely useful, as economies of scale and the funding provided by the Commission have allowed them to carry out inspections for some priority categories of products. The measures under this initiative would not affect the Member States' competences in market surveillance or assessment of risks, neither would they interfere with national enforcement or judicial systems, nor would they affect the internal division of competences among authorities at national level. In the product safety field, Member States can act first independently to notify the corrective measures taken against dangerous products, but then follow-up actions are required from all other Member States. 3.3.Subsidiarity: Added value of EU action EU level action in product safety for non-harmonised products has clear benefits demonstrated by the GPSD evaluation: -Common Union rules allow economy of scale in market surveillance, in particular nowadays with the exponential development of online selling which intensifies sales across the EU and direct imports from outside the EU. Sharing costs of market surveillance occurs also by performing joint market surveillance actions among EU countries and exchange information. -EU action allows faster and more efficient circulation of information, in particular via the Safety Gate/Rapex, thus ensuring fast actions against dangerous products across the EU and also level playing field. -Common rules for product safety at EU level have benefits in term of costs savings and lower administrative burden and complexities for businesses by avoiding them having to comply with heterogeneous sets of national rules. This enables also free circulation of goods in the EU and allows for closer cooperation between Member States. -Common Union rules enable developing EU product safety standards, which by giving EU-wide presumption of safety facilitate product safety compliance for businesses (and potentially decrease the related costs). - At international level the common set of provisions established by the GPSD has also allowed the EU to be stronger in promoting high level of safety with international actors, thus tackling the increasingly high circulation of goods from third countries via online selling. The functioning of the internal market will be improved by EU level action since common product safety and market surveillance rules across the EU will ensure a more even treatment of businesses and therefore less likely distort competition on the EU Single Market. Better market surveillance and enhanced coordination between Member States will lead to higher detection of unsafe products, and thus to higher consumer protection and trust. The food-imitating product directive is currently subject to very different interpretations between Member States, ranging from a ban of such products to the inclusion of the food-imitating aspect in the elements taken into account in the risk assessment. This leads to a fragmentation of the internal market regarding such products, a more unified approach of food-imitating products is therefore needed at the EU level, requiring Union action.

4.Objectives: What is to be achieved? Figure 2: Schematic overview of problems and objectives 4.1.General objectives The general objective of the GPSD is to ensure EU consumers are protected from dangerous products and to ensure the proper functioning of the Single Market. These two main objectives of the GPSD are interlinked: if the same high level of safety requirements applies to all economic operators, it ensures the health and protection of EU consumers and also level-playing field for all businesses operating on the EU market. 4.2.Specific objectives This initiative has five specific objectives linked to the five problems identified; it also seeks to simplify legislation and reduce the administrative burden of the current acts under consideration (REFIT objective): Table 3: Specific objectives Specific objectives Description Ensure that the EU legal framework provides for a safety net for all consumer products and risks, including products and risks linked to new technologies This initiative aims to make sure that the GPSD ensures the safety of all non-harmonised products and addresses relevant risks. In view of the development of new technologies, there is a need to ensure legal certainty regarding the legal coverage of new technology products such as connected products and AI, and to be able to address new products safety risks for health and safety of consumers related to these new technologies, when not already covered by sectoral legislation. The aim is to preserve the role of the GPSD as a safety net for consumers. The initiative does not aim to regulate all risks related to new technologies in general but only when they create risks to health and safety of consumers (e.g. cybersecurity can entail risks for privacy or data protection, which are not covered by the GPSD; the GPSD would only cover the risks related to health and safety (e.g. physical incident) created by e.g. lack of sufficient cybersecurity features) Address product safety challenges in the online sales channels There is also a need to adapt the GPSD to the new challenges of e-commerce. Product safety must be ensured irrespectively of the modalities of the supply chain: rules for new online business models need to be clarified and provisions for market surveillance of imported products improved to enable appropriate consumer protection and level-playing field for businesses. Also national market surveillance authorities need to have efficient tools to perform market surveillance of online sales and the product traceability in the online sales needs to be improved. Make product recalls more effective and efficient to keep unsafe products away from consumers Product recalls play an important role to ensure the safety of EU consumers, since they are the last resort to keep dangerous products away from them. This initiative aims to increase the effectiveness and efficiency of recalls by improving the channels and content of recall information, making recall procedure less burdensome for EU consumers and ensuring their right to an effective remedy. The initiative takes into account the identified behavioural biases to increase consumer response. The initiative also aims to ensure effective monitoring of recall actions. Enhance market surveillance and ensure better alignment of rules for harmonised and non-harmonised consumer products This initiative aims to ensure better enforcement of product safety rules by contributing to more efficient market surveillance. The objective is to improve product traceability so that dangerous product can be effectively eliminated, the deterrent effect of the legislation for economic operators not complying with the rules, and to tackle possible discrepancies about risk assessment between Member States. The aim is also to simplify the procedures leading up to referencing standards in the Official Journal of the EU for non-harmonised products. Following the recent adoption of Regulation (EU) 2019/1020, there is a need to align the market surveillance legislative framework for non-harmonised products with the one for harmonised products, the definitions of the GPSD with product harmonisation legislation and ensure equal treatment for all products and businesses. The objective is also to ensure more efficient and coherent enforcement and implementation of the product safety rules across the EU and to monitor that sufficient resources are dedicated to market surveillance at national level. Address safety issues related to food-imitating products This initiative aims to ensure a consistent application of product safety rules for food-imitating products by simplifying and clarifying those rules. REFIT Simplification and improving the efficiency of the existing legislation This initiative aims also to simplify and reduce the regulatory burden of the current GPSD. Figure 3 presents the intervention logic for this initiative:

Figure 3: Intervention logic Source: GPSD Study 5.What are the available policy options? 5.1.What is the baseline from which options are assessed? In the baseline scenario, no new legislative or non-legislative actions specifically targeting the safety of consumer products will be developed at EU or national level. This scenario includes several EU-level and national policies and measures which are assumed to continue being in force or will enter into force in the future: At EU level, the Commission has recently adopted a proposal for a Digital Services Act which, if adopted by the co-legislators and once entered into force, should set up new responsibilities for online intermediaries, including online marketplaces. Also, the Commission has recently announced its intention to propose new legislative initiatives linked to new technologies and artificial intelligence, namely the proposal for a horizontal instrument on AI and the proposal for the revision of the Machinery Directive, which will clarify certain sectorial safety aspects of new technologies. The new customs provisions applicable for GPSD products under the new Regulation (EU) 2019/1020 will start to apply in 2021. The Commission will continue, in the frame of the allocated EU budget, to finance coordinated market surveillance activities on product safety (see Annex 9). The Commission is expected to continue its advocacy policy on product safety, in the form of information campaigns and other promotion initiatives such as the Product Safety Award. The Commission will also continue its coordination role in product safety as Chair of the Consumer Safety Network (‘CSN’). In the area of product safety in the online sales, the baseline scenario takes into account that the Commission will continue the cooperation with and steering the commitments of the online market places in the context of the Product Safety Pledge. Finally, the Commission will continue adopting safety standards giving presumption of safety for non-harmonised products under the current procedure, and also its international cooperation activities. At national level, it is assumed that Member States will also continue their measures supporting product safety policy, such as information and promotion campaigns, under the constraints of the national budgets, and their current market surveillance activities. Several expected socio-economic developments are also relevant for the product safety area. Important technological developments bring an increasing number of AI-driven consumer products and connected products on the EU market. Also the increasing digitalisation of online sales, dramatically accelerated during the current COVID-19 crisis, will increase the number of products sold online and also those imported directly from outside the EU. Demographic changes can also have an impact on the safety of consumers, as for example older people have specific consumption-related needs. The time horizon for this baseline scenario, which will be used for the assessment of impacts of the different options is a 10 years’ horizon. This takes into account the likely lifetime of any individual option and on the need to allow for impacts to be realised. The GPSD Study estimated the costs associated with this baseline scenario for businesses and Member States as following: Table 4: Estimated annual cost for businesses to comply with the GPSD, by company size class, in million EUR

Cost by company size Total costs Company size (employees) From 0 to 49 50 – 249 250 or more All size categories Total of manufacturing 79 101 163 343 Total of wholesale 118 81 122 321 Total of retail 232 44 163 439 Total 428 226 448 1 102 Source: The survey conducted in the context of the GPSD Study The estimated costs for businesses to comply with the GPSD in its current form amount to EUR 1.1 billion per year. Consumer detriment linked to the unsafe products is expected to grow in the mid-term in the baseline scenario, due to increasing consumption and a continuing shift to e-commerce: the GPSD Study evaluates that consumers suffer financial costs of EUR 19.3 billion in 2019 arising from the fact that they have purchased unsafe products that they would not have purchased if they knew these products are unsafe. This consumer detriment in the EU due to unsafe non-harmonised products is estimated on the basis that the product value is EUR 3.9 billion for the online sales channels, and EUR 15.4 billion for brick-and-mortar shops and other offline sales channels, for a total of EUR 19.3 billion per year. This estimated baseline consumer detriment in the EU related to unsafe non-harmonised products is currently reduced due to recalls by approximately EUR 0.4 billion per year. This consumer detriment due to the loss of value of unsafe products is expected to reach EUR 20.8 billion by 2025 and almost EUR 22 billion by 2034 in the baseline scenario. The cost estimation for Member States takes into account the different organisational approaches of Member States to market surveillance and is based on staff data for surveillance of non-harmonised consumer products at national level. The GPSD Study concluded that the total EU27 staff-related costs for market surveillance of non-harmonised consumer product amount to approximately EUR 122.4 million per year. Also, four in ten MSAs reported incurring costs other than staff costs (e.g. testing of products), estimated at most at 0.34% of total staff costs. The GPSD Study identified that (minor to significant) additional costs due to differences in the safety requirements in Member States, caused by differences in the national implementation of the GPSD (e.g. regarding traceability requirements) or legislative fragmentation between harmonised and non-harmonised products, currently affect 42% of surveyed companies and 16% of MSAs. These costs are estimated for MSAs to amount to EUR 0.7 million annually (total for the EU27) and to EUR 119 million annually for businesses. On the benefits side of the baseline, the interviews carried out in the context of the GPSD Study identified that authorities and businesses see moderate to significant benefits resulting from the GPSD across the board, and in particular through better information on unsafe products and measures taken by authorities provided through the Safety Gate/RAPEX, a better functioning internal market and increased consumer trust. 90% respondents that expressed an opinion considered the costs due to the product safety requirements of the GPSD to be at least “moderately proportionate” to the resulting benefits. Close to 60% of respondents that had an opinion even found these costs to be “largely proportionate” or “very proportionate”, including respondents from companies and business associations. For SMEs, the estimated annual costs to comply with the GPSD (after subtraction of business-as-usual costs) are EUR 428 million per year (companies < 50 employees) and EUR 226 million per year (companies 50 to 249 employees). The median value for consumer product safety-related costs in proportion of the total annual turnover appears to decrease with the company’s size/turnover. This is likely due to scale effects. This general pattern is confirmed by SMEs’ replies to the business stakeholder survey. Accordingly, SMEs account for 59% of the total of GPSD-related compliance costs in the EU, in line with their overall share in the market. The GPSD Study also analysed the impacts of the COVID 19 crisis on the baseline scenario. It shows that while the confinement measures have serious expected impacts on GDP, total retail quickly recovered after the first crisis wave, but new measures in the current second wave are likely to again lead to substantial impacts on retail and therefore sales of products. The decline in overall retail sales has been accompanied by a rise of e-commerce sales that are expected to increase by 16.9% in 2020 in Western Europe. The boost in new spending is expected to leave e-commerce permanently ahead of its previous pace. In general terms, product safety processes at companies including with respect to related supply chain management appear to remain largely unchanged in the COVID-19 context, except with the increasing reliance on electronic communication instead of physical meetings (this may pose issues to product assessments). Companies also confirmed the switch to online sales channels to offer products. Moreover this crisis required increased market surveillance of COVID-19-related products, in particular face-covering products (other than the medical or personal protective equipment devices).Until 1 December 2020, 16 Member States notified in the Safety Gate/RAPEX 174 alerts (mainly safety masks, some disinfecting gels and UV lamps). Finally, there is a strong political commitment for a strong product safety policy at EU level. This has been recognised by the recently adopted Consumer Agenda and several Council conclusions as explained above. The GPSD evaluation confirms the validity of the GPSD, but at the same time considers the need for its revision. The European Parliament has also highlighted the need to revise the GPSD in its resolution on addressing product safety in the Single Market . This also has been largely recognised by the stakeholders in the consultation process. 5.2.Description of the policy options To address the objectives developed above, the initiative will intervene on the following areas: Figure 4: Interventions to improve the GPSD’s effectiveness Beyond the baseline scenario (‘Status quo’) not involving any new actions, the identified policy options to address the different specific objectives are: •Option 1. Improved implementation and enforcement of the existing legal framework, without legal revision of the GPSD (only FIPD revised); •Option 2. Targeted revision of the GPSD (Directive or Regulation); •Option 3. Full revision of the GPSD and recasting as Regulation; •Option 4. Integration of more legal instruments

The range of options includes non-legislative (Option 1) and legislative actions (Options 2, 3 and 4) to address the different specific objectives. All the options defined in the report propose specific actions to address all five problems identified, but differ in the level of ambition. The substantive provisions of the Food-imitating Product Directive were considered to be revised under all options 1 to 4 with two possible sub-options: (a) a full ban of food-imitating products per se and (b) application of a product safety risk-assessment on a case by case basis to this category of products. Table 5: Overview of the policy options and addressees of the measures Option 0 Baseline Option 1 Enhanced enforcement Option 2 Targeted legal revision Option 3 Full legal revision Option 4 Integration of rules Most relevant stakeholders New technologies No change •Guidance for economic operators •Use of standards for new risks •Coverage of new risks •No clarifications on software related rules •Coverage of new risks •Clarify software related rules Option 3 + Integration of the legal instruments on market surveillance (GPSD market surveillance provisions and Regulation 2019/1020) Businesses (for consumer products incorporating new technologies) and MSAs Online sales No change Reform, promotion and expansion of the Product Safety Pledge •Making most provisions inspired by the Product Safety Pledge legally binding Obligations for economic operators going beyond the Product Safety Pledge (e.g. display same information online as it is with the product offline, duty of care as for distributors) Online marketplaces, online retailers, and MSAs Recall effectiveness No change Guidance on product recalls •Mandatory requirements on product recalls •Legal basis to use customers’ data for recalls •Mandatory elements of recall notice Option 2 + Some additional mandatory requirements (e.g. on product registration, template for recall notice, right to remedy and monitoring) Businesses (harmonised and non-harmonised consumer products), MSAs Market surveillance No change Increased funding of joint market surveillance activities •Alignment with market surveillance and traceability rules of harmonised products •Simplifying standardisation procedures Option 2 + stronger enforcement powers to Member States (penalties) , arbitration mechanism and increased traceability (delegated acts) MSAs and businesses (in particular businesses of non-harmonised consumer products) Food-Imitating Products No change Separate revision of the FIPD to ensure its even interpretation 2 sub-options for treatment of food-imitating products: (a) full ban per se. (b) risk-assessment approach Integration of the FIP provisions into the GPSD 2 sub-options for treatment of food-imitating products: (a) Maintaining dedicated provision on FIP (recast and integration) with a full ban per se (b) Abandoning any dedicated provision (repeal) and reliance on general provisions for risk-assessment approach Idem Option 2 Producers of food imitating products and MSAs Instrument Directive Directive Directive or Regulation Regulation Regulation Businesses and MSAs are the most affected stakeholders by the measures as detailed in the Table 5. The SMEs and micro-SMEs are not exempted from any of the obligations foreseen under the different options. EU product safety legislation does not allow for "lighter" regimes for SMEs since a consumer product must be safe whatever the characteristics of its supply chain to meet the general objective of product safety and consumer protection.However provisions are foreseen in the EU legislation e.g. to facilitate access for SMEs to EU safety standards including those adopted under the GPSD (see Article 6 of Regulation (EU) 1025/2012 ). The detailed description of the actions under the different options, as well as their time horizon, potential for simplification and reduction of regulatory burden and digital solutions envisaged to increase efficiency, are developed in the Table 6. Table 6: Option packages Objectives Option 0 Baseline Option 1 Enhanced enforcement Option 2 Targeted legal revision Option 3 Full legal revision Option 4 Integration of market surveillance rules Ensure the EU legal framework provides for general safety rules for all consumer products and risks, including products and risks linked to new technologies No change •Guidance for businesses that cyber-security threats and other risks of new technologies affecting physical or mental health. •Exploring use of European Standards for new risks •New risks (cyber-security and other risks of new technologies affecting physical or mental health) explicitly covered through legal revision of product safety definition Option 2 + Clarify software related rules: Explain how software can impact the safety of product and clarify responsibilities to ensure consumer safety Option 3 + Integration of the legal instruments on market surveillance (GPSD market surveillance provisions merged with Regulation 2019/1020 into one Regulation on market surveillance Address product safety challenges in the online sales channels No change •Review, promotion and expansion of the Product Safety Pledge Making most provisions of the Product Safety Pledge legally binding for all online marketplaces, such as: •to consult information on recalled/dangerous products available on Safety Gate/RAPEX and from other sources and react quickly; •to take appropriate action in respect to recalled/dangerous products, when they can be identified •to provide single contact points for EU MSAs and to cooperate with them • to have an internal mechanism for notice and action procedure with specific provisions for unsafe products (e.g. timeframes for action) and other requirements Option 2 + additional requirements for online operators: •to display of all safety information online that is also required to be provided offline; online marketplaces required to make sure that sellers on their platform provide this information together with the product offer •a duty of care to help ensure compliance with the safety requirements for online marketplaces (in the same vein as the classical distributors have today: stop supplying unsafe products, participate in market monitoring, keeping traceability information, cooperation in corrective actions, cooperate with MSAs, making efforts to identify dangerous product offers already removed from their websites but that keep reappearing. That duty of care would be different than for distributors as they do not have physical contact with the product, so their role will focus on doing their most to ensure that their websites do not offer dangerous products, and if they do, they cooperate with authorities for corrective actions. This duty of care would be complementary to the obligations of actual sellers on the online marketplaces) Make product recalls more effective and efficient to keep unsafe products away from consumers No change •Guidance on product recalls Mandatory requirements on product recalls: •Legal basis to use available customer contact details for recalls •Operators need to disseminate recall announcements on their website, social media, newsletters, retail outlets and other appropriate channels to ensure the widest possible reach. •Mandatory key elements for recall notices (product description + photo, description of hazard, instructions on what to do, description of remedy, contact details for queries) •Prohibition to use terms decreasing the perception of risk in recall notices Option 2 + Further measures to enhance recall effectiveness, for example: •Obligation for economic operators to notify consumers directly whenever possible •Economic operators who already offer product registration systems or loyalty programmes should offer consumers the possibility to register their contact details specifically to receive safety notifications •Possibility to set further requirements for registration of specific categories of products through delegated act •Mandatory template f