COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT Accompanying the document Proposal for a Directive of the European Parliament and of the Council on liability for defective products
Date: 2022-09-28
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: damage, defective product, indemnification, market approval, market supervision, natural person, producer's liability, single market

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  EN 

   EUROPEAN COMMISSION  Brussels, 28.9.2022  SWD(2022) 317 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT  Accompanying the document Proposal for a Directive of the European Parliament and of the Council on liability for defective products {COM(2022) 495 final} - {SEC(2022) 343 final} - {SWD(2022) 315 final} - {SWD(2022) 316 final}  
 
 
Executive Summary Sheet 

Impact assessment on  the  revision of  Directive 85/374/EEC concerning liability for defective products (Product 
Liability Directive) 

A. Need for action 

What is the problem and why is it a problem at EU level? 
The Directive lays down common EU rules for the strict liability (i.e. liability irrespective of fault or negligence – 
no-fault liability) of producers for damage caused by defective products. It allows any person who has been 
injured by a defective product, whether they are the owner or a bystander, to claim financial compensation for 
death, personal injuries or damage to consumer property.  

Building on the findings of the evaluation1, the impact assessment identifies two problems. 

1.  Certain products, economic actors and damage in the digital and circular economy escape no-
fault liability. The Directive was conceived long before the digital revolution and it is unclear how its 
rules apply to products in the digital age, in particular software and products that need software or digital 
services in order to function, such as smart devices and autonomous vehicles. It is also unclear who 
should be liable when a product that has been modified by a refurbisher or remanufacturer is defective 
and causes harm. In addition, it is increasingly common for consumers to purchase products from non-
EU countries without there being a producer or importer based in the EU. This means there is no one to 
seek compensation from under the Directive if a product is defective and causes harm.  

2.  Consumers face obstacles to getting compensation. Proving a product is defective and that the 

defect caused the damage can be very difficult for victims of harm in complex cases, such as certain 
cases involving artificial-intelligence-enabled products, smart products or pharmaceuticals. The Directive 
does not give victims a right to technical information they might need to prove liability, nor is there any 
explicit possibility to ease the burden of proof when victims face disproportionate difficulties. The 
Directive also places restrictions on making claims: claims for property damage worth less than EUR 
500 are not allowed and producer liability ends after 10 years.  

What should be achieved? 
The  revision  of  the  Directive  pursues  two  general  objectives  to  address  the  problems  identified,  both  of  which 
build on those of the current Directive: 

1)  Continue  to  ensure  the  functioning  of  the  internal  market,  free  movement  of  goods  and  undistorted 

competition between market operators; 

2)  Continue to ensure a high level of protection of consumers’ health and property. 

The initiative pursues five specific objectives:  (i) ensure liability rules reflect nature and risks of products in the 
digital age; (ii) ensure liability rules reflect nature of products in the circular economy; (iii) ensure there is always 
an EU-based liable person for defective products bought from producers outside the EU; (iv) ease the burden of 
proof in the case of complex products and clarify liability for undiscoverable defects, while ensuring fair balance 
between  producers  and  consumers;  and  (v)  ease  restrictions  on  making  claims,  while  ensuring  fair  balance 
between producers and consumers. 

What is the value added of action at the EU level (subsidiarity)? 
Regulatory action at EU level would ensure consistent implementation of product liability rules. As the Directive 
fully harmonises the matters it covers, any changes must be made at EU level. It would provide legal certainty 
about:  (i)  what  products,  economic  operators  and  types  of  harm  fall  within  the  Directive’s  scope;  and  (ii)  the 
appropriate balance of interests between producers and consumers across the EU. In the absence of a uniform 
set  of  rules  for  compensating  victims  harmed  by  defective  products,  manufacturers  would  be  faced  with  27 
different  sets  of  rules,  leading  to  different  levels  of  protection  for  consumers  and  no  level  playing  field  among 
businesses from different Member States. 

1 Evaluation of Product Liability Directive, SWD(2018)157. 

B. Solutions 

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What are the various options to achieve the objectives? Is there a preferred option or not? If not, 
why? 
Besides the baseline scenario of no action, the impact assessment identifies three options to address problem 1 
relating to the  digital age and circular economy,  and two options to  address problem 2  on obstacles  to getting 
compensation. 

Option 1a would ensure that manufacturers of products for which software or digital services are necessary for 
them  to  operate  would  be  liable  under  the  Directive.  Just  like  for  tangible  components,  the  providers  of  those 
intangible  digital  elements  would  be  jointly  and  severally  liable  with  the  manufacturer.  Businesses  that 
substantially modify a  product and place  it  back on the market, such as remanufacturers,  would also be liable 
under the Directive. The authorised representative of a non-EU manufacturer would also be liable when there is 
no importer in the EU. 

Option 1b builds on option 1a and, in addition, would include all safety-relevant software as a product in its own 
right.  This  includes  third-party  software  added  to  a  product  or  standalone  software  that  itself  may  cause  harm 
(such  as  medical  device  software).  Under  this  option  it  would  also  be  possible  to  hold  a  fulfilment  service 
provider  liable  under  the  Directive  if  there  is  no  importer  in  the  EU  and  no  authorised  representative  was 
appointed by a non-EU manufacturer. 

Option 1c would include the measures of option 1b and, in addition, would include any software with implications 
for  fundamental  rights.  Damage  resulting  from  fundamental  rights  infringements,  such  as  data  protection 
breaches,  privacy  infringements  or  discrimination  (e.g.  by  artificial  intelligence  recruitment  software)  would  be 
compensable.  

Option 2a would ease the burden of proof on victims of harm by harmonising: (i) rules on when producers are 
obliged to disclose necessary technical information to the victim in court; and (ii) conditions for national courts to 
presume  that  a  product  was  indeed  defective  or  that  the  defect  did  indeed  cause  the  damage,  especially  in 
complex  cases  where  proving  liability  is  excessively  difficult.  Option  2a  would  reduce  restrictions  on  making 
claims (by removing the property-damage threshold and lengthening the period of liability). 

Option  2b  would  reverse  the  burden  of  proof,  so  that  if  a  product  causes  harm  it  would  be  the  producer  who 
must  prove  the  product  was  not  defective  and  did  not  cause  the  harm.  The  development  risk  defence,  which 
exempts producers from liability when the defectiveness of a product was not discoverable according to state-of-
the-art knowledge, would be removed. Option 2b would further reduce restrictions on making claims (thresholds 
and time limits). 

The impact assessment identifies options 1b and 2a as the preferred combination of options. 

What are different stakeholders' views? Who supports which option?  
In  relation  to  the  options  to  address  problem  1,  56%  of  respondents  to  the  public  consultation  (excluding 
members  of  the  public)  were  in  favour  of  legislative  change  to  adapt  liability  rules  to  the  digital  and  circular 
economy. Among the public this was 75%. Consumer organisations, public authorities and NGOs were more in 
favour  of  greater  intervention  (option  1b  or  1c)  than  businesses  and  business  organisations.  These  business 
stakeholders were particularly sceptical of option 1c, because they considered that infringements of fundamental 
rights  could  be  compensated  under  other  laws  like  the  General  Data  Protection  Regulation,  and  that  applying 
no-fault  liability  to  producers  would  be  disproportionate.  While  recognising  the  current  lack  of  legal  certainty, 
stakeholders  representing  larger  businesses  and  the  software  industry  were  more  in  favour  of  addressing  that 
issue 
than  through  legislative  change.  Stakeholders  from  more  traditional  sectors 
(engineering, component suppliers, domestic appliances) were in favour of cautious change (option 1a or 1b). 

through  guidance 

In relation to the options to address problem 2, consumer organisations and NGOs were more in favour of option 
2b.  They  considered  that  option  2a  did  not  go  far  enough  to  strike  a  fair  balance  between  consumers  and 
producers. Stakeholders representing business were more in favour of option 2a but overall they were sceptical 
about making any changes to the existing balance between consumers and producers. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)? 
Option  1b  would  provide  legal  certainty  on  what  products  and  producers  are  covered  by  no-fault  liability  and 
would  encourage  all  producers,  including  non-EU  producers,  to  place  only  safe  products  on  the  EU  market  to 
avoid  incurring  liability.  This  reinforces  product  safety.  It  would  also  ensure  that  consumers  enjoy  the  same 
protection  when  they  are  harmed  by  defective  products  regardless  of  whether  the  defect  concerned  the 
product’s digital or tangible components and when they are harmed by defective standalone software itself. By 

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explicitly bringing software providers,  businesses that substantially modify products, authorised representatives 
and  fulfilment  service  providers  into  the  scope  of  the  Directive,  victims  of  harm  will  have  a  better  chance  of 
getting  compensation  because  they  will  not  have  to  prove  the  fault  of  the  producer  (the  Directive’s  no-fault 
liability principle). Annual compensation for injured persons is expected to increase by between EUR 0.15 million 
and 22.13 million compared to the baseline. 

Option 2a would create greater legal certainty and achieve more equal consumer protection across the EU. The 
burden of proof would be shared more fairly between injured parties and producers in more complex cases. This 
would  increase  the  chances  of  enforcing  a  successful  compensation  claim  in  such  cases.  Disproportionate 
obstacles to making claims would be reduced. Annual compensation for injured persons is expected to increase 
by between EUR 0.20 million and 43.54 million compared to the baseline.  

By  extending  the  application  of  no-fault  liability,  the  policy  options  would  lead  to  shorter  legal  proceedings 
because courts would not have to deal with questions of fault or negligence.  

What are the costs of the preferred option (if any, otherwise main ones)?  
The  benefits  of  increased  compensation  for  consumers  is  a  cost  to  producers.  For  the  80%  of  producers  that 
have liability insurance, this would lead to a small increase in the annual insurance premium. For option 1b, this 
is estimated  to  be  between EUR  4.35 million  and 8.69 million compared to  the  baseline. For option  2a, this is 
estimated  to  be  between  EUR  14.35  million  and  28.71  million  compared  to  the  baseline.  For  the  minority  of 
producers  that  do  not  have  liability  insurance,  they  would  face  compensation  pay-outs  in  relation  to  victims. 
However,  in  order  to  avoid  double  counting,  this  is  taken  on  board  in  the  benefits  to  consumers  of  increased 
compensation. 

Although legal proceedings would be shorter (see benefits), the number of proceedings would also increase due 
to  the  expanded  scope  of  the  Directive.  Under  option  1b,  total  annual  legal  costs  are  assessed  to  slightly 
increase between EUR 1.12 million and 2.75 million compared to the baseline. Similarly, under option 2a, total 
annual legal costs are estimated to slightly increase by between EUR 0.41 million and 1.02 million compared to 
the baseline. 

Authorised representatives and fulfilment service providers, who could be held liable when there is no EU-based 
importer, would pass on increased costs to non-EU producers. This could lead to small but unquantifiable price 
rises  of  products  from  non-EU  countries.  Any  price  rise  is  counterbalanced  by  increased  product  safety  and 
consumer protection in the event of harm.  

What are the impacts on small and medium-sized enterprises (SMEs) and competitiveness? 
Stakeholder  feedback  did  not  highlight  any  specific  impacts  on  SMEs  of  the  policy  options.  However,  SMEs 
would  greatly  benefit  from  clearer  liability  rules,  as  they  have  fewer  resources  for  legal  advice.  Increases  in 
product liability insurance, even if expected to be small, might affect SMEs more than larger companies, as they 
have less ability to absorb costs. 

Will there be significant impacts on national budgets and administrations? 
 There are no administrative costs generated by the Directive. No impact on national budgets was identified.  

Will there be other significant impacts? 
No other significant impacts have been identified. 

Proportionality? 
The proposed action addresses the objective of the initiative and does not go beyond what is necessary to bring 
the  liability  rules  up  to  date  with  developments  in  the  digital  and  circular  economy  and  reduce  obstacles  for 
getting compensation. 

When will the policy be reviewed? 
The Commission will prepare a review of the revised Directive 6 years after its entry into force. 

D. Follow-up 

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