On 17 December 2015, the German Parliament (Deutscher Bundestag) passed a bill on the improvement of enforcement of data protection provisions protecting consumers (Entwurf eines Gesetzes zur Verbesserung der zivilrechtlichen Durchsetzung von verbraucherschützenden Vorschriften des Datenschutzrechts). Under the new law, registered consumer associations will have the right to sue companies for violations of data protection laws (“class actions”). To this aim, certain amendments will be made to the German Injunction Act (Unterlassungsklagengesetz). The bill is subject to signing by the Federal President and announcement in the Federal Law Gazette (Bundesgesetzblatt). The new law will enter into force one day after announcement in the Federal Law Gazette.

Class actions to be expanded to data protection laws

Under the new law, collection, processing and utilization of personal data of consumers for the purposes of advertising, market research, operation of credit agencies, profiling, address trading, other data trading and similar purposes, will be subject to supervision by registered consumer associations, which will have their own right to sue companies that are in breach of the relevant statutory data protection provisions. This will inter alia cover privacy issues related to contracts and terms and conditions. An exemption will apply to the extent that collection, processing and utilization of personal data will be necessary for establishment, performance or termination business transactions with consumers.

Consumer associations are obliged to submit annual reports about issued warning letters and initiated class actions based on data protection breaches with the Federal Office of Justice (Bundesamt für Justiz) for monitoring purposes. Further, courts shall hear the competent data protection authority before making a judgment, unless an injunction for emergency has been requested by the relevant consumer association.

During a grace period until 30 September 2016, consumer associations may not initiate class actions in relation to data transfers to the United States which have been based on the European Commission’s Safe Harbour Decision prior to its invalidation by the Court of Justice of the European Union on 6 October 2015.

In addition: restrictive contractual form requirements to be prohibited in consumer contracts

The bill contains also a substantial change in consumer protection under the German Civil Code (Bürgerliches Gesetzbuch – BGB). Under the new law, a clause in a consumer contract by which notices or declarations that are to be made by the consumer to the company or a third party are tied to a more stringent form than “text form”, will be prohibited. Under the existing law, a consumer may be required to observe the more stringent “written form”. Under the new law, written form may still be required in contracts which are subject to a statutory requirement for notarization.

Companies are called on to review and amend their terms and conditions for consumer contracts accordingly within a grace period until 30 September 2016. After expiration of this grace period, consumer associations will have the right to take companies to court for use of prohibited and, therefore, invalid terms and conditions. According to the legislative materials, the Federal Statistical Office estimates that in Germany, around 750,000 consumer contracts require consumers to observe written form. The economic burden for companies to amend their terms and conditions is estimated at around EUR 70 million.