Implementation of market surveillance rules should go no further than necessary

Viðskiptaráð has submitted its comments on a draft bill on market surveillance, case no. S-222/2026 in the government’s consultation portal. The bill proposes incorporating Regulation (EU) 2019/1020 on market surveillance and compliance of products into Icelandic law and enacting a new comprehensive act on market surveillance. Among other things, the bill would separate the rules on carrying out market surveillance from the general rules on product safety, clarify the role of surveillance authorities and increase coordination of surveillance. It also sets out the authorities’ investigative and surveillance powers, measures concerning products that do not meet statutory requirements, powers to recover costs, and administrative fines. In addition, it proposes amendments to existing legislation, including the Act on Product Safety and Official Market Surveillance.

Viðskiptaráð considers it important that implementation of the regulation contributes to a clearer and more consistent regulatory framework for market surveillance without unnecessarily increasing the administrative burden on businesses. Viðskiptaráð welcomes the fact that the legislation was prepared with the aim of going no further than the regulation’s minimum requirements, and stresses that this approach should be reflected as work on the bill continues. In that context, it makes the following comments on the current draft.

Efficient and risk-based market surveillance

The bill proposes a separate act on market surveillance and assigns the Housing, Construction and Planning Agency the role of central liaison office, while individual authorities would continue to carry out surveillance in their own areas. Viðskiptaráð considers it important that the changes promote greater coordination and efficiency rather than a heavier administrative burden. In particular, a clear division of responsibilities between surveillance authorities must be ensured, and businesses should not have to submit the same information repeatedly to different authorities. Viðskiptaráð also stresses that surveillance should be prioritised on the basis of risk, taking into account, among other things, the nature of products, the past conduct of economic operators and the likelihood that non-compliance with statutory requirements could cause harm. Such an approach is also consistent with the emphasis in Regulation (EU) 2019/1020 on risk-based surveillance and on limiting the burden that surveillance places on economic operators.

Investigative powers and proportionality

Article 13 of the bill provides for extensive investigative powers for market surveillance authorities to gather evidence for assessing whether a product meets statutory requirements. These powers include obtaining documents, access to software and on-site inspections, and are largely based on Article 14 of Regulation (EU) 2019/1020. Viðskiptaráð draws attention to the burden that the use of these powers may place on businesses and stresses that proportionality must always be observed. The scope of information gathering and other investigative measures must be limited to what is necessary for the investigation in question, and particular care must be taken to protect businesses’ commercial and other confidential information. It is also important that the powers to issue regulations under the bill are not used to extend investigative powers or impose further obligations on economic operators beyond what follows from the act itself.

Impact on business and transition

Section 6.3 of the bill’s explanatory memorandum discusses its impact on business. It states that the impact may vary depending on the operator’s activities and that importers of products from outside the EEA and online retailers in particular may be affected. The discussion is, however, rather general, and no assessment is made of the costs or administrative burden that implementation may entail. Viðskiptaráð considers it important that the bill’s impact on business is fully assessed before it is submitted to Althingi. Particular attention should be paid to whether the requirements arising from implementation call for changes to procedures, product labelling, documentation or communication with surveillance authorities. Surveillance should also be carried out in a way that keeps costs and the administrative burden on businesses to a minimum. Otherwise, the implementation risks adding complexity and costs for businesses, which may ultimately be passed on to consumers through higher prices.

Article 21 of the bill provides that the act would enter into force immediately, without any specific transition period. Viðskiptaráð considers it important to assess specifically whether, and to what extent, a transition period is needed, taking into account the obligations arising from the EEA Agreement. In this context, regard must be had to, among other things, the requirements under Article 4 of the regulation concerning information on responsible economic operators, labelling and access to conformity documentation. Businesses may need time to change packaging, update documentation or adapt internal processes to these requirements. It is important that implementation takes such circumstances into account and that unnecessary costs and waste are avoided, including in relation to existing stock. Viðskiptaráð also points out that the amendments to Act No. 134/1995 on Product Safety and Official Market Surveillance are not fully set out in Article 22 of the bill. Among other things, it provides for amendments to Chapters III–VI of the act without specifying them further. It is important that these amendments are finalised before the bill is submitted to Althingi, so that the interplay between the new act and existing legislation can be assessed as a whole.

Cost recovery and optional national measures

The legislative plans stated that the implementation of Regulation (EU) 2019/1020 was not intended to go further than its minimum requirements. Viðskiptaráð agrees with this approach and considers it important to distinguish clearly between provisions of the regulation that must be implemented and those that give authorities discretion in national implementation. Article 15 of the bill proposes that market surveillance authorities be permitted to recover the costs of surveillance measures when products are found not to meet statutory requirements. The provision is based on Article 15 of the regulation, which allows member states to recover such costs but does not require them to do so. Viðskiptaráð considers that the need to use this optional power has not been demonstrated, nor has its potential cost impact on business been assessed. It therefore proposes that the provision be removed, in line with the government’s stated aim of going no further than the regulation’s minimum requirements. Viðskiptaráð also considers it important that the explanatory memorandum clearly identifies which provisions are based on optional powers under the regulation and why it is considered necessary to use them. This would better ensure that no greater burden is placed on Icelandic businesses than is necessary to meet obligations under the EEA Agreement.

Administrative fines and the requirement of fault

Article 19 of the bill would empower market surveillance authorities to impose administrative fines on economic operators for certain breaches. Fines could amount to up to ISK 10 million for individuals and ISK 25 million for legal entities.

Viðskiptaráð comments specifically on paragraph 4 of Article 19 of the bill, which states that administrative fines under the article may be imposed regardless of whether the conduct in question was intentional or negligent. The wording suggests that administrative fines could be imposed on a strict liability basis, i.e. without regard to fault, which appears contrary to the legislator’s intention judging by the comments on the provision in the explanatory memorandum. The memorandum states that an administrative fine may not be imposed unless one of these conditions of fault is met. There is therefore an inconsistency between the text of the bill and the explanatory memorandum that must be corrected.

Under Article 41 of Regulation (EU) 2019/1020, member states must lay down penalties that are effective, proportionate and dissuasive. The regulation does not, however, require administrative fines to be imposed regardless of fault, or that negligence alone should suffice for a fine. Viðskiptaráð considers that onerous penalties such as administrative fines should be limited to intentional breaches and therefore proposes that intent, or at least gross negligence, be clearly stated as a condition for imposing them. Viðskiptaráð also stresses that proportionality must be observed when deciding on administrative fines, taking into account the seriousness and extent of the breach, the responsibility of the economic operator concerned and any corrective action taken. In particular, care must be taken that penalties for minor or technical breaches are not excessive in relation to the nature and consequences of the breach.

Assessment of the bill’s impact

Viðskiptaráð stresses that the implementation of Regulation (EU) 2019/1020 should contribute to clearer and more efficient market surveillance without unnecessarily increasing costs and the administrative burden on businesses. To that end, a clear division of responsibilities between surveillance authorities, proportionality in the use of investigative powers, and implementation that goes no further than necessary to meet obligations under the EEA Agreement must be ensured.

In particular, Viðskiptaráð proposes that the cost recovery power under Article 15 of the bill be removed and that administrative fines under Article 19 be limited to intentional breaches. It also considers it necessary that the bill’s impact on business be fully assessed, that the need and scope for a transition period for economic operators be specifically assessed, and that the provisions based on optional powers under the regulation be clearly identified.

This article was automatically translated from the Icelandic original.