101. Consumer Protection in the Age of AI: Transposing the New EU Product Liability Directive in Sweden, Denmark, and Finland
- Author:
- Fredrik Erixon, Oscar Guinea, Dyuti Pandya, Vanika Sharma, and Renata Zilli
- Publication Date:
- 03-2026
- Content Type:
- Working Paper
- Institution:
- European Centre for International Political Economy (ECIPE)
- Abstract:
- Digital technologies and artificial intelligence (AI) are transforming Europe’s economy. The legal frameworks designed to govern them are catching up – perhaps too hastily. The EU’s revised Product Liability Directive (PLD) provides a good example of the tension between the speed of technological progress and the need for norms that balance the rights and obligations of users and producers of these technologies. The PLD seeks to modernise product liability rules by recognising that software, AI systems and connected devices are now integral to everyday products and services. For the first time, digital manufacturing files, algorithms and software fall within the scope of strict liability, meaning that producers can be held responsible for harm caused by defects in code or data as much as by flaws in hardware. While well-intentioned, the Directive risks imposing heavy economic costs, particularly in countries whose competitiveness depends on digital innovation. Expanding liability may discourage companies from experimenting or launching new products as even routine design improvements could be construed as evidence of past defects. Faced with greater legal uncertainty, firms are likely to divert resources from research and development into compliance documentation, testing and risk management in order to minimise litigation exposure. For Denmark, Finland and Sweden – among the world’s most digitalised and research-intensive economies – the stakes are high. Scenario analysis suggests that if the PLD were to encourage mass litigation and if this reached even a fraction of United States levels, the combined market value of their most innovative firms could fall by between €2 billion and €7 billion, equivalent to several years of public R&D spending. Technology-intensive sectors such as ICT and life sciences would bear the brunt of this impact, with potential knock-on effects for GDP and employment across the Nordic economies. The new PLD continues a broader EU trend of favouring private regulatory enforcement through the courts, rather than the traditional model of public oversight that has been the preferred model in Europe, and especially in the Nordics. This shift marks a departure from the Nordic region’s tried and tested approach where public regulators and other public authorities, including Ombudsmen, resolve disputes efficiently and at low cost. If transposed without regard for this well-established model, the PLD could erode not only innovation-driven growth in the Nordic countries but also the foundations of their existing consumer protection systems. Nordic policymakers should shape the PLD to fit their own systems, ensuring that national implementation preserves the strengths of their regulatory traditions. This study outlines the following recommendations: Transpose the PLD with caution. Nordic governments should implement the Directive in line with existing procedural frameworks and avoid a simple copy-and-paste of the directive. Seek Interpretive Guidance from the European Commission. PLD’s regulatory complexity runs contrary to the EU’s goals of simplification and economic competitiveness. Nordic governments should lead a joint initiative to request formal interpretive guidance from the Commission. Such guidance is essential to ensure a consistent and harmonised application of the Directive across the Single Market, clarify ambiguous terms, prevent unintended consequences, and protect against litigation abuses. Clarify the application of new legal principles. Legislators should specify how and when courts are to apply the new presumptions brought in by PLD and establish clear and rigorous standards for disclosure of evidence based on existing rules. The presumptions introduced in the PLD should be integrated carefully within the laws in the Nordic countries and interpreted narrowly, in keeping with the EU’s intent that there should be no reversal of the burden of proof. Clarify liability boundaries for digital and AI technologies. National guidance and sector-specific standards should define how liability applies to software, AI systems, and connected devices, especially where responsibility is shared across supply chains or evolves through updates. Preserve proportionality and retain the development-risk defence. The development risk clause should be maintained to prevent liability for defects that could not have been detected with existing scientific and technical knowledge at the time of production. Ensure coherence across the regulatory landscape. The PLD’s implementation should align with existing frameworks on data protection, cybersecurity, and digital services to avoid duplication, legal uncertainty, and conflicting enforcement. Maintain the Ombudsman-centred model for consumer redress. The Nordic tradition of public oversight and accessible dispute resolution should remain the primary mechanism for enforcement, with litigation reserved only for systemic failures. This approach has long safeguarded both consumer trust and innovation at a fraction of the cost of mass litigation seen in other countries.
- Topic:
- European Union, Artificial Intelligence, Digital Technologies, and Product Liability Directive
- Political Geography:
- Europe, Finland, Denmark, and Sweden