Amending, modernising and, above all, enforcing European consumer protection legislation so that the same rights are ensured whether purchases are made in shops or through online services throughout the EU, with penalties for companies which do not abide by the rules: that is the main objective pursued by the “New Deal for Consumers”, presented by the European Commission on Wednesday 11 April.
Having been long announced, it takes the form of a package containing a communication setting out the implications and the arrangements of the recast and two proposals for directives: an “omnibus” directive amending all relevant legislation, including the directive on consumer rights and those on unfair trading practices, and a revised directive on termination of contract and compensation (see EUROPE 11994 and 11948).
The New Deal was described by Justice and Consumers Commissioner Věra Jourová as a “historic recasting of the legislation”, as it will make it easier for consumers in the modern world and it will help citizens protect themselves against large-scale fraud and abuses committed by major companies, such as Volkswagen in the “dieselgate” scandal, for example. It will also improve consumer protection online, harmonise the penalties imposed on companies that infringe European law, ban dual standards in the quality of foodstuffs and other products sold under the same name in different regions (see EUROPE 11987 and 11980).
European-style collective redress. The flagship measure is in the possibility offered to consumers deliberately deceived by major companies to be able to mount, free of charge, a European-style action for collective redress, or “representative action”, through representation by qualified, not-for-profit entities, such as consumer associations and independent public bodies designated by the member states, either in dispute settlement bodies or, as a last resort, before the courts. In this latter case, it will be for the court to determine if there has been a breach of EU law and to establish the scale of the compensation (see EUROPE 11994).
In the dieselgate scandal, Volkswagen, in order to avoid compensating European consumers, consistently argued that no breach of consumer law had taken place. The prospect of court action would certainly have strengthened the hand of European consumers in negotiations to reach amicable agreement on compensation, at least, the Commission says.
“We are not looking to increase the volume of work for law firms but to bring greater fairness for consumers. And with heavier penalties linked to companies’ annual turnover, consumer protection authorities will at last have the means to punish cheats”, said Jourovà.
The procedure will not resemble the American class action system, precisely in order not to create a lucrative litigation industry. It will prohibit punitive damages payments, with compensation for the actual harm suffered. Qualified entities, designated by the member states, whether consumer associations or independent public bodies, will be required to meet exacting standards and will have to be fully financially transparent. The Commission proposes to bar financing by hedge funds. Thus, the new deal should ensure that European consumers obtain reparation while avoiding the risk of improper or unjustified claims. Member states will be free to choose between opt-in or opt-out systems for consumers seeking redress.
Penalties. National consumer protection authorities will have the power impose coordinated effective, proportionate and dissuasive penalties. For widespread infringements that affect consumers in several EU member states, the maximum fine available will be 4% of the trader’s annual turnover in each of the member states concerned. Member states will, however, be free to introduce higher maximum fines.
“In Europe, only two competent authorities imposed penalties on Volkswagen, totalling €5 million. In the United States, the sum was $25 billion”, Commissioner Jourová pointed out.
No more dual standards in product quality. There are already guidelines in the directive on unfair trading practices. The Commission proposes to clarify them. To this end, it proposes that a specific provision (Article 6) be included in the directive, banning this practice if there is no sound reason for it and making provision for the use by the competent authorities of a common testing methodology being developed by the Joint Research Centre (JRC). This will be ready next month. Once this methodology is ready, the JRC will turn its attention to detergents, Jourovà said. The wording is such that the text will be able to be used for foodstuffs and all other products. (Original version in French by Aminata Niang)