The European Commission has unveiled its promised 'New Deal for Consumers', proposing new measures to increase transparency in online sales, extend consumer protection to 'free' services, allow consumer groups to launch collective lawsuits, and set minimum standards for both individual compensation and trader penalties for violating consumer rights. The proposal follows a review of EU consumer rights regulation last year and was prompted by recent EU-wide breaches such as 'Dieselgate'. It builds on the EC's work to date on extending consumer protections online, under the Digital Single Market project.
To further strengthen consumer rights online, the EC wants more transparency on online market places. Consumers should be clearly informed whether they are buying from a merchant or a private person, so they can claim their rights accordingly, and they also should be informed when searching online if a search result was paid for by a seller. In a follow-up to the investigation into Google, online marketplaces also would have to inform consumers about the main parameters determining the ranking of the results.
The EC also wants 'free' digital services to be subject to existing consumer protection rules, such as the right to cancel a contract within 14 days. While no payment is made for the service, consumers often pay indirectly by providing personal data to the provider. This typically would apply to cloud storage services, social media or email accounts, the EC said.
Non-profits to lead collective actions
To claim compensation in the event of a consumer rights violation, the EC proposed introducing an EU-wide form of collective legal action. Similar to the system used in countries like Belgium, this would allow non-profit groups to represent large groups of affected consumers in a legal case against the offending company in order to claim compensation. The EC said this type of system has advantages over the US class-action, as it avoids the high costs and speculative actions of law firms launching cases. A public authority would determine which groups are eligible to start such suits.
Furthermore, the 'New Deal' would ensure that consumers in all EU states have the right to claim individual remedies (e.g. financial compensation or termination of contract) when they are affected by unfair commercial practices, such as aggressive or misleading marketing. This protection currently varies greatly across the EU.
The attempt to clarify consumer rights to compensation was welcomed by EU consumer group Beuc, which unites national rights groups across Europe. However, it was more cautious on the collective action proposal, saying "it is only a first step". According to Beuc, the proposed procedure would require claimants to first get an injunction from a court determining a violation, before seeking a ruling on collective compensation. "This can take years and carries the risk that consumers lose evidence and interest in the case," the group said in a statement. Beuc also fears that EU states will be given too much discretion to decide which type of cases are fit for a collective action.
Fines of 4% of turnover
In addition to collective and individual legal action, the EC wants to strengthen the powers of national regulators enforcing consumer protection rules. It found that EU consumer authorities are not well equipped to sanction ‘mass harm situations' that affect a large number of consumers across the EU. The level of penalties differs widely depending on the country, and is often too low to have a deterrent effect, particularly on companies operating cross-border and on a large scale, the EC said. Under the proposal, national consumer authorities would have the power to impose a maximum fine of 4 percent of the trader's annual turnover in each affected EU country. Member states would be free to introduce higher maximum fines.
As a trade-off for businesses, the EC proposed lifting some of the obligations on companies in terms of the consumer's withdrawal right. For instance, consumers would no longer be allowed to return products that they have already used instead of merely trying them out, and traders would no longer have to reimburse the consumers before actually receiving the returned goods. The new rules would also introduce more flexibility in the way traders communicate with consumers, such as allowing web forms or chats instead of e-mail, provided the consumer can keep track of the communication with the trader.
In terms of legislation, the New Deal for Consumers would require two directives: one amending the Council Directive on unfair terms in consumer contracts, Directive on consumer protection in the indication of the prices of products offered to consumers, Directive concerning unfair business-to-consumer commercial practices and Directive on consumer rights; and one introducing the proposal for collective action and repealing the Injunctions Directive of 2009.
The directives must still be considered by the European Parliament and Council before taking effect. The Commission did not give a deadline for when it hopes to pass the legislation. It also published a Communication with an action plan to develop and strengthen coordinated enforcement actions among national authorities in the EU and with their counterparts abroad.
