Collective redress

Fitness check of EU consumer law: New deal for consumers – Collective Redress

On 11 April 2018, the European Commission published its package on the “New Deal for Consumers”, a targeted revision of European consumer law. The revision follows the Fitness Check of consumer and marketing laws and the parallel evaluation of the Consumer Rights Directive which had the aim of identifying excessive regulatory burdens, overlaps and inconsistencies that may have appeared over time.

The New Deal for Consumers is composed of two proposals for Directives:

  • A proposal to amend the Directive on unfair terms in consumer contracts, the Directive on consumer protection in the indication of the prices of products offered to consumers, the Directive concerning unfair business-to-consumer commercial practices and the Directive on consumer rights. This proposal aims “to ensure better enforcement and to modernise EU consumer protection rules, in particular in light of digital developments”. Fines are introduced as a mandatory element of penalties for infringements of consumer law, the maximum fine for such infringements could be at least 4% of the trader's annual turnover in the Member State concerned.
  • A proposal on representative actions for the protection of the collective interests of consumers and repealing the Injunctions Directive. This proposal aims “to improve tools for stopping illegal practices and facilitating redress for consumers where many of them are victims of the same infringement of their rights, in a mass harm situation”. The scope of the proposal is extended to cover “new” areas, including health, environment and financial services.

An accompanying Communication includes an action plan to develop and strengthen coordinated enforcement actions among authorities and their international cooperation with authorities from key trading partners. A study on transparency in online platforms, also published on 11 April, supports the New Deal's proposals on online market places. It shows that greater online transparency helps consumers take decisions and increases their trust when buying online (see link: https://ec.europa.eu/info/publications/behavioural-study-transparency-online-platforms-2018_en).

BIPAR is monitoring actively the reading of the two proposals by the two EU co-legislators (Council and European Parliament).

Taking into account that the scope of the proposal on “representative actions” extends beyond traditional consumer legislation, BIPAR is particularly concerned about the impact that the new proposal may have on the insurance intermediaries and financial advisors, who in their majority are SMEs. In particular, the proposed directive will govern how consumers can collectively launch legal actions (for domestic and cross-border infringements) against traders through a consumer association or independent public authority, seeking for a redress order, such as obtaining compensation, price reduction or contract termination.

BIPAR believes that the Commission’s proposal to revise the Injunctions Directive by extending it to collective redress mechanisms will have limited benefits to consumers, while holding a harm potential for businesses, and SMEs in particular. BIPAR is of the view that IDD, MiFID II, PRIPS, IOPRS should be excluded from the scope. While acknowledging the Commission’s intention to prevent the misuse of representative actions, BIPAR fears that there is a real risk in introducing US-like class actions at EU level. BIPAR regrets that the mechanism as proposed by the Commission lacks robust procedural guarantees to prevent vexatious claims as it fails to include the full range of safeguards laid down in the 2013 Commission Recommendation on collective redress. Mainly, the abovementioned Recommendation advocates the opt-in principle (consumers’ mandate), whereas the current proposal includes an opt-out regime.

Our commitment to being accountable to customers for illegal practices under collective actions is indisputable, as this could foster fair competition. It should not be forgotten that the insurance and financial intermediation sector is a heavily regulated and highly supervised sector. BIPAR warns against introducing a new unnecessary set of rules that will in practice discourage companies to engage in commerce.

BIPAR is always willing to take part in constructive discussion for a balanced proposal.

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