EU consumer law: New Deal for Consumers

Background

In April 2018, the European Commission published a targeted revision of European consumer law, composed of two proposals for Directives:

• A proposal to amend the Directive on Unfair Contract Terms, the Directive on consumer protection in the Price Indication of products offered to consumers, the Directive on Unfair business-to-consumer Commercial Practices and the Directive on Consumer Rights.
• A proposal on Representative Actions for the protection of the Collective Interests of consumers and repealing the Injunctions Directive 2009/22/EC. The proposal extends the scope of this Directive to cover infringements of financial and insurance services legislation, including the IDD, MiFID, PRIIPs, Solvency II, and GDPR.

New EU Consumer Protection Rules

The Directive amending the four existing EU Directives on the protection of consumer’s interests was published at the Official Journal of the EU on 27 November 2019 (Directive 2019/2161). Member States have 24 months to transpose the Directive into national law (28 November 2020. These measures shall apply from 28 May 2022. The main objective of this reform is to update consumer rights for the internet age by making the use of online marketplaces more transparent for consumers. The amended Price Indication Directive and the Directive on Consumer Rights still do not apply to contracts for financial services, including insurance contacts. The amended Unfair Commercial Practices Directive (UCPD) and the Unfair Contract Terms Directive apply to financial services insofar as there are no specific provisions in EU financial/insurance sector legislation regulating unfair commercial practices. Where such sector-specific provisions do exist, they will take precedence over the general UCP Directive.

Under the new rules, online marketplaces, comparison tools and search engines (e.g. Amazon, eBay, AirBnb, Skyscanner) will have to disclose to the end consumers who buy products/services online:

• The main parameters determining how offers resulting from a search query are ranked, including search results which contain “paid placements” or “paid inclusion”.
• From whom consumers are buying goods or services, i.e. trader, the online marketplace or private person.
• Information about whether and how the trader ensures that the published reviews of products/services originate from consumers who have purchased or used the product/service.

Fines are introduced as a mandatory element of penalties for infringements of national provisions transposing these Directives. Such infringements now include aggressive or misleading marketing or selling practices in the context of unsolicited visits to the consumer's home or excursions. The maximum fine for such infringements will be at least 4% of the trader's annual turnover in the Member State concerned.

It is important to clarify that this Directive governs the relationship between traders/online platforms and end consumers who buy products and services online via a platform or a comparison website. This Directive does NOT apply to the relationship between online platforms/marketplaces/search engines and traders who are using such platforms in their professional capacity to reach consumers. Transparency requirements with regard to the main parameters of ranking for traders-business users of online intermediation services are regulated by the Regulation on “promoting fairness and transparency for business users of online intermediation services” (see the article on digitalisation for more information). This Regulation applies, for example, to insurance/financial intermediaries when being providers of online platforms/corporate website offering (ancillary) insurance/financial services.

Representative Actions for the protection of collective interests of consumers

The Directive on “representative actions for the protection of the collective interests of consumers” in mass harm situations is still under examination by the EU co-legislators. The European Parliament has adopted its official position March 2019 and the Council of the EU has adopted its official position in November 2019. The European Parliamen, the Council and the Commission have started negotiations with a view to exploring the possibility of an agreement for the adoption of the Directive (trilogue stage).

The aim of the Directive on “representative actions” is to put in place an EU-wide enforcement system of Union law establishing obligations for the protection of consumers. This system will enable the consumers represented collectively by a qualified entity, e.g. consumer association, to bring actions against infringing traders (such as insurance intermediaries). Such actions will seek to stop or prevent illegal practices (injunction order) or to obtain compensation for the harm caused (redress order).

Key points of the Commission’s proposal and the EP (JURI) Report are:

• This Directive should cover a variety of areas, including financial and insurance services.
• Representative actions aimed at protecting the collective interests of consumers can only be brought by qualified entities (QE), such as consumer organisations and public bodies designated by Member States, which should meet specific eligibility criteria.
• The mandate of the consumers concerned is not required for the QEs to seek a court order establishing the existence of the infringement and stopping/prohibiting the illegal practice (injunction order).
• Member States have the possibility to decide whether or not the mandate of the consumers concerned is required before QEs seek a redress order (compensation, price reduction, contract termination, etc.).
• In relation to the scope, to make reference to specific articles of each legal act (IDD, MiFID, PEPP, etc) the objective of which is to protect consumer interests.
• To make a distinction between domestic and cross-border representative actions, depending on the Member State in which the plaintiff entity was designated as a QE.
• To have different qualification criteria for QEs based on whether a domestic or a cross-border representative action is launched.
• To adopt an opt-out principle in the case of injunction order; no consumer mandate will be required. In the case of redress order, it will be left to the discretion of the Member States to decide whether to apply an opt-out or an opt-in system (whether or not the explicit mandate of the consumer is required).

In its adopted position the Council proposes:

BIPAR has regularly contacted the EP Rapporteur and other MEPs on this issue.

BIPAR is concerned about the extension of scope of the Directive to cover financial services legislation. It believes that no analysis has been carried out to determine whether there is a need for collective mechanisms in the sector of financial services at EU Level. National mechanisms should first be properly assessed before any European mechanism is set up. Focus should also be on ADR which offers effective redress for consumers when harmed by a breach of law.

BIPAR is also of the view that the explicit mandate of the consumer concerned - the party that suffered loss or damage for which compensation is sought- is indispensable to the objective of creating a robust and balanced collective redress system. Having and being able to prove the explicit consent of the party represented in a legal action is a well-established and undisputed rule of basic procedural law.

- Published in June 2020 -