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A New Deal for all Consumers?

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Yesterday, the European Commission published its “New Deal for Consumers” which aims to empower consumers through new EU-wide standards for collective redress if consumer rights have been violated.

 

Looking back at recent scandals there are plenty of headlines which make an overhaul of the current rules extremely timely.

The two that come to mind, and which inspired the Commission, are the “Dieselgate” emissions scandal, when consumers were clearly cheated yet most could not seek compensation, as well as EU consumers’ growing discontent with how low-cost airlines deal with compensation requests for flight delays and cancellations.

The Commission’s proposal for new rules applicable to the online marketplace and to online “free” services also comes against the backdrop of increasing public scrutiny of online platforms, to improve safety and transparency. The proposal to enable collective redress for data breaches clearly rides on a wave of public outrage.

The European Commission has also taken the opportunity to address the controversial issue of “dual quality” products, as consumers from several Central and Eastern European Member States feel that they are misled by businesses using lower quality ingredients than elsewhere for the same (mostly food) branded items. “In a Union of equals, there can be no second class consumers”, said Commission President Juncker anticipating the proposal last September.

But does the proposal live up to expectations and could it finally offer equal rights to consumers across the EU?

Harmonised collective redress mechanisms

The key – and most controversial – novelty is the proposal to strengthen the possibility for all EU citizens, regardless of national laws, to put an end to a fraudulent practice and to collectively receive compensation for the harm they suffered.

Despite EU efforts to encourage Member States to establish collective redress under national legislation, there are still nine Member States which do not allow consumers to collectively claim compensation in mass harm situations.  In most other Member States where such a mechanism does exist, restricted scope, high costs and lengthy procedures prevent consumers from exercising their rights fully.

To allay fears among businesses that the proposal could open the door to a US-style class action system, the European Commission proposes safeguards to prevent abusive collective litigation. Most importantly, only non-profit independent public bodies (e.g. consumer organisations) would be able to bring representative actions.

The proposal also provides flexibility for courts and national authorities to decide which type of cases are suitable for a collective redress procedure. EU consumer association BEUC has already expressed dissatisfaction on this point.

Better enforcement of consumer law

To do away with different treatment regarding consumer compensation depending on nationality, the proposal also strengthens and harmonises the penalties that national authorities can impose, with minimum fines of 4% of a company’s (including online platforms) turnover for “widespread infringements” of EU consumer law.

Under the new rules, a right to damages could be granted for breaches of personal data. The proposal would also require online marketplaces to be transparent about their rankings of products/services and about the identity of the service provider.

The proposal further introduces a right to individual remedies when consumers are harmed by unfair commercial practices, such as misleading (e.g. dual quality) and aggressive marketing.

Addressing ‘dual quality’

The proposal puts forward amendments to the EU Directive on Unfair Commercial Practices to deal specifically with the issue of dual quality, mostly but not exclusively linked to food products.

However, the language used is ambiguous and does not make clear how “dual quality” should be defined, leaving it to the discretion of national authorities how to define “significant” difference. It also states that a marketing practice is misleading if a product is “marketed as being identical” when in fact it is not. But does “marketed as being identical” imply a claim that the product is identical, or simply that it is marketed in the same way without the consumer being informed of “significant” differences?

Judging by the Commission’s statements, the intent seems to be the latter. This would mean that manufacturers would need to adapt their marketing if they sell products with non-identical composition under the same brand in more than one Member State. However, the proposal does clarify that national authorities should consider legitimate factors, such as the availability of raw materials, product reformulation, as well as consumer preferences, when assessing whether there is an infringement.

Members of the European Parliament across the political spectrum have already made clear that they intend to strengthen this provision, by classifying this commercial practice as inherently misleading, as opposed to on a case-by-case basis.

What’s next?

The proposals will now be transmitted to the Parliament and the Council for amendment. Timings will be tight as the procedure will need to be concluded before the end of the current legislature in May 2019.

Conscious of these time constraints, the Commission’s relatively targeted approach, trading full harmonisation of EU citizens’ rights for broader rules left for interpretation at national level, seems wise. Yet giving too much leeway to Member States to implement the new rules could undermine legal certainty for business and fail to bring equal rights for consumers.

Considering the highly political nature of the proposals, there is also risk of missing the deadline. This would be a missed opportunity for consumers, as well as the EU at large, at a time when it is trying to win back Europeans’ trust in the single market.