The European Commission has announced a “New Deal for Consumers” – aimed at strengthening consumer rights and authorities’ enforcement powers across the EU. The European Commission intends it to deliver a market “that benefits consumers and businesses”. Some provisions, however, are raising concerns for industry.
The New Deal proposals include the following.
Collective redress: a new right in all EU countries for ‘qualified entities’ to bring representative actions against businesses on behalf of groups of consumers for remedies including compensation, repair or replacement. Member states will decide whether such collective actions are opt-in or opt-out. ‘Qualified entities’ will include consumer organisations that are non-profit and fulfil eligibility criteria monitored by public authorities – but not law firms.
Qualified entities can seek injunction orders to stop a business practice and/or establish a breach of consumer law. If there is already a final court or authority decision, this will be irrefutable evidence of breach in actions brought in the same member state (and a rebuttable presumption elsewhere).
Businesses that breach consumer law will need to provide redress, or agree a settlement with the qualified entity, for consumers in the collective action. Recovery would be for actual loss, not punitive damages. They will also need to inform other consumers about the breach and how to receive redress.
Strong sanctions: national authorities will be given powers to impose stronger penalties for violations of EU consumer law, including – where infringements affect several EU countries – a fine of up to 4% of annual turnover in each country. Member states will be free to levy higher fines if they wish. The Commission suggests this means: “consumer authorities will finally get teeth to punish the cheaters. It cannot be cheap to cheat.”
Transparency online: consumers buying products or services from online marketplaces will have to be told whether they are buying from a trader or an individual. When searching online, consumers will have to be informed when search results are paid for. Current rights to information and withdrawal for paid digital services will be extended to free digital services such as cloud storage, social media and email. A study on transparency in online platforms has been published alongside the New Deal.
Dual-quality practices: the Unfair Commercial Practices Directive will be updated to clarify that national authorities can address misleading practices involving the marketing of products as being identical across EU countries, when their composition or characteristics are different. This targets, in particular, food producers that change recipes for the same brands across the Union.
It’s clear that the drivers for the Commission’s proposals are as much political as they are legal. The 2015 ‘Dieselgate scandal’ is repeatedly cited by the Commission; ‘dual-quality’ provisions respond to Central and Eastern European politicians’ concerns that they are sent inferior products; and, at the press conference, Commissioner Jourová described how: “many people in Europe expect real changes and improvements. Sometimes they turn to the populist parties because they lose faith.… This is a perfect opportunity for European and national politicians to show that we can change things for the better.”
The Commission suggests that the New Deal is about “delivering a fairer Single Market that benefits consumers and businesses”, but with few improvements for industry, it may feel short-changed. Plans for collective redress and sanctions linked to annual turnover are likely to be particularly concerning for businesses and industry bodies such as Eurocommerce have already voiced objections. Some ‘unnecessary burdens’ will be lifted (for example, traders will no longer have to reimburse consumers before receiving returned goods), but the overall balance feels like it has shifted in consumers’ favour.