Throughout 2018 the European Commission has been developing its ‘New Deal for Consumers’ agenda, which was formally launched in April 2018. According to First Vice-President Timmermans the ‘New Deal’ is a proposal for a “fairer Single Market that benefits consumers and businesses”.
The Commission recognises that, despite the EU being a global leader in consumer protection legislation, the rules are often hard to enforce and wronged consumers rarely benefited. The diesel emissions scandal is viewed as an example of these failings in practice. The aim is to impose larger sanctions on miscreant companies, whilst lifting the administrative burden from the well behaved.
A key part of the ‘New Deal’ is a proposed Directive covering collective redress for consumers. The proposed Directive would allow State-nominated non-profit entities (such as regulators and consumer associations) to seek financial redress for harms caused by an illegal commercial practice. The Directive would, for example, enable consumers to pursue car manufacturers for misleading advertising as to a car’s emissions. Such actions would not previously have been possible. The Commission describes it as “Representative action, the European way”, and is keen make a distinction to US-style class actions; for example imposing strict eligibility criteria on those able to bring such actions, including the exclusion of law firms. The aim is to ensure appropriate compensation for consumers whilst avoiding unnecessary litigation.
Recently the European Parliament’s Committee on the Internal Market and Consumer Protection (the CIMCP) has scrutinised this new proposed legislation and this month produced an Opinion. The Parliament is generally supportive of the Commission’s proposal, agreeing with the “underlying principles” and feeling that it “strikes the right balance of facilitating representative actions, without opening the doors to abusive practices.” However some amendments have been proposed, most of which strengthen the Directive further in favour of consumers. Some of these key changes are highlighted below:
- Recital 22: The Commission originally envisaged that measures aimed at eliminating continuing effects of infringement should commence after only after an infringement was proven on the basis of a final decision. However the CIMCP has proposed that actions for those measures can be launched in parallel with actions seeking injunction orders and decided upon simultaneously.
- Article 1(2): This has been clarified to state that the Directive aims at minimum harmonisation and that Member States are free to adopt or maintain legislation that is more favourable to consumers.
- Article 6(2): The Commission proposed that in cases where quantification would be complex, a court can issue a declaratory decision regarding the liability of a trader towards consumers rather than a redress order, an unsatisfactory outcome for the consumer. The CIMPC has thus chosen to strengthen this provision, by ensuring that such a declaration can only be granted in exceptional circumstances, where the quantification of redress is extremely complex.
- Article 6(3): The CIMPC has added text to confirm that even in cases where an individual consumer has suffered a small amount of loss, individual redress must still be given. The Commission had originally proposed that where a number of individual consumers had each suffered a small amount of loss it would be more effective to pool the compensation and direct it to a “public purpose”. This ability to redirect such small payments remains, provided the individual consumer has not sought their individual compensation.
- Annex I: This annex lists the legislative instruments the breach of which permits collective redress to be sought under this Directive. The CIMCP has chosen to include a far greater number of instruments in Annex I, considerably widening the scope of the directive to include, amongst others, electrical equipment, toys, lifts, pyrotechnics, chemicals, food, cosmetics, medical devices and medicines.
The Commission will now consider whether to incorporate these amendments, and the directive will then undergo scrutiny by the European Council. If all three bodies are in agreement the Directive will be adopted and published in the Official Journal. If agreement can’t be reached a game of legislative ping-pong will ensue between Parliament and Council.
The Directive, even if adopted in time, is highly unlikely to be implemented by the UK before Brexit in March 2019 as the current proposal allows 18 months for implementation by Member States. This means that implementation in the UK is dependent upon the outcome of the negotiations. The draft Withdrawal Agreement specifies that EU law shall apply to the UK during the transition period up to the end of 2020 so a successful negotiation could well see the Directive apply (should it be implemented in the EU during that time). However the European Union (Withdrawal) Act 2018, the legislation by which the UK Government is transposing all EU law into domestic law, only applies to legislation in force on March 29 2019. This leaves the question of what ultimately happens to EU legislation introduced during the transition period an open issue. Under a ‘no deal’ scenario the outcome is clearer; for the proposed Directive to have force in the UK, there will have to be an active choice by the Government to implement similar legislation. However the UK already has a limited number of possible routes for collective redress under the Consumer Rights Act 2015 and the introduction of Group Litigation Orders into the Civil Procedure Rules following the Woolf reforms. Consumers have also sought to use the new powers granted by the Consumer Rights Act in the Competition Appeal Tribunal, but have thus far been unsuccessful.