Approved by the Council of Ministers on May 2nd 2013, the draft law on Consumer Protection aims to introduce in France -- and for the first time -- the possibility of class actions for consumers. The scope of this draft seems however quite limited compared to other existing European laws.
A ‘French class action’ …
Set out in Chapter 1 of the draft law, which introduces the new articles L. 423-1 to L. 423-18 to the Consumer Protection Code, the ‘French class action’ would be limited to repairing the material harm suffered by consumers placed in a similar position and having as common cause:
- (I) The failure of a professional to fulfill its legal or contractual obligations when selling goods or supplying services or
- (II) The violation by a professional of the antitrust rules prohibiting cartels and abuse of dominant positions.
The new group action would be closely related to the existing "joint actions" (l’action en représentation conjointe) provided for by article L.422-1 of the Consumer Protection Code, but attempts to correct weaknesses in the existing law by providing better protection to consumers.
However, for now, French class actions could only be brought by state authorized consumer associations. Because of that, the French class action cannot be considered to constitute a real ‘collective action’ allowing the victims to gather their individual damage claims in order to bring a single action to justice.
In line with this approach, the judge would play an important role in defining the consumer group towards whom a professional’s liability could be engaged, in assessing the harm caused to each consumer in the group and in specifying the types of advertisements needed to best inform consumers likely to belong to the group. He would also be in charge of setting deadlines and conditions for inclusion in the group.
The French approach follows an opt-in rationale, i.e. requiring formal adherence to the group by the consumer, enabling each to exercise his own right to decide whether to not to bring an action. As a result, the French law rejects any opt-out option (one of the main features of the traditional American class action, and also followed in certain European countries, as explained below), which would operate by including every potential injured party in the lawsuit, with such parties having to affirmatively opt-out if they do not wish to be included.
French class actions would be divided in two stages:
- judgment on the merits laying out the liability of the professional, defining the conditions according to which consumers would be entitled to ask for compensation and setting the amount or stipulating how the compensation will be calculated, as well as the conditions consumers must meet in order to obtain compensation.
- The compensation stage allowing consumers to obtain the compensation granted by the judgment, either directly from the professional or through the relevant consumer protection associations.
If the professional refuses to settle with the consumers regarding the level of compensation, such consumers could, via the consumer protection association acting as plaintiff, request that the judge who originally held the professional liable also determine the level of compensation for claims that have not yet been treated.
As far as competition law is concerned, the French class action would supplement any sanctions imposed on companies by the competition authorities (and, where relevant, confirmed by relevant court rulings). As a follow on action, its admissibility would be conditioned on the existence of a definitive judgment not subject to further appeal. Thus, and subject to applicable statutes of limitations, the class action could be started within 5 years from such a ruling. Specifically empowered district courts would be in charge of ruling on class actions; at this point it is unclear whether such courts will be specialized in competition law (as per article L.420-7 of the Commerce Code).
… In a more challenging European background
Starting with the Green Book in 2005, followed by the White Book in 2008 and by public consultations in 2011, the European Commission’s work on legal proceedings in order to obtain damages after the violation of European competition law should be implemented in the proposed directive announced by the 2012 Commission’s work plan.
The main objective is to grant victims of European competition law violations an effective damages claim before national courts while at the same time safeguarding the major role of the prosecution via appropriate protection for leniency programs. The aim is to help victims of anticompetitive conduct ascertain their right to obtain compensation for harm they have suffered (for instance, excessive pricing), as stated by the EU’s Court of Justice in 2001 and 2006 in the Courage (C-453/99) and Manfredi (C-295-298/04) cases.
Regarding collective actions, the Commission has broadened their scope and they can now also be brought for any violation of the EU law (they were previously only authorized for competition law violations). Therefore, the draft proposal that will be presented by the Commission will likely offer to make collective actions available for every type of offense, while allowing member states some freedom to choose the terms by which they will implement it. The Commission’s proposal should also focus on consumer and SME protection.
In addition to its proposal for a broadened class action scope, the Commission, along with the European Parliament in two resolutions of February 2nd 2012, should use a harmonization instrument to set out several basic principles such as the right to an effective remedy, the right of victims to be informed, as well as the role of representative bodies. This instrument should also promote consensual collective resolution of conflicts as an alternative to traditional conflict resolution and highlight the need to ensure the availability of the proper funding mechanisms for citizens and SMEs.
The main goal of the Commission is to strengthen the ‘decentralized control’ of the EU law application by promoting private action as a support for the public bodies in charge of compliance with EU law. However the Commission as well as the member states and the Parliament still want to avoid the risk of misuse or excess use in order to prevent the abuses noticed in the American class action system.
…. Coupled with the initiatives of other member states
While the French possibility of a class action is being considered, several European states have allowed class actions or similar actions for years, most often with a relatively broad scope. Indeed, if in most cases qualified entities such as consumer protection associations, professional organizations or public bodies (Ombudsman in Sweden and in Denmark), have the right to introduce collective actions, class actions can also be introduced by a consumer or a company in the name of a group of victims, such as in Portugal, Denmark, Netherlands or UK.
While the current trend favors opt-in mechanisms when creating consumer groups, States that have been experiencing class actions for a longer period seem to be switching from the opt-in to the opt-out option, as shown by the pending action reform in the United Kingdom. This reform aims at making class actions more attractive to British victims and should reinforce the role of the Competition Appeals Tribunal, which will be in charge of deciding if the class action should be introduced on an opt-in or an opt-out basis and will offer a collective mediation mechanism based on the opt-out option, very similar to the one existing in Netherlands since 2005.
It is however not clear whether the future French law will be able to restrict the scope of class actions to a limited frame. A current trend is for plaintiffs to introduce an action as victims of anticompetitive practices before other member states’ jurisdiction (UK, Netherlands, and Germany), against the local subsidiaries of the company prosecuted or already punished, thereby making it easier for plaintiffs to obtain damages and of a larger amount.