Last week’s announcement of a new draft Directive on representative consumer actions was a welcome recognition by EU policymakers that the current regime of consumer protection is falling short. By attempting to allow for greater private enforcement of consumer law across the EU, the European Commission is attempting to facilitate greater access to justice and making clear the extent to which recent consumer scandals have made the institution feel its citizens are insufficiently equipped in the face of corporate power.
The diesel cars debacle is a case in point but there are others. Once the VW scandal broke, consumers in some countries, notably the US, were able to bring collective actions against the carmaker for redress. The pressure of litigation and the existence of a robust means by which consumers could, en masse, enforce their rights, brought Volkswagen to the table and compensation was secured for US consumers. Unfortunately, the EU lags some way behind the US in arming consumers with the tools they need to protect their rights in a world of increasingly cross-border trade.
The case for collective redress for consumers and SMEs, not only in relation to breaches of consumer law, but in other spheres – such as competition law infringements and breaches of data protection legislation – is a strong one. In mass harm situations, hundreds, thousands or millions of consumers will have suffered loss and yet that loss may be at a level such that it is not viable or advisable for a consumer to fight their way through the courts (with all the associated costs) alone. There is, in this scenario, no effective way in which a harmed consumer can enforce their rights and their legal protections therefore serve no purpose whatsoever. Companies will not often choose to compensate consumers or their corporate customers voluntarily, unless there is a business case for them to do so, and so the consumer is left wronged but powerless to do anything about it.
The answer for the wronged consumer in this situation is a means by which they can join together with the many others who have also been affected by the corporate harm in a simple, cost-effective and efficient way to seek the redress they are due. Such a system need not contain some of the features of the US class action regime which many European policymakers have made it clear they wish to avoid – such as treble damages and a prevailing ‘culture of litigation’. These issues were canvassed fully in the UK prior to the passage of the Consumer Rights Act 2015, which introduced opt-out, collective actions for breaches of competition rules. This UK regime has its constraints (not least the irrational transitional provisions which have severely restricted the actions which can be brought, and the fact they are limited to breaches of competition law only) but as an exercise in balancing the need for consumers’ access to justice and greater private enforcement against the desire to steer clear of the some of the excesses of the US system, it is an example to be examined.
The case for collective redress at EU level is also of course one with some history now. The Commission’s Recommendation in 2013 that Member States adopt more effective procedures to deal with infringements of EU law impacting on consumers was precisely that, a ‘recommendation’ only. The Commission’s own report on the effectiveness of their Recommendation, published earlier this year, demonstrated not only that the impact of the Recommendation had been limited but also that the risk of infringements of EU law affecting the collective interests of consumers is firmly on the increase.
For all of these reasons, the Commission’s stated intentions for their draft proposal are of course very welcome. However, whilst the text of the proposal will require thorough review and scrutiny, by those both inside and outside of European institutions – and by consumer groups in particular, an initial review of the documents highlights a number of respects in which the Directive could be strengthened in consumers’ favour. Principally, the current proposal may be implemented in a manner which is too restrictive to be truly successful in achieving the Commission’s stated aim - both in terms of the actions which may be able to be brought and the types of claimant group that can bring them.
A good example is that redress actions for breaches of competition law, which is it very well-established can create mass harm situations, appear to be excluded from scope. Seemingly also excluded from potential redress are mass harm situations where consumers have suffered a ‘small’ amount of loss, although a definition as to what ‘small’ may constitute is absent. Actions may only be brought by ‘qualified entities’ which have to be designated as such by a Member State. And the precise circumstances in which an action may fall within the intended remit of the Directive are unclear – for example, compensation may be available to consumers in certain circumstances where consumers are identifiable. Much may turn on what ‘identifiable’ means - in many types of mass harm situations, the identity of affected consumers may not be known and the number not known precisely, but this ought not to stop consumers being awarded the redress they are due.
All this said, with careful amendment, the Directive can and should arm EU consumers with greater power with which to enforce and uphold their rights. That’s undoubtedly a good thing.