The French Law on Consumer Protection, Law n° 2014-344 (hereinafter, the “Hamon Law”) entered into force on 17 March 2014.
The final wording of the Hamon Law, which was initially introduced before the French National Assembly on 2 May 2013, was adopted by the French Senate and the French National Assembly on 12 and 13 February 2014 respectively. On Friday 13 March 2014, the Supreme Constitutional Court (the “Conseil Constitutionnel”) held that the Hamon Law was, broadly speaking, compatible with the Constitution.
Among the major changes, the Hamon Law introduces class actions for damages resulting from anti-competitive practices implemented by undertakings.
Chapter 1 (Articles 1 and 2) of the Hamon Law is the most significant as it introduces a form of class action into French law for the first time. However, this class action has certain distinguishable features compared to class actions that exist in other jurisdictions.
Ability to act and scope
A key feature of this class action is that only officially recognised national consumer protection associations may bring a class action. Officially recognised national consumer protection associations may attempt to seek damages for the individual harm suffered by consumers placed in a similar or identical situation, the common cause of which is a breach by one or several same professionals of their legal or contractual obligations in the context of a sale of goods or provision of services, or when the harm derives from a breach of competition law.
Furthermore, it ought to be highlighted that these class actions may only seek to obtain damages in respect of pecuniary losses resulting from material or financial damage suffered by the consumers (as opposed to moral harm).
Two types of procedures have been provided for: a standard one, and a simplified one.
In the standard procedure, the judge hands down one single decision, for which the consumer protection association must present a number of individual cases of consumers who have actually suffered harm as a result of an undertaking’s conduct.
In that decision, the judge rules on the undertaking’s liability, defines the group of consumers in relation to whom the professional is liable and draws up the criteria that consumers must meet in order to join the group of consumers in relation to whom the professional is liable (“opt-in” system). In that regard, consumers can still individually go to court in the event that they encounter difficulties relating to their request to be part of the group, for example, in the event of a refusal by the consumer association to consider a consumer’s application to join the group.
In the same ruling, the judge determines, for each consumer or category of consumer within the group, the harm that may be repaired along with the amount of damages to be awarded (or at the very least, a method for calculating them).
The decision also states the timeframe within which consumers may join the group (no less than two months and no more than six months), along with the means of doing so (for instance, whether consumers may approach the professional directly, or whether they should go through the consumer protection association instead).
Finally, the judge fixes the time frame within which the damages must be paid to the consumers.
With the simplified procedure, when the identity and the number of consumers having suffered harm are known and when those consumers have suffered the same loss, or loss of an identical value for a given service or over a given period of time or duration, the judge may order the professional to compensate the consumers directly and individually.
Regardless of the procedure, the Hamon Law has been drafted in such a way as to ensure that consumers will not have to bear the costs or fees owed in respect of an amicable or judicial recovery. Indeed, all reasonable costs of recovery or payment provided for by the French Code of Civil Enforcement Procedures for the implementation of the group action are to be borne by the relevant professional.
The Hamon Law includes certain provisions in relation to class actions when the professional is alleged to have breached rules on anti-competitive agreements or abuses of a dominant position.
In such circumstances, professionals (namely undertakings) may only be held liable in the context of a class action on the basis of a decision by a jurisdiction or competition authority of the EU or a EU Member State which can no longer be appealed as to the finding of a breach committed by the professional. If this condition is met, then the professional’s breach cannot be disputed.
However, a class action must be introduced within five years following the moment it becomes no longer possible to appeal the aforementioned decision.
As a result of the new legal provisions,
- no consumer is made to participate in legal proceedings without its consent (“opt-in”); and
- the professional retains the possibility to call upon all available means of defence throughout the proceedings, including passing-on defence, which entails a presumption that additional costs incurred by an initial victim have been passed on to their subsequent clients, thereby reducing the actual loss suffered by the initial victim, as this is the “normal and customary commercial practice”.
As such, the Supreme Constitutional Court concludes that the class action procedure is neither contrary to consumers’ personal freedom nor an obstacle to the right to a fair and just trial.
Reinforcing the DGCCRF’s Powers
Chapter 5 (Articles 76 to 133) of the Hamon Law intends to modernise the powers of the Directorate General for Competition Policy, Consumer Affairs and Fraud Control(the “DGCCRF” – competition authorities within the Ministry of Economy) and its agents as well as their ability to impose penalties. This applies in respect of both consumer protection and relationships between businesses.
In this context, the scope within which the DGCCRF is competent to take action is widened (to include, for instance, breaches of the general duty to inform consumers, issues pertaining to contracts entered into at fairs, the application of the rules applicable to credits or some anti-competitive practices with a very local impact, ...), the DGCCRF’s powers will be reinforced (so as to include, most crucially, the ability to withhold informing professionals of their true identity, thereby effectively allowing DGCCRF agents to adopt the “mystery shopper” technique).
In addition, the Hamon Law modifies the penalties the DGCCRF may impose. In that respect, the Hamon Law makes two significant changes: from a general standpoint, it increases penalties and, notably, the level of fines that can be imposed, but it also transforms criminal penalties into administrative ones, thus lightening and speeding up procedures. For instance, the Hamon Law instigates a penalty of 3,000 euros for a natural person and 15,000 euros for a legal person for offences relating to pre-contractual information on commercial warranties, premium rate numbers, the inclusion of unfair terms in contracts etc. Furthermore, the Hamon Law transforms offences such as those pertaining, for instance, to the indication of prices or pre-contractual information for distance selling into administrative offences, and establishes a 15,000 euro fine for natural persons and 75,000 euros for legal persons in their respect.
During his 2012 presidential campaign, President Hollande committed himself to introducing new tools for economic regulation in order to rebalance power between businesses and consumers as well as between distributors and suppliers. This is the intended objective of the Hamon Law, which contains several other provisions (such as, for example, the ability to include a price revision clause to deal with the situation where the prices of raw materials fluctuate (whether upwards or downwards) in the context of supply contracts with a duration in excess of three months and relating to perishable agricultural products).
In addition, these new tools are supposed to stimulate economic activity, innovation and competition. It is hoped that, particularly given the economic climate, the Law on Consumer Protection will restore consumers’ confidence.
Moreover, the provisions on class action are in line with the European Commission’s adoption of a proposed Directive on damages actions for breaches of EU Competition law, aimed at further encouraging the use of private enforcement.
Time only will tell whether, in practice, the Hamon Law will be a success.