knowledge | 24 April 2018 |
Class Actions for EU Consumers – but not US-style
Following the Dieselgate controversy, the European Commission has announced draft legislation to make it easier for groups of consumers across the Union to pursue businesses for breach of consumer rights. The Commission is keen to avoid lawyer led, US-style class actions however, so only approved not-for-profit bodies, such as consumer groups, will be able to avail of the proposed representative action procedure.
The procedure will work as follows. A consumer group, or several consumer groups acting together, will take a case in one or more Member States. They will have to show that they represent a group or groups of consumers affected by an alleged infringement, although it will not be necessary to identify all the consumers concerned.
If an action is successful, the remedies available will include injunctions, compensation, repair, replacement or simply a declaration that the consumers’ rights have been infringed. A declaration can be made where it is impractical to carry out individual assessment of individuals’ loss in the action. To help consumers across the Union, a final decision in one Member State will be presumed to be correct in an equivalent action in another Member State concerning the same facts and law.
A proposed settlement of a representative action will be subject to court or other official approval, to ensure that the deal does not short-change consumers. The courts or other authorities will also be able to direct infringing business to inform all affected consumers (not just those in the representative action) of the relevant finding and the compensation available.
Court actions are expensive, so the proposed law will require Member States either to waive or reduce court and administrative fees, as well as to help finance any action taken under the proposed law. State support for these legal actions would be a remarkable development in Ireland, where there is almost no state civil legal aid at present.
These proposals, if enacted and faithfully implemented by the Member States, may succeed if consumer groups are well organised and determined. Otherwise, conventional “test case” litigation, often promoted and led by lawyers, may continue to be the principal means of pressing businesses to compensate large groups of similarly affected consumers.
The proposals also strengthen EU consumer laws in other respects:
Larger penalties for widespread cross-border infringements – The proposed law will allow national authorities to impose greater penalties for breaches of consumer law. Businesses will face fines of up to 4% of turnover for serious infringements.
Increased protection for consumers of free digital services - The proposal will extend the application of the Consumer Rights Directive to digital services for which consumers do not pay money but provide personal data, such as cloud storage, social media and e-mail accounts. Consumers will have the same right to pre-contractual information and to cancel the contract within a 14-day right-of-withdrawal period.
More transparency for consumers buying from third-party sellers online – The proposed law will place greater obligations on online marketplaces to make it obvious to consumers where the seller is a third-party who is responsible for any consumer rights relating to the contract.
Better remedies for unfair commercial practices – The Unfair Commercial Practices Directive will be amended to allow consumers protection when they are harmed by unfair commercial practices such as unduly aggressive marketing.
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.