New Deal for Consumers and the Consumer Green Paper

The "New Deal for Consumers" was published on the 11th April and is essentially a proposal put forward to the European Parliament to modernise consumer protection rules across the EU and address the challenges of an evolving marketplace. This follows an evaluation of the Consumer Rights Directive which concluded that current EU rules provide a high level of protection for consumers, but must be better applied and enforced. It also included a report on collective redress which concluded that the current mechanism for individual redress are not sufficient in situations where a large proportion of EU consumers are affected.

The proposal requires changes to a number of directives, including those on unfair terms in consumer contracts, price indications, unfair commercial practices, consumer rights and the replacement of the directive on injunctions for the protection of consumers.

The key changes include:

  • Individual remedies for consumers harmed by an unfair commercial practice will be introduced.
  • Collective redress will be available in situations where there is mass consumer harm. The Injunctions Directive will be replaced, allowing non-profit making bodies such as consumer organisations to seek to claim redress in collective representative actions.
  • The Commission also seeks to apply common criteria for deciding financial penalties for breaches of consumer law as these can vary significantly across member states. It is argued they are not sufficient to act as a deterrent, so we could see larger financial penalties imposed. Where a trader breaches the rules across several member states, authorities will be able to impose fines of at least 4% of a business's turnover.
  • Online marketplaces will have to be more transparent so that the identity of sellers is clearer, and consumers know who they are contracting with and what rights they have if things go wrong. They will also have to clearly indicate where listings appear in search results based on payments received from traders, as opposed to "natural" search results and provide information about parameters used to rank listings.
  • The requirements for a 14 day cancellation period will be extended to cover free digital services such as cloud storage, social media and email accounts. This is because consumers are exchanging their personal data which then has an economic value and therefore, is not "free". Providers will have to supply pre-contractual information including cancellation rights to consumers.
  • Removing some of the burdens on businesses will mean that they have more flexibility to choose how they communicate with consumers and can utilise new communication methods such as web forms or chats, providing that the consumer can access and keep track of the communication.
  • Currently consumers buying goods or services online, over the phone or by another "distance" means away from business premises, have a right to cancel. The EC proposes to remove this right where the consumer has used the goods, rather than just trying out as they would be able to in a traditional store, which will reduce the time and cost implication for businesses dealing with returns.
  • Concerns have been raised about "dual quality" of consumer goods, this relates to food products being marketed across member states in the same branding and packaging, but where the composition is different for each country. The Commission intends to undertake further work in this area and to include specific reference to this practice being unfair in the Unfair Commercial Practices Directive.
  • Improving enforcement mechanisms and capability across the EU and improving cooperation between member states and also partners outside of the EU is also covered in the New Deal, and is seen as key to tackling unfair practices online and ensuring the safety of consumer products.

Although, the UK will soon be exiting the EU, the Department for Business Energy and Industrial Strategy also published its Consumer Green Paper this same week. This is a consultation covering some of the same issues as the EU New Deal for Consumers, indicating that consumer protection policies will still be closely aligned with the EU. The areas covered by the Green Paper are:

  • Providing consumers with better deals and a better service in the utilities markets
  • Helping consumers benefit from their data and remain protected when they buy and sell online
  • Improving the system of Alternative Dispute Resolution (ADR)
  • Supporting local and national enforcers to work together to protect consumers

It also proposes to give powers to the civil courts to impose financial penalties for breaches of consumer law of up to 10% of a business's worldwide turnover.

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