Last April, the Commission published its so-called ‘collective redress’ proposal, a text aiming to empower consumers to obtain compensation in case of mass harm situations. The proposed text is complex and has thus far been shaped by strong political intentions, a cocktail which promises intense discussions in the Parliament and Council.
Let’s set the scene first. The political dynamite was triggered by the Diesel Gate case, where Commissioner Jourova acknowledged a weakness in the consumer protection rules when dealing with mass harm situations. Confronted by a lack of access for consumers to compensation in mass harm situations, the Commissioner for Justice, Gender Equality and Consumers promised herself that she would not quit her job before addressing this issue. Glancing at the United States and its class action model, assessing the effectiveness of Consumer Protection rules and also the limited national implementation of the Commission’s Recommendation on collective redress, the Commission collected its ingredients to mix a potent legislative proposal.
Under this proposal, specific bodies representing consumers’ interest, called ‘qualified entities’, would now be allowed to claim for compensation on behalf of consumers together with an injunction order. How would this work? In simple words, qualified entities would have to first seek an injunction order establishing the trader’s illegal practice and could then seek for a redress order forcing the trader to compensate consumers for the damages they suffered. This could either be done by the judge or through an out-of-court settlement reached between the trader and the qualified entity. To be valid, this settlement would nonetheless have to be approved by the judge. Concerning the fines, the proposal doesn’t provide any harmonization and leaves Member States free to determine the level of the penalty. We can suspect therefore that consumers will go to the Member States with higher fines (forum-shopping).
The legislative proposal is complex and the text received lukewarm reactions from a variety of concerned stakeholders. Businesses are concerned that the collective redress mechanism might introduce a much-feared US-class action model into the EU law; resulting in frivolous cases and abusive litigation, thus jeopardizing companies’ activities. Despite Jourova’s statements that safeguards have been inserted in the text, the private sector continues to stress the absolute necessity to avoid the creation of a US-class action system in Europe. On their side, consumer associations feel that the Commission’s text doesn’t go far enough and continue to call for swifter collective redress procedures and avoiding a national fragmentation of the text by Member States’ implementation powers.
The proposal is now in the hands of the Parliament and the Council for examination. In the Parliament, the Committees on Legal Affairs (JURI) and the Internal Market and Consumer Protection (IMCO) will share the work on the proposal, requiring the centre-right Geoffroy Didier (EPP, FR) and far-left Dennis De Jong (GUE, NT) to create a somewhat unnatural political collaboration. In the Council, the upcoming Austrian Presidency will have the difficult task of steering Member States’ work towards a General Approach and it appears already that divisions among the Council’s members will not facilitate the achievement of this goal.
While the timing is tight to conclude the legislative process under this Commission, the political moment appears to be well-timed to talk about collective redress issues. With ongoing revelations about Diesel Gate, the Cambridge Analytica scandal affecting millions of consumers, and the search for ‘consumer wins’ before the upcoming European elections, the political context provides an excellent base for the proposal’s progress. This will inevitably overshadow the upcoming debates which promise to be complex, intense and stormy.
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July 13, 2023