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EU: New Deal for Consumers - A Proposal to Strengthen Collective Redress

EU: New Deal for Consumers - A Proposal to Strengthen Collective Redress

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The European Commission has just published its comprehensive proposal for the so-called "New Deal for Consumers", which aims to strengthen EU consumer rights and enforcement. This includes the proposal for a new Directive enabling certain qualified entities to seek redress on behalf of consumers who have been harmed by an unlawful commercial practice.

Collective redress – quo vadis?

A few days ago, the discussion about collective redress mechanisms on a national and European level gained momentum as the European Commission proposed a Directive (the "Proposal") that will enable consumers to receive damages for infringements of a variety of Union consumer protection laws, such as data protection, financial services, travel and tourism, energy, telecommunications and environment.

Proposal for further collective redress mechanisms

Until now, Member States had only to ensure under EU law that certain qualified entities, e.g. consumer protection associations, can apply for an injunction to stop or prohibit a trader's practice that infringes EU consumer protection law (Directive 2009/22/EC).

The Proposal still does this, but its primary aim is to implement mechanisms that make it easier for consumers to claim damages. National courts or administrative authorities will be able to issue a redress order that obliges the trader infringing Union law to provide, among other things, monetary compensation, repair, replacement, price reduction, contract termination or reimbursement of the price paid.

Alternatively, instead of a redress order, a declaratory decision on the trader's liability towards consumers harmed by an infringement may be issued, provided that (i) consumers are not identifiable and have not suffered comparable harm in relation to a period of time or a purchase (e.g. long-term consumer contracts), and (ii) it is not a so-called "low-value case" where the loss suffered was so small that reasserting claims based on the declaratory decision would be disproportionate. A final declaratory decision irrefutably establishes the trader's liability towards the harmed consumers in the same Member State.

Finally, a qualified entity and the alleged author of the infringement will be able to request a court or administrative authority to approve a collective settlement reached before a representative action has been initiated. The court or administrative authority must assess the legality and fairness of the settlement, mainly by considering the rights and interests of the consumers concerned. Individual consumers are free to either accept or refuse to be bound by the settlement.

Essential procedural aspects

Collective representative actions will be initiated by qualified national entities designated, at their request, by the Member States in advance and placed in a publicly available list, e.g. consumer protection associations. Qualified entities must have a non-profit character and have a legitimate interest in ensuring that the relevant Union laws are complied with.

For easier redress of qualified entities, the competent court or administrative authority will also have the right under certain circumstances to order that evidence which lies in the control of the trader must be presented in the proceedings (easement of proof). A similar, more comprehensive provision on the disclosure of evidence can be found in the Damages Directive 2014/104/EU, which the Member States should have already implemented.

The submission of a representative action (i.e. injunction, redress order or declaratory decision) suspends or interrupts the limitation periods applicable to any redress actions for the consumers concerned.

What's next?

The European Parliament and the Council will discuss the European Commission's Proposal. Although the Proposal sets forth quite a detailed legal framework for collective redress, the Proposal will likely undergo changes during the EU legislative process. The actual implementation of the Directive will finally be a matter of national law, taking into consideration national substantial and procedural law.

By Klara Kiehl, Counsel, Philipp Wetter, Associate, Schoenherr 

Hungary Knowledge Partner

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