The battle for EU consumer rights
The EU's new Consumer Rights Directive is designed to drag consumer rights legislation into the 21st Century by creating legal certainty for businesses and better protecting online shoppers in particular. But EU policymakers are currently at loggerheads over the scope of the draft law.
Draft proposals for a new Consumer Rights Directive, first tabled by the European Commission in October 2008, seek to merge the existing four EU consumer rights directives into one set of fully harmonised rules (EurActiv 08/10/08; EurActiv 10/10/08).
The proposed directive concerns business-to-consumer (B2C) sales contracts for goods and services and specifically covers issues such as pre-contractual information, delivery rules, 'cooling off' periods for distance sales, repairs, replacements and guarantees as well as new selling technologies.
The new law is designed to bring consumer rights into the 21st Century, in particular by taking account of online sales. But the matter is proving extremely divisive.
Lawmakers in Brussels are grappling with draft proposals by the European Commission to update EU consumer protection rules, which are currently spread across four separate directives and pre-date the digital revolution (see 'Background').
The new regulations are intended to grant better protection and stronger rights to European consumers and firms who buy and sell goods online in another EU member state.
Online sales among bones of contention
Rules governing online sales are among the most controversial issues in the negotiations.
Consumer groups have complained that without significant amendments the Consumer Rights Directive in its current form would represent a "missed opportunity to establish essential rights for online digital purchases" like music, video and software, arguing that such transactions are not adequately covered by current legislation, which predates the explosion in the popularity of online shopping.
"There is currently a gaping hole in the rights of consumers with regard to digital products," EU consumer group BEUC said, warning that despite the growing popularity of the digital market, "Europeans currently don't benefit from clear rules or appropriate means of redress if things go wrong".
BEUC fears that the Commission has shown itself too willing to accept controversial compromises in its desire to see the legislation adopted as soon as possible.
"The Commission is like a plane without a pilot. It just wants [the Consumer Rights Directive] off its agenda," the group's director-general, Ursula Pachl, told EurActiv in an interview.
Agreement on cancellation rules
Rules approved by the European Parliament in plenary on 24 March 2011 give consumers across the EU the same 14-day right to cancel a purchase when buying products from abroad and the goods must be delivered to the consumer within 30 days, otherwise the buyer will have the right to cancel the purchase.
MEPs also stipulated that the trader is responsible for any damage or loss of the product during delivery, and insisted that it must be made clear to consumers from whom they are buying, exactly what they are buying and what the total cost will be when shopping online.
Buyers will have to knowingly accept the total price before a sale is concluded.
After the vote, the European Parliament's rapporteur on the new law, German centre-right MEP Andreas Schwab (European People's Party), said online shopping across EU borders would soon be safer and easier for both companies and consumers alike.
"I am pleased to see that the Council is in line with the Parliament regarding key elements in the new legislation, such as standardised cancellation rules for orders placed by Internet or phone," said Schwab.
"Cancellation rules are a central point. Only if rules are transparent and common will consumers feel confident shopping across borders. This would strengthen all suppliers in the internal market and create new market opportunities, eventually bringing more choice, competition and dynamism in the market," Schwab argued.
In addition, new rules on information requirements, especially as regards the price, but also on identity and contact details of the trader, will bring about more security and transparency for consumers, the MEP explained.
"We are also stepping up the fight against defrauding consumers by dubious and unclear Internet 'offers'. By setting up a 'double click' solution, consumers will have to confirm their acceptance of any obligation to pay a price," he said.
However, it remains to be seen whether member states will back the approach called for by the EU assembly.
Parliament divided on level of harmonisation
For months, splits have been apparent in the European Parliament over the direction that EU consumer rights legislation is taking, and these came to the fore when the internal market and consumer affairs (IMCO) committee voted on the legislation on 1 February 2011.
Parliament rapporteur Schwab has endorsed the approach of the Council, which represents the EU's 27 member states.
Other MEPs, however, warned against drawing premature conclusions and stressed the need to agree a deal that is beneficial to both businesses and consumers alike.
Divisions in the committee first emerged as early as last June when the new directive was first discussed, with parliamentarians unable to agree on how far to go in harmonising consumer rights across EU countries.
Full harmonisation vs. mixed approach
Full harmonisation of consumer rights throughout the whole EU, as originally proposed by the European Commission, is seen as desirable from a business perspective because it creates a level-playing field for firms seeking to trade throughout Europe. But it obliges member states with more stringent rules in place to water down their legislation to comply with the EU-wide standard, meaning opponents of full harmonisation prefer a mixed approach.
BEUC, for its part, fears that by pushing for full harmonisation in a bid to create a level-playing field for European business at all costs, Schwab is running the risk of reducing consumer protection in some member states, where laws currently go further than the draft directive.
"With full harmonisation, it is very much a case of one size does not fit all. But it is not inevitable. The European Parliament has a second-to-last opportunity to rescue this directive and tailor it to the quickly evolving needs of EU consumers," BEUC said.
Instead, the group is advocating a "mixed harmonisation" approach whereby a minimum level of EU-wide harmonisation would be defined but member states would be allowed to exceed this if they wish, ensuring that countries with more robust protection would not be compelled to water down their laws to the EU level.
MEPs, governments in tug-of-war
In December 2010, the Belgian EU Presidency angered consumer groups by deleting the most contentious parts of the draft Consumer Rights Directive, including chapters on unfair contract terms and legal guarantees or consumers in the event that a trader breaches a contract, in order to secure a deal on the law before the end of its term at the EU helm.
Belgium's move was formally endorsed by governments on 24 January 2011.
The European Commission has backed the Council's approach, with Vice-President Viviane Reding describing it as "a very important step forward".
On 24 March 2011, meanwhile, the Parliament broadly backed the position of German MEP Schwab, who is in charge of steering the Consumer Rights Directive through the European Parliament.
Schwab compromised by supporting a mixed approach of minimum and maximum harmonisation to benefit small and medium-sized enterprises (SMEs) and consumers alike.
Indeed, the Parliament's internal market and consumer affairs committee - chaired by UK Conservative MEP Malcolm Harbour - wants to fully harmonise areas such as information requirements, delivery deadlines and a right of withdrawal for distance and off-premises sales to give SMEs legal certainty and ensure transparency for consumers, while leaving member states free to retain higher standards in other areas.
Schwab's compromises on the Consumer Rights Directive were backed by MEPs in plenary amid support "from all major groups". But governments are expected to win concessions on the level of harmonisation between national legislation demanded by MEPs.
IMCO committee members are now considering the draft legislation for a second time.
Policymakers have suggested that the final vote on the Consumer Rights Directive will take place during a plenary session of the European Parliament in May or July.
Any final text will have to be endorsed by both the Parliament and member states represented in the Council.
"The Consumer Rights Directive will bring tangible benefits to consumers and businesses," said European Commission Vice-President Viviane Reding, the EU's justice commissioner.
"The current rules are fragmented, preventing citizens and businesses from taking full advantage of our single market. The proposal will increase consumer protection by eliminating hidden charges and costs on the Internet and pre-ticked boxes on websites, such as for express delivery or travel insurance. Consumers will also benefit from an EU-wide cooling off period of 14 calendar days during which they can change their minds," Reding added.
"The Parliament's amendments and the Council's general approach are a good starting point for reaching a final agreement. The Parliament rapporteurs, Andreas Schwab and Diana Wallis, have done a great job in moving the draft law forward in a balanced manner. I am confident that by working together we can deliver this as soon as possible," she concluded.
French liberal MEP Robert Rochefort, the ALDE (Alliance of Liberals and Democrats for Europe) group's rapporteur on the file, said the new rules will make electronic commerce more secure. "Given that purchases via the Internet already cover 10% of commercial transactions in Europe and keep growing, it is time to harmonise the variety of national rules within the EU, to build trust in better regulation and to fuel our common market."
"By adopting the text, we will simplify the existing rules, encourage enterprises to develop their cross-border activities and adapt consumer protection rules to the rapid development of e-commerce," he said.
German MEP Jürgen Creutzmann, who is the ALDE coordinator on the IMCO committee, said: "ALDE nevertheless insists that some rectifications be made during the trialogue negotiations to further improve the text. The directive extends the obligation to provide a comprehensive list of pre-contractual information requirements to the consumer even to offline sales in shops. This is too burdensome for small entrepreneurs and should not be regulated in the context of this directive which mainly should address distance sales."
"The proposal to oblige all online traders to deliver all products to all member states and to respect local laws on consumer protection creates legal risks and could potentially ruin small traders," he added.
EU retailers' group EuroCommerce said the Parliament's vote was "disastrous" and would create more barriers to cross-border e-commerce.
After more than two years of discussion the European Parliament has not provided businesses with an environment to increase their online cross-border activities but instead created more obstacles for them, not only for cross-border trade, but even for businesses operating on domestic markets, EuroCommerce complained.
Businesses need help in order to be competitive in a globalised market, but what the Parliament has adopted today is not providing any solutions to the current problems. On the contrary it creates even more obstacles for businesses involved in distance and off-line transactions, in particular for SMEs, the organisation said.
"The mixed minimum and full harmonised approach as adopted today will not provide more confidence in the internal market: it will increase legal fragmentation, creating more market barriers and extra compliance costs, and so undermining business activities across Europe and especially e-business," said Xavier Durieu, secretary-general of EuroCommerce.
EuroCommerce urged the Council, the Commission and the Parliament to work in trialogue negotiations to deliver to both consumers and businesses a clearer and more predictable legal framework for EU consumer protection rules by creating a more balanced set of rules which is giving added value to consumers but also providing businesses real opportunities.
Further fragmentation of the internal market should be prevented, it warned.
"[March’s plenary] vote shows that members of the European Parliament have lost sight of one of the key objectives of the on the Consumer Rights Directive, which was to cut legal costs for businesses wishing to sell cross-border," said Arnaldo Abruzzini, secretary-general of Eurochambres.
The vote introduces a number of minimum harmonisation clauses that leave member states at liberty to keep or develop a myriad of additional requirements to the directive, complained Abruzzini, who claimed that according to an impact assessment run by the European Commission, it costs a business over 70,000 EUR to adapt to 27 fragmented legal frameworks.
"These are huge administrative and financial burdens, especially for small businesses," said Abruzzini.
Eurochambres now hopes that "the wiser approach taken by the Council will prevail during the negotiations" and that the Parliament's vote "will prove a mere hiccup in the process".
EMOTA, the European eCommerce and mail order trade association, is "deeply concerned" about a series of provisions the European Parliament agreed upon in March’s plenary session.
"The initial goal of the European Commission was to achieve a real business-to-consumer internal market, striking the right balance between a high level of consumer protection and the competitiveness of enterprises. And at the same time, in the Commission's version, cross-border distance sales were to be encouraged by reducing legal fragmentation within the European Union via full harmonisation," EMOTA said in a statement.
"The text as it stands after the Parliament vote is certainly not the right way of achieving the valuable goals of the Commission. It rather implies that distance sellers should become lenders of clothes, cell phones and other products for free! This is not acceptable," said Susanne Czech, EMOTA secretary-general.
At a moment when, thanks to the Internet, the distance trading sector is one of the very few European business sectors with a strong growth rate, EMOTA considers that the European Parliament and the European Council should make all necessary efforts towards encouraging further growth, access to choice, competition and high quality in the single market, instead of making this business model unattractive to companies.
"Should the text become law in its present form, costs for both consumers and businesses will increase, legal certainty will not improve, and the competitiveness of the sector will be at risk," claimed Czech.
EMOTA called on member states, the Parliament and the Commission to refocus the law towards its initial goals during the upcoming negotiations.
European business organisations urged the European Parliament plenary to preserve full harmonisation of consumer rights across the EU, warning that changes to the draft introduced by the Parliament's IMCO and legal affairs committee risked jeopardising the Commission's original intentions.
In a joint statement, BusinessEurope (which represents Europe's biggest companies), Eurochambres (representing chambers of commerce) and UEAPME (representing SMEs) called on MEPs to focus efforts on full harmonisation and refrain from adopting any minimum harmonisation provisions.
"Full harmonisation, as proposed by the Commission, is the most effective way to address the legal uncertainty that currently prevails in relation to cross-border business-consumer transactions," the statement read.
The three organisations also backed the deletion of chapters four (sales contracts and remedies) and five (unfair contractual terms) from the directive, as suggested by the Council, since these chapters now contradict the initial purpose of reducing legal fragmentation in the internal market.
Moreover, they rejected the addition of information requirements for on-premises contracts and called for the exclusion of solicited visits for off-premises contracts from the scope of the text, which would create more burdens and costs for businesses and consumers than benefits.
BEUC, the European consumers' organisation, said the decision to refer the compromise package on the Consumer Rights Directive back to committee for negotiations with the Council presents an opportunity to resolve the issues in the current text which continue to be problematic and where improvements are dearly needed.
BEUC wants to see the section on unfair contract terms removed, arguing that as it stands it would significantly reduce consumer protection in many member states while not extending any benefit to business.
Furthermore, the proposed safeguards for 'Internet cost traps' (where consumers are caught by seemingly 'free of charge' offers on the Internet, but later are hit with unexpected costs) must be strengthened, the group said.
Current rules on off-premises contracts (for example doorstep sales or organised excursions) currently offer too many loopholes for business to escape from providing information and from observing the consumer’s right to withdraw from the contract, BEUC argued.
Monique Goyens, the group's director-general, commented: "If we want a Rights Directive which truly serves Europe, then the legislators in this final phase absolutely must put consumers where they belong - in the driving seat of the internal market. We trust EU legislators will now jointly endeavour to avoid any reduction of consumer rights at a national level, but instead to contribute to the legislation earning its name."
"We also urge the European Parliament to take a strong stance in the upcoming negotiations with the Council to maintain the positive aspects recently added to this Directive, which could in the end afford this legislation a real value added for consumers: e.g. a prohibition of unreasonably inflated fees for the use of payment means (e.g. with credit cards); the rules on digital products which would provide consumers with necessary clearer rights and information; and the new rules on basic information where consumers order goods in a shop," Goyens said.
"Although the directive could have some notable benefits for UK consumers, it could also erode some of the protections we currently enjoy," warned Peter Vicary-Smith, chief executive of UK consumer organisation Which?.
"There's a danger that UK regulators could end up fighting with one hand tied behind their back, with their options for protecting consumers limited by Brussels," the consumer chief said.
The software industry expressed disappointment with March’s plenary vote in the European Parliament, warning that it threatens to undermine consumer protection in the Digital Single Market.
The decision taken to apply protection intended for tangible goods to software and other digital services could have the unintended consequence of weakening consumer protections for digital services while increasing costs for consumers, the industry warned.
"We all agree that strong and effective protection for consumers in Europe is a must and the question is how we get there," said Francisco Mingorance, senior director of government affairs (Europe, Middle East and Africa) for the Business Software Alliance (BSA). "The vote […] is not a step in the right direction for consumers of digital services," he said.
The vote of the European Parliament incorporates under the same set of rules a software program and physical goods such as a toaster or a personal computer.
"For digital services like software, safeguards are needed that protect consumers given the unique ways in which digital services are acquired, delivered and used. The Consumer Rights Directive is not the appropriate instrument to address protection for digital services," said Mingorance.
The BSA also called on the European institutions to refocus in order to fully understand the issues faced by consumers with regards to digital services and, if necessary, craft appropriate and effective measures for consumer protection legislation.
- 8 Oct. 2008: EU tables proposals for a new Consumer Rights Directive.
- 15 April 2010: Commission gives up bid to secure full harmonisation of consumer rights in Europe.
- 25 May 2010: Spanish EU Presidency expresses preference for mixed harmonisation accompanied by basic rights.
- 3 June 2010: First three chapters of draft directive debated by Parliament’s internal market and consumer protection (IMCO) committee.
- 24 June 2010: Major divisions on draft directive emerge within IMCO committee.
- 10 Dec. 2010: Belgian EU Presidency deletes contentious parts, including chapters on unfair contract terms and legal guarantees for consumers in the event that a trader breaches a contract.
- 24 Jan. 2011: Member states formally endorse Belgium’s move.
- 1 Feb. 2011: IMCO committee backs updated directive but Socialists, Greens reject text.
- 24 March 2011: Parliament plenary approves updated version but postpones adoption of final position.
- 6-9 June 2011: Possible vote on final version of directive in Parliament plenary.