BEUC: EU ‘lacks clear vision’ on consumer rights

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Brussels lacks a "clear vision or strategy" on consumer rights legislation, Ursula Pachl, deputy director-general of European consumer group BEUC, told EURACTIV in an interview. 

Ursula Pachl is deputy director-general of European consumer organisation BEUC.

She was speaking to EURACTIV's Andrew Williams.

To read a shortened version of this interview, please click here

What is your view of the developments on the Consumer Rights Directive following last December's Competitiveness Council? Do you have concerns regarding full harmonisation and the establishment of "common consumer rights" throughout the EU under the "general approach" pushed by the Belgian Presidency? I understand BEUC is unhappy.

Yes, that's quite true. We were quite surprised by the sudden move by the Belgian Presidency to delete basically half of the directive as proposed by the [European] Commission.

We know that they have been very ambitious about this directive and I think they have been doing a great job and working very hard on this, but I think at the end a bit more discussion and deliberation on how to move forward would probably have been a better idea, from our point of view – simply because it seems like there was a blocking situation in the Council in relation to the parts that ended up being deleted.

But on the other hand, it is also true that according to the co-decision procedure it is the Council that has the first say in that they have to give an opinion first, and only after that can the Council formally adopt an opinion, so I think it would have been a good idea to wait and see if Parliament could come up with something meaningful before taking that decision.

From our point of view, there was a real hurry by the Belgian Presidency and it's not really clear why this was necessary.

Indeed – why do you think the Belgian Presidency was in such a rush?

They always said that their objective was to come to a general approach agreement in December. I think that was a very ambitious schedule that they always had, and nobody was against that – the Presidency was trying to move forward after two years of negotiations – and I think they just wanted to have a deal done under their presidency.

But the only reason for this was that the Belgian Presidency is about to end – that's not necessarily a big enough reason to delete half of the directive. I think it was probably a difficult situation, because some member states just didn't want to risk any kind of decrease in consumer rights in their country, whereas others didn't want to see any kind of minimal harmonisation. It was a difficult situation.

What's your view of the approach that the Belgians decided to take, focusing on full harmonisation and establishing common consumer rights?

BEUC has always been in favour of what we call a mixed approach, the basis of which is minimum harmonisation as it is in the current consumer acquis, and this should be the default rule.

It should only be deviated from towards full harmonisation if that is possible, in the sense that there would be advantages to both businesses and consumers. There must be no decrease in consumer protection. Normally, that kind of system would apply to more technical questions, like how long withdrawal periods should be and the details in exercising that.

So there are issues which can be fully harmonised, from our point of view, but this should be combined with minimum harmonisation. That was also what the Competitiveness Council in May this year had discussed and the majority of member states had agreed on a mixed approach.

But finally what we have now seems to be a proposal or the remainder of a proposal based on full harmonisation, with some openings on certain issues where certain member states have problems.

Why do you think we have seen this change since May, then?

As I said, I think there is a very ambitious Presidency that really wants to go forward in having as much full harmonisation as possible. They saw that this could probably not be achieved within the time given to them, and they pulled the handbrake and decided to delete those parts where they thought full harmonisation did not seem to be possible.

We think that on those chapters, minimum harmonisation as a default rule with some parts fully harmonised could have been a meaningful result for both businesses and consumers, and could have led to further approximation of these laws – not full harmonisation, but still a step forward – and that would have been a meaningful concept.

Again we'll have to see now what the Parliament is able to do. At the moment it's not very clear how far they will be able to reach compromises.

Attention will turn to the European Parliament, then. Do you have any indication of what kind of approach the IMCO (internal market and consumer affairs) committee is going to take?

I think we have seen a lot of discussions already, and we have already seen the draft report by Mr. Schwab. All of this together I think indicates that they will probably go for what I would call a mixed approach, which is full harmonisation on parts similar to those that have been agreed by the Council, but we hope that there will still be a higher level of protection on certain delicate issues, and maybe some issues with minimum harmonisation.

Then, according to what Mr. Schwab proposed and also what he said in the committee, I think he will still go for quite a bit of minimum harmonisation in those chapters that have been deleted by the Council. Again, this really depends on the negotiations between the shadow rapporteurs and the rapporteur, which have already started and will continue throughout January.

Will it be easy for the IMCO committee to reach agreement, or are battle lines already emerging among MEPs, some of whom may favour business and others consumers?

That's very difficult to say. The big question now is ‘what will be the direction taken by the rapporteur in relation to what the Council has done?', because it is very likely that Mr Schwab might consider it a better approach to limit the directive to what the Council has done.

Obviously the Hungarian Presidency will work in that direction, and then it depends whether a meaningful compromise can be reached on those chapters. But again, it's complicated, because the legal affairs committee has exclusive competence on one of those parts, the part on unfair contract terms, and they have just postponed their vote.

So, it's at least two committees in the Parliament that have to decide on this. We'll just have to see.

Are you optimistic that the directive can be amended?

What we have seen so far is that on the checklist of things that have been deleted by the Council is unfair contract terms, which is a fundamental piece of legislation for consumer protection.

The proposals made by rapporteur Diana Wallis in the legal affairs committee are promising from a consumer point of view and would indeed improve consumer protection, so it depends now whether the Parliament manages to reach a compromise agreement, and if they maintain the whole proposal.

It will be very complicated on an institutional level to see how it will evolve further. The Council was always going to approve a general approach but of course that is not the final, formal decision by the Council, which can only be taken after the Parliament has given its opinion.      

If full harmonisation is not the answer in many areas, then what is the alternative? How else can member states with low levels of consumer protection be encouraged to act?

We have not yet completed our analysis of the Council text because we've only just received it, but there is basically nothing of real added value for consumers in this text. It aims to fully harmonise these two directives, which at the moment are minimum, and I fear that there may be decreases in one country or another. There is no added value.

So, what's the way forward? We're advocating a mixed harmonisation approach, whereby you do full harmonisation where possible, like for a 14-day right of withdrawal period – that's really something that should be the same everywhere in Europe and gives more clarity to business and consumers alike.

Then you have other issues like unfair contract terms, where full harmonisation doesn't really make sense but what an approximation would be useful, which means you can still harmonise and thereby equalise more the laws in the member states without precluding them from doing anything better themselves.

That's the scenario that we hope will be the guiding line for the EU institutions, but we'll have to see.

What else can be done? [European] Commission Vice-President [Viviane] Reding is very much pushing for an optional instrument – no decision has been taken on that – or at least a legal initiative on contract law. That is now very much seen by the Commission as a way out of this dilemma between full and minimum harmonisation.

I think we can now say that full harmonisation for the whole area of consumer contract law has been a failure, and the next idea is this optional instrument. There, I have to say we're very sceptical.

The optional instrument is very much linked to the Consumer Rights Directive in that it would cover exactly the same substance. It is indeed being pushed by the Commission now as the way forward in relation to contract law, given that full harmonisation is not possible for the whole field of contract law in relation to consumer contracts.

What's currently missing is a clear vision or strategy on how consumer legislation should evolve in the European Union. First there was the Consumer Rights Directive, which was proposed as fully harmonising everything. This then turned out not to be viable, so the Commission came out with the optional instrument. But they rarely make the link between these two initiatives.

We now see that the Commission has established an expert group which has already been tasked with drafting an optional instrument, which would basically cover everything that's in the Consumer Rights Directive. But we still haven't seen the results of the Consumer Rights Directive, so there is really a missing link.

There is no strategy behind it. We see the whole process of approximation of contract law as something that has to be done step-by-step, on a 10-15 year perspective. It seems the Commission wants to do it next year, and that is exaggerated.

Let's turn our attention to the new European Commission. Previous Consumer Affairs Commissioner Meglena Kuneva was seen as extremely active on consumer affairs, was often in the news and was even voted European of the Year. How would you assess the performance of the new Commission?

First of all, there is now more than one commissioner in charge of consumer legislation. It's not very positive that consumer policy is now even more scattered around between different commissioners.

It was of course a very positive situation to have one single commissioner responsible only for consumer protection, and we have seen that the work of Kuneva in principle has had a very good influence, except the proposal on the Consumer Rights Directive, which has unfortunately thrown a shadow over her term of office, from our point of view.

This dossier has now moved to [Commission] Vice-President [Viviane] Reding, and I think most people would agree that the Barroso II Commission has never really seen the proposal as something to be enthusiastic about. Right from the start they said they would very much listen to what the Parliament and the Council would do.

Right from the start, this proposal has been like a plane without a pilot. It has been going on like that for a while. Now it can be seen very easily: of course the Commission says it agrees with what the Council is doing, because it already has something else in the pipeline preferred by Ms. Reding: further harmonisation or de facto the optional instrument, which is still under consultation.

There is a consultation until the end of January about what options should be chosen by the Commission on further harmonisation of contract law, and one of the options is the optional instrument.

But already it very much seems that there will be an optional instrument, as it said as much in the Commission's communication on the digital agenda. So the credibility of this consultation is very much questionable.

The Consumer Rights Directive has never been particularly appreciated as a proposal and Reding has now inherited it. Right from the start she has been focusing her efforts on a new initiative: contract law and the optional instrument.

Do you expect that to be one of the top issues on the Commission's agenda in 2011?

Absolutely. It is in the work programme of the Commission and will be put forward in the fourth quarter of 2011. The Commission is really creating a lot of pressure and has said that the timeline for this issue is not negotiable, which is not very understandable not only from our point of view but also from that of other stakeholders, because we all sit together in a stakeholder group that should comment on the work of the expert group that is drafting an optional instrument.

None of us are particularly happy with the rhythm of the meetings or the work, which is going very, very quickly, taking into account that the consultation on this issue is not even closed yet and the Consumer Rights Directive is still before its first reading.

All of this should be taken into account before any decisions are taken and before any further work is done.

How about collective redress? It seems like Brussels is set for a huge fight on this in the coming year. What's your position here?

This is a very difficult issue, and it's another one where the Barroso II Commission has not shown what President Barroso promised in his political guidelines before starting his new term in office, which was to put the needs and expectations of citizens and consumers at the centre of the new Commission's policymaking.

I think that's an area where proof is very much lacking.

The whole postponement of the Commission bringing forward measures on collective redress is a typical indicator that there is a lot of lobbying from business going on.

We've already had at least three consultations on this issue and it's been around for 10 years. Evidence has been delivered many times that this would be a very meaningful tool for consumers, while on the other hand no business has suffered bankruptcy after being sued under the collective redress procedure.

Unfortunately the consultation that has been announced now for the end of the year will again delay a discussion which is really overdue.

Are you optimistic that the new consultation will bring anything new to the table?

Of course, we haven't seen the questions, which is the decisive issue. We can only repeat what we've been saying for years, which is that all the questions have already been looked at in detail and solutions are at hand.

As for the whole discussion about not introducing an American-style class action system – which we very much support, we don't want class action, we want a European-style group action and collective redress measure – solutions have been identified and are available on how to do that.

We think in principle there is now no longer any pretext not to go forward and provide a much-needed proposal on how to introduce that.

I must also say we are very worried about what we're hearing about consultations in terms of how the results will be measured by the Commission, because it seems that the Commission will measure quantity, and that every single individual voice or response will be counted equally to responses from representative bodies like BEUC.

I think there is a real governance problem there, and I've heard the same about the current consultation on European contract law, so I think there's a real issue now in terms of how does the Commission deal with consultation responses and whether they are really meeting their responsibility to weigh up responses in terms of quantity in relation to the representative-ness of the respondents.

If a collective redress system were ever introduced properly in Europe, where do you see the problems in using it? We're already seeing that there's maybe not much cross-border interaction between consumers on many issues. How easy would it be to set up collective redress between individual consumers in 27 different countries? Who exactly is going to organise it?

I think consumer organisations are obviously the bodies that should have a standing in these procedures, and that could do the work of coordinating, collecting and compiling the different claims. We're pre-destined to do such work.

It also has a lot to do with the development of the single market, and now that the Single Market Act has been relaunched: and rightly so. In Mario Monti's recommendation as well as in the excellent report by the European Parliament, collective redress is one of the tools that is currently missing, and this would help to complete the internal market and give consumers confidence that they can easily embark on cross-border transactions.

If there are any damages, they wouldn't face the problems they face now, namely that they are kind of blocked from taking action. This has been identified as an element of completing the single market, overcoming fatigue and inspiring confidence.

In the future single market that we're all working for and hoping to complete soon, there will, of course, be more cross-border sales.

The European Commission is always talking about trying to boost the volume of cross-border trade, most of which takes place online. But the actual percentage of cross-border trade is still tiny, and when buying Christmas presents online I was reminded of how annoying the obstacles are. For example, some websites don't let you buy a product with a credit card that is registered outside the country that the company is registered in, and others don't let you order from one country and post to another.  

That is indeed a very important point that you raise there. We think the Commission probably putting all its eggs in one basket. The point is that there is a low percentage of cross-border online sales, and there is more potential. The question is what the real obstacles are, and what the perceived obstacles are, and what can be done in terms of policy measures at the European level.

We think the Commission at the moment is focusing far too much on contract law as a potential barrier to cross-border trade, as well as the Consumer Rights Directive and now this European contract law initiative, the optional instrument, which from our point of view are not beneficial to consumers and won't change a lot.

Even the businesses concerned are not very enthusiastic about the optional instrument as something that would really change the situation, so the Commission is looking too much at harmonisation of contract law and is neglecting what is really important to consumers – the complaints handling and redress situation.

That's what consumers are really worried about: how do I get my money back in the event of a problem? How do I deal with a situation where I don't get something that I've bought delivered? These are very important points.

And then there are other very important issues, like payment systems. We don't have a harmonised situation in relation to credit cards, and we don't even have alternative means of payment on the Internet which would be better than credit cards, as they haven't been developed in a coherent or general way.

There are many other problems. Businesses have problems with different tax systems and there are fears of fraud, because you can't really control what happens in different member states.

We think there are a number of very important elements that are preventing e-commerce from growing as much as it probably could. The Commission always refers to a study it carried out last year, a mystery shopping study. I don't know if you've heard the figure: 61% of consumer attempts to buy something cross-border online are rejected.

The Commission always puts this into the context of lack of harmonisation of law. In the consultation on contract law, they pointed to the figure again. But if you read it in detail, it is only descriptive and doesn't allow you to draw any conclusions that legal fragmentation is the reason why so many [cross-border] offers are rejected.

It could very well be because of credit cards or logistics, because again the Commission always comes up with the examples of Malta or Cyprus, where only 50% of the goods online in other member states are available.

In Malta these goods are not available online. Why not? Because Malta is an island and it's much more difficult to get to. It has a small population, so it's a small market. The same goes for Cyprus.

The whole concept of how much legal fragmentation matters in terms of putting businesses off expanding their activities across borders seems to be rather overestimated.   

Do you think the biggest obstacles are more on the legal side, then? Is this what's stopping consumers? Or are they simply fundamentally reluctant to shop across borders? 

The basic problems are not related to differences in law. They are related to problems concerning complaints handling and redress. Language is also an inherent problem for consumers and is very difficult to address.

There are also worries related to data protection and of course credit cards not being accepted, not to mention digital content, like applications, games and music for mobile phones, where you have problems related to copyright.

Copyright legal systems are still dominated by the idea of territoriality, meaning you have the copyright in one country but not another, and there are some things that you simply can't buy in certain countries.

So there are many different reasons why consumers don't engage more in cross-border online commerce. We think that legal fragmentation as described by the Commission is only a small part of that.

Do you think the EU could do more to encourage price comparisons between different countries? Certain products, like high-end electronic items, are much cheaper in certain countries than others.

That should be an incentive for consumers to go online and check prices. Consumer organisations and their members certainly have an important role in looking into price comparisons that take into account the whole market that is available online.

The online market is one of the most fantastic things about the Internet. The Commission has already announced plans to look more deeply into price comparisons and better search tools to help consumers make price comparisons, which I think is a very good idea.

You've identified contract law and collective redress as your two biggest priorities for 2011. Does BEUC have any others?

Of course there are other areas, like food and product safety, but I can't really talk in detail about these yet. There is a lot going on in copyright and financial services too.

Next year will be a very, very important year for financial services, and I think [Internal Market] Commissioner [Michel] Barnier is doing quite a good job in increasing the level of consumer protection in financial services. 

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