Parliament battles over consumer rights

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An updated version of the EU's Consumer Rights Directive was approved by the European Parliament's internal market committee yesterday (1 February). But socialist MEPs rejected the text and accused their centre-right colleagues of "selling off" the rights of European consumers, suggesting that further battles lie ahead before the legislation becomes law.  

Internal market (IMCO) committee members were voting on 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. 

Just before Christmas, 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 decision to remove controversial parts of the draft where it felt that full harmonisation of laws in all 27 member states could not be achieved was formally endorsed by governments on 24 January.

"In this vote the internal market committee has taken the position that full harmonisation is possible: however, only if consumer protection levels are taken seriously," said German MEP Andreas Schwab (European People's Party), the European Parliament's rapporteur on the directive.

Schwab was speaking after the IMCO committee had passed his draft text with 22 votes in favour and 16 against amid one abstention. 

The German MEP said the new law would help boost consumer confidence in the digital single market and allow SMEs to prosper.

Splits along party lines

But IMCO committee members have long been divided over the new directive and yesterday's vote, which saw MEPs sift through a series of amendments to Schwab's report, confirmed long-standing splits across party lines.

Full harmonisation 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.

The IMCO committee backed the position of rapporteur Schwab, who compromised by supporting a mixed approach of minimum and maximum harmonisation to benefit small and medium-sized enterprises (SMEs) and consumers alike.

The committee 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.

'Huge step back' for SMEs

But Socialist & Democrat group members voted en masse against the amended draft, which they felt did not go far enough to protect consumer rights. And even SME groups described yesterday's outcome as a "huge step back" that would place higher burdens on SMEs without clear benefits.

The Greens also voted against the final package, which they said risked reducing consumer rights in some EU countries, while the liberal ALDE group supported it.

Ahead of the vote, MEPs in the committee were split over the direction the directive should take, with some, including Schwab, who is in charge of steering the file through the Parliament, partly endorsing the approach taken by member states in the Council of Ministers.

But internal market committee chair and UK Conservative MEP Malcolm Harbour thought that "many members of the committee feel that this important directive would be better considered in two readings" given that "the deletion of significant elements by no means has full support amongst the groups in the committee".  

Indeed, speaking after the vote, Harbour said the final content was "likely to be significantly changed before it is voted in plenary".

"We will also need to assess the likelihood that the Parliament will be able to agree with the Council of Ministers at first reading. We have moved forward a step in agreeing this directive and, for the sake of consumers and businesses, I hope we can reach a compromise in due course," he added.

‘Selling off' rights of EU consumers 

Meanwhile, the European People's Party group stood accused by the Socialists & Democrats yesterday of "selling off" the rights of European consumers. 

Socialist MEPs were particularly alarmed by plans to harmonise rules on distance selling and door-to-door selling. "The maximum harmonisation being advocated for this type of contract means that member states will no longer be able to have tougher protection standards, which is unacceptable," said German MEP Gebhardt, S&D group spokesperson on internal market issues.

The S&D group also wants financial services – such as offers of small loans sent by text message – to be covered by European legislation. "At present there are no plans for such services to receive any European protection," complained Gebhardt.

Rapporteur Schwab expressed regret that he had not managed to secure cross-party support for his report. "We have focused on the priority issues of cross-border business. I regret that, after months of negotiations, the Socialists and the Greens have in the end denied their support for my compromise package," he said.

"Still, I am confident that we can now reach a good deal in the negotiations with Council. Citizens expect European added-value instead of red tape. And this is what the EPP Group is committed to achieving", said Schwab.

Despite the split, yesterday's vote gives an indication of the European Parliament's position for upcoming negotiations with the Council on the new Consumer Rights Directive.

Updated EU consumer rights legislation "should cover all purchases, whether made in a shop, by phone, postal order or on the doorstep," the committee decided.

"In particular, it should improve the rights of online shoppers, so as to boost consumer confidence and cross-border trade," the MEPs said.

But the EU assembly's formal position will not be established until MEPs have backed the committee's view in plenary. A vote is expected in March. 

"The balanced approach favoured by [MEPs] will strengthen both consumer rights and the strengthening of the internal market," said European Commission Vice-President Viviane Reding, speaking after the vote.

"Today's vote in the IMCO committee provides for one set of EU rights for consumers shopping at a distance or off-premises, such as from a door-to-door salesman. Both consumers and businesses can be satisfied at the progress now being made on this important proposal. I would like to thank in particular the Parliament's rapporteur, Andreas Schwab, who has skillfully and tirelessly steered this major initiative forward," Reding said.

"Online shopping across borders in the EU will soon be easier for both consumers and companies," said German MEP Andreas Schwab (European People's Party), the European Parliament's rapporteur on the draft directive, after yesterday's vote.

"We have adopted a set of rules that provides real added-value for European citizens. The cornerstone is a harmonised right to withdrawal of 14 days across the EU. This is going to boost consumers' confidence and create new market opportunities for providers," said Schwab.

Consumer groups said yesterday's vote saw moves in the right direction for the proposed European Consumer Rights Directive.

UK Tory MEP Malcolm Harbour (European Conservatives and Reformists), who chairs the IMCO committee, expressed satisfaction that "after two years of discussions, and with almost 2000 amendments in play, we now have a consolidated committee proposal as a working basis for a final package which aims to deliver more opportunities for business to trade online and across the EU while simplifying the rules and improving benefits for consumers".

"Inconsistencies in the committee report remain and we now need to take stock and screen the text to take forward only those proposals where there is demonstrated added value for consumers and business," Harbour added.

"We will be working in the coming weeks to secure a directive that improves consumers' rights within the Single Market, compared to the current rules. I am committed to making it easier for businesses, especially SMEs, to make online offers with better consumer information and stronger safeguards in case of problems," he said.

The Greens expressed disappointment with the vote, warning that it could risk diminishing consumer rights throughout the EU.

"The outcome […] would not strengthen EU consumer rights, which is the ultimate goal of this legislation.  On the contrary, these proposals for maximum harmonisation risk being based on the lowest common denominator for consumer rights and could reduce these rights for all EU consumers," said Danish Greens/European Free Alliance group MEP Emilie Turunen.

"While the Greens worked constructively to try and ensure this ambitious legislation would lead to stronger consumer rights, ultimately we could not support the draft voted as it goes in the wrong direction," she said. 

Commenting on rumours of a first-reading agreement between the Parliament and Council on the directive, Turunen said: "Concluding a first reading agreement would be at the expense of improving consumer rights. It would also be part of a growing trend to rush through legislation at the first reading which undermines the democratic process and continually fails to ensure the best outcome for EU citizens."

"We will work hard to ensure today's result is dramatically improved when the Parliament votes in plenary," she added.

"The proposals on the table will ultimately water down consumer rights instead of reinforcing them. This report challenges the approach always defended by this Parliament of assuring a high level of consumer protection," said the S&D (Socialists & Democrats) group's spokesperson on internal market issues, German MEP Evelyne Gebhardt.

European consumers' organisation BEUC praised MEPs for heeding its calls to prevent 'maximum harmonisation' of all main consumer rights in Europe. 

"There was previously a significant risk of a decrease in many aspects of consumer protection. However, we are relieved to see the Parliament begin to steer this directive away from its original destination of simply breaking down barriers for business and more towards securing and improving protections for consumers," said BEUC Director-General Monique Goyens.

"Nonetheless, it remains unfortunate that the adopted text would be detrimental for consumers in off-premises contracts and that the Parliament has not taken the opportunity to strengthen protection on frequently encountered issues with legal guarantees. We are pleased to see the MEPs committed to adding value for consumers to this directive, but this crucial legislation has yet to earn its name," she added.

"The Business Software Alliance supports genuine and harmonised protection for European consumers, and measures that will enhance consumers' confidence in the Digital Single Market. Yesterday's vote on the Consumer Rights Directive, however, sets back consumer protection and puts unnecessary strains on technology providers," said Francisco Mingorance of the Business Software Alliance.

"If the directive is extended to intangible goods such as computer software and related online services, then such services will be subject to the rules applicable to physical goods, such as toasters and washing machines. This could limit the protections consumers enjoy on software and online services," said Mingorance, warning that "the straight-forward extension of the Consumer Rights Directive to digital 'intangible goods' could have negative consequences for consumers, industry and jobs". 

The vote by the European Parliament's IMCO committee on the Consumer Rights Directive is a significant step back compared to the 'general approach' adopted last week by the Council, according to UEAPME, the European craft and SME employers' organisation.

The group complained that MEPs had reinserted into the text chapters that were rightly scrapped by the Council, and failed to introduce a distinction between solicited and unsolicited contracts into the directive. UEAPME said this would create more burdens especially for small entrepreneurs who tend to work outside their business location, despite the insertion of some safeguards in this respect.

UEAPME Enterprise Policy Director Luc Hendrickx said the vote overall "a setback for SMEs". "The reinsertion of the two chapters that were deleted by the European Council defies reason, as according to member states it will increase the burden on authorities that will have to transpose the directive without clear benefits," he said.

"MEPs should have concentrated on where Europe is able to provide added value, rather than pretending to regulate every single aspect, including those on which a full harmonisation of national legislation is simply impossible. This is not 'better regulation' by any stretch of the imagination," Hendrickx said.  

"The issue of 'off-premises contracts' was also left unsolved. Under the current text, small entrepreneurs and craftsmen who must visit consumers' homes to assess what needs to be done and make an offer are still subject to heavy information requirements, which will lead to more burdens for SMEs and less choice, higher prices and longer delivery times for consumers," he added.

"Despite the insertion of some safeguards on the text, solicited and unsolicited visits are still subject to the same rules after today's vote. This is a shortcoming that must be redressed in the plenary vote. Failure to do so would give birth to a one-sided directive that puts all burdens on companies. We trust that MEPs will not let this happen," Hendrickx concluded.

"We're delighted that MEPs are making positive steps towards improving consumer rights. Which? has long argued that it's vital for consumers to be at the heart of these proposals and we're now starting to see that become a reality," said Peter Vicary-Smith, chief executive of UK consumer organisation Which?, after the vote.

"We really hope that the European Parliament vote in March ensures that the Consumer Rights Directive really helps consumers, rather than hindering them," Vicary-Smith said.

Which? is concerned that the attempts to harmonise consumer protection rules across the EU would water down or remove existing UK rights, rather than improve them.

While there are still some improvements to be made, according to Which?, yesterday's vote shows MEPs are moving in the right direction.

Which? welcomed the following developments: the UK will be able to retain its right to reject and longer liability periods; cancellation periods for distance and doorstep selling contracts increase from seven to 14 days; excessive surcharges for particular payment means (e.g. credit cards) have been banned; clarifications have been introduced that delivery charges must also be refunded if a contract is cancelled, and; pre-contractual information requirements have been made more robust.

But Which? feels that improvements are still needed in several areas, for example: how information is provided in off-premises (i.e. doorstep selling) contracts; provisions on unfair terms to ensure that the UK can safeguard its current rights and future plans in financial services; there are still some potential gaps to fill in the context of remedies for faulty goods, and; consumers need to have the right to cancel flight/hotel bookings, especially where they are made a long time in advance. 

At present, the contractual rights of EU consumers are set out in four separate directives on unfair contract termssales and guaranteesdistance selling and doorstep selling respectively. These date from the 1980s and 1990s, while many EU countries have since adopted stricter rules themselves. 

The proposal for a new Consumer Rights Directive, first tabled by the European Commission in October 2008, seeks to simplify this by merging the existing four EU consumer rights directives into one set of fully harmonised rules (EURACTIV 08/10/08; EURACTIV 10/10/08).

The aim is to improve the functioning of the internal market for consumers through encouraging business to sell to consumers abroad and increasing consumer confidence in cross-border purchases.

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.

  • March: Vote on draft Consumer Rights Directive in Parliament plenary. 

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