Reding ditches plans for US-style consumer lawsuits

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Consumer groups have expressed dismay following Justice Commissioner Viviane Reding's announcement that plans for an EU "collective redress" system are now off the agenda.

In an interview with FT Deutschland, Reding acknowledged that she has now effectively stopped the plans, although the proposal had been in the pipeline for a long time.

In her words, the decision was taken to ensure that Europe's economic recovery is not jeopardised by unnecessary burdens for businesses.

The plan was designed to ensure that consumers harmed by illegal commercial malpractice are compensated for their losses, but was staunchly opposed by business organisations.

BEUC, the European consumers' lobby group, described the move as "a deep disappointment," claiming that it reflected a huge about-turn by the EU executive.

In April this year, EU Consumer Commissioner John Dalli seemed to take a strong position in favour of action, indicating he would instigate a follow-up to the 2008 Green Paper on consumer collective redress.

As reported by EURACTIV, EU Competition Commissioner Joaquin Almunia has also openly backed the idea of a system of collective redress to compensate victims of anti-competitive behaviour.

The Commission had made plans to table proposals, which were expected in the coming weeks.

Now, BEUC believes Reding's about-turn may fatally undermine the public consultation, jeopardising its credibility on a topic they feel remains vitally important to EU consumers.

Stop comparing EU and US, says BEUC

BEUC accused Reding of linking a future European redress system to US-style class action lawsuits.

In her interview, Reding noted that she had "conducted long conversations with representatives of American industry" on this topic in recent months, and "they warned about the introduction of such a system" to the 27-member EU bloc.

However, BEUC said this misses the point entirely, as the EU collective redress system would contain many measures against US-style "excesses".

A collective redress system already exists "to great effect" in Portugal, Spain, Greece and Denmark, BEUC said.

On 10 June 2010, EU Competition Commissioner Joaquin Almunia said that "to be credible, antitrust rules must be accompanied by deterrent instruments. And in that regard, our fines should aim at preventing that any harm is caused to customers in the first place. I also believe that, where such harm occurs, our system in Europe should enable customers – whether companies or consumers –to claim compensation for the harm caused to them".

This was why, he argued, the "Commission has been examining how to introduce a coherent framework for collective redress and plans to organise a public consultation on this in the autumn. Before taking any action, we first must agree on common principles that can be applied in various areas, beyond competition, such as the protection of consumers against faulty products.  Following this public consultation, the Commission will take a position, which will form the basis for individual legislative proposals, such as the one on antitrust damages actions.  I am confident that a solution can ultimately be found that will avoid the abuses due to excessive litigation and will guarantee real access to justice for all European consumers and businesses harmed by anticompetitive conduct".

BEUC Director-general Monique Goyens said that "the very surprising comments of Vice-President Reding saying collective redress is off the EU agenda come as a deep disappointment. They jeopardise the public consultation due to begin shortly. Puzzlingly, they also reraise questions already settled by the previous Barroso Commission who said consumer collective redress is “not in any way a blueprint for US style class actions".

She added that "the envisaged EU collective redress system bears simply no resemblance to the excesses of US-style ‘class action’. What is more dismaying is the news that US business representatives have prompted this change of course. We would like to see the Commission refocus their concerns on what is needed by European consumers. The Vice-President responsible for Justice and Fundamental Rights seems to be locking the door to the public debate before it has started."

Collective redress makes it easier for small claimants in cross-border disputes to take action by allowing a large number of small claims to be bundled and brought to court by a third-party representative, such as a recognised consumer organisation.

According to European Commission figures from 2008, "76% of consumers would be more willing to defend their rights in court if they could join together with other consumers". 

Financial services (39%), telecoms (12%), transport (8%) and package tourism (7%) were identified as the sectors in which consumers find it most difficult to obtain redress for mass claims by a study carried out by the EU executive. 

The European Parliament has repeatedly backed Commission plans to provide individual EU citizens with a collective redress mechanism for the settlement of cross-border complaints, asking the EU executive in 2008 to carry out "extensive research" into the feasibility of introducing such a system across borders (EURACTIV 22/05/08).

However, previous Commission attempts to consider ways of introducing such a system for victims of illegal commercial practices were judged to be "lacking ambition" by consumer groups (EURACTIV 28/11/08).

  • 16 Oct. 2010: Expected public consultation on consumer collective redress 

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