New rules to help consumers join forces to seek compensation
- First-ever EU-wide rules on collective redress
- Consumers to be better protected in “mass harm” situations such as Dieselgate, Ryanair
- Safeguards against abusive lawsuits (“loser pays principle”)
Rules allowing groups of consumers harmed by illegal practices to launch collective actions and seek compensation were confirmed by plenary on Tuesday.
Currently, only 19 member states provide some form of legal remedy to victims of mass harm and proceedings can often be lengthy and costly, especially if victims go to court individually.
The new rules address concerns raised by recent mass harm scandals with cross-border implications (Dieselgate, Ryanair). They would allow group action against trader violations with a broad public impact in domestic and cross-border cases in different consumer areas such as data protection, financial services, travel and tourism, energy, telecommunications, environment and health.
The new representative action rules would:
- strengthen the right to access to justice by allowing consumers to join forces across borders and jointly request that unlawful practices be stopped or prevented, or to obtain compensation for the harm;
- harmonise collective redress mechanisms and end disparities across member states;
- reduce the financial burden and make remedies more accessible through collective representation;
- strike a balance between citizens’ access to justice and protecting businesses from abusive lawsuits through the “loser pays principle introduced by MEPs.
Eligible representation and safeguards
Under the new draft rules, representative action can only be brought by eligible entities, such as consumer organisations and certain independent bodies designated by member states. These should be non-profit and have no financial agreements with law firms.
Finally, the text requires the Commission, within three years, to assess if a European Ombudsman for collective redress should be established.
The rapporteur Geoffroy Didier (EPP, FR) said “This reform strikes the right balance between increasing consumer protection on one hand and the necessary legal safety for companies; it goes even further, by showing that safety and security need to go hand in hand.
“The aim is not to punish anyone, but to compensate victims for any loss. The text also ensures all dangers and failures inherent in American class action are avoided” concluded Didier.
Plenary confirmed its negotiating position by 579 votes to 33, with 43 abstentions. For the legislation to enter into force, both Parliament and Council need to find an agreement, but talks cannot start before the latter adopts its position.
The Representative Action Directive is a part of the New Deal for Consumers, launched in April 2018 by the European Commission, to ensure stronger consumer protection in the EU. It includes stronger consumer rights online, tools to enforce rights and compensation, penalties for violating EU consumer law and improved business conditions.