Collective Redress: European Parliament Proposes Extension to Cover Product Safety Breaches
Product manufacturers risk a significant increase in European-style “class actions” if proposals to amend the draft “New Deal for Consumers” are adopted.
The European Parliament’s Committee on the Internal Market and Consumer Protection has issued a Draft Opinion on the European Commission’s proposal for a directive on representative actions for consumers. This forms one of the key planks of the Commission’s “New Deal for Consumers”. In its Opinion, the Committee has suggested amendments to the Commission’s proposal, aimed at increasing consumer access to redress. Overall, it feels it: “strikes the right balance of facilitating representative actions, without opening the door to abusive practices.” However, some will question whether the proposals have now shifted even further in consumers’ favour.
Some of the key amendments in the Draft Opinion are:
- More sectors in scope: the Committee proposes to significantly extend the scope of representative actions to include a much larger number of legislative instruments, primarily focussed on product safety. These include the General Product Safety Directive, and the regimes relating to low voltage equipment, radio equipment, machinery, PPE, chemicals, cosmetics, toys, foods, medicines and medical devices.
- Launching actions in parallel with actions for injunction orders: the amended directive would allow the launch of representative actions for redress in tandem with action for a decision on whether an infringement of Union law has taken place. The Committee suggests that, otherwise, the risk is that procedures may last so long that evidence of damage is lost. However, this change obviously introduces its own risks – in particular, increasing the burden and costs for defendants and courts.
- Narrower scope: the Committee seeks to narrow the instances in which a declaratory decision is issued instead of a redress order. The Commission had proposed that such decisions could be made where it was difficult to quantify individual redress. The Committee suggests a narrower role reserved for cases which are “exceptional” and the quantification of individual redress is “extremely complex”. This is to prevent cases being marked as complex too easily. The clear indication is that redress orders should be preferred over declaratory decisions.
- Consumers entitled to receive compensation for low value claims: the Committee has suggested that individual consumers are still permitted to claim compensation, regardless of the amount of the loss. The compensation should be deducted prior to any distribution of the redress for a public purpose. To avoid giving the wrong incentives, the rest of the redress should not be managed by the qualified entity that brings the representative action. The Commission had previously proposed that small amounts of loss be directed to a public purpose serving the collective interests of consumers. This change in approach is likely to incentivise consumers to participate in representative actions.
The Committee’s amendments clearly focus on increasing the individual consumer’s right to redress. They broaden the product regimes in respect of which representative action can be brought, narrow the role for declaratory decisions and seek to fast-track recovery.
These actions will further empower consumer rights under the proposal; in circumstances where the balance was already in their favour. Significantly, it could also encourage more consumer claims in relation to identified safety issues. It will be important for industry stakeholders to engage over the coming months to secure the “fairer Single Market that benefits consumers and businesses” that the Commission promised.