Irish consumers will win the right to bring class actions against companies under new proposals from the European Commission.
National consumer authorities will also be able to impose fines on rogue traders of up to 4 per cent of turnover under the Commission’s New Deal for Consumers.
The document also proposes greater transparency for online transactions although it may be several years before it is sanctioned.
The plan allows for a qualified entity, such as a consumer organisation, to seek redress, including compensation, replacement or repair, on behalf of a group of consumers harmed by an illegal commercial practice.
While some Member States allow consumers to launch collective actions in courts there is no legal framework for this in the Republic.
The lack of legal remedies for consumers affected by major consumer issues was highlighted in the tracker mortgage scandal that saw thousands of people wrongly forced off low cost mortgages by all the State’s main lenders.
The new model has “strong safeguards and is distinctly different from US-style class actions”, the Commission said. “Representative actions will not be open to law firms, but only to entities such as consumer organisations that are non-profit and fulfil strict eligibility criteria, monitored by a public authority.”
Under the deal, when consumers are buying online they will have to be clearly informed about whether they are buying products or services from a trader or from a private person, so they know whether they are protected by consumer rights if something goes wrong.
There will also be greater transparency on search results on online platforms and consumers will have to be clearly informed when a search result is being paid for by a trader. Online marketplaces will also have to inform consumers about the main parameters determining the ranking of the results.
As it stands when a consumer pays for a digital service, they benefit from certain information rights and have 14 days to cancel their contract. The New Deal will extend this right to “free” digital services for which consumers provide their personal data, but do not pay with money. This typically would apply to cloud storage services, social media or email accounts.
The New Deal for Consumers will ensure consumers have the right to claim individual remedies (eg, financial compensation or termination of contract) when they are affected by unfair commercial practices, such as aggressive or misleading marketing.
The Commission said as it stands, EU consumer authorities are not well equipped to impose sanctions on practices creating “mass harm situations” that affect a large number of consumers across the EU.
As it stands, the level of penalties differs widely across the EU and, the Commission said, it “is often too low to actually have a deterrent effect, particularly on companies operating cross-border and on a large scale”.
Under the proposal, national consumer authorities will have the power to impose effective, proportionate and dissuasive penalties in a coordinated manner. For widespread infringements that affect consumers in several EU Member States, the available maximum fine will be 4 per cent of the trader’s annual turnover in each respective Member State. Member States are free to introduce higher maximum fines.
“In a globalised world where the big companies have a huge advantage over individual consumers we need to level the odds,” said Vera Jourová, Commissioner for Justice, Consumers and Gender Equality. “Representative actions, in the European way, will bring more fairness to consumers, not more business for law firms. And with stronger sanctions linked to the annual turnover of a company, consumer authorities will finally get teeth to punish the cheaters. It cannot be cheap to cheat.”
The Commission's proposals will have to be discussed by the European Parliament and the Council before they can become a reality.
