UK: The Review of EU Consumer Protection Rules: European Commission Seeks To Boost E-Commerce Within the Internal Market

Last Updated: 1 March 2007
Article by Rebecca Anderson

The European Commission is engaged in a major new initiative which will fundamentally overhaul core EU consumer protection law1 and is now inviting comments on various proposals set out in a Green Paper which seek to create a borderless on-line retail market within Europe.

Why the need for an overhaul?

The European Commission perceives that there is a need to adapt European consumer protection legislation to meet the challenges faced in a fast changing digital and on-line world and also wishes to boost consumer confidence in the EU Single Market by introducing a single set of rules which better enable consumers to know their rights and ensure that they are adequately protected. They hope that by introducing simple and clear legal rules, on-line businesses will be encouraged to venture beyond domestic trading and enter into the, as yet, relatively unexploited cross-border market.

The new EU Consumer Affairs Commissioner, Meglena Kuneva, stated at her first press conference in Brussels that "There is an urgent need for action, the world is moving so fast and Europe risks lagging behind. We need a root and branch review of consumer rules…At the moment, consumers are not getting a fair deal on-line, and complex rules are holding back the next generation of bright business ideas." Kuneva considers that "injecting a new sense of consumer confidence into the e-shopping world so that it becomes a trusted market place" is pivotal to the growth of the digital and on-line world across Europe.

A number of recently conducted Eurobarometer surveys2 reinforce Kuneva’s comments:

Consumers

Two-thirds of EU consumers consider that there are more risks or difficulties associated with purchasing their goods and services from suppliers in other EU Member States than from suppliers located in their own Member State: primarily, they believe that it is harder to resolve problems related to making complaints, returns, price reductions and guarantees3.

Businesses

The European Commission has identified that there are inconsistencies between different EC Directives and that Member States have implemented EC Directives inconsistently. It is clear that some Member States have implemented the minimum standards imposed upon them whereas other Member States have implemented standards that exceed the minimum in order to achieve a higher level of consumer protection. These varying standards across Europe have proved to be a hindrance for trading on-line and have left both businesses and consumers unsure of what standards apply.

Despite a significant proportion of retailers being engaged in Internet based sales, two-thirds of those retailers only sell in their domestic market. A third of retailers in the EU sell cross-border to another EU country but only one in five advertise cross-border. Retailers identified the perceived insecurity of transactions as the most significant hindrance to cross-border trade, including non-payment and fraud4.

Green Paper Adopted

The European Commission has now adopted a Green Paper5 which discusses the issues that need to be addressed in each of the eight consumer related EC Directives under review. The Commission’s objective, once it has completed its overhaul of the existing regulatory framework, is to ensure that no matter where a consumer is located in the EU or which Member State a consumer buys his/her consumer goods or services from, his essential rights will be the same. Likewise, businesses should be able to benefit from a more predictable regulatory environment and simpler EU rules in order to decrease their compliance costs and to allow them to trade more easily across the EU, irrespective of where they are established.

The Green Paper invites a range of stakeholders6 to comment7 on how, from a legal perspective, any proposals adopted should be introduced as law. The Green Paper also asks for comments on over 28 different aspects of European consumer law, including the harmonisation and simplification of the rules for consumers, most notably, in the following areas:

  • The introduction of a clause of good faith and fair dealing;
  • When risk in products should pass;
  • Late, partial or missing deliveries;
  • How to return unwanted goods;
  • The right to and cost of returning goods;
  • The length of any "cooling-off" period within which goods may be returned if the consumer has second thoughts about buying them; and
  • Remedies available to consumers, for example, price reduction and termination of contract.

The Concepts of Good Faith and Fair Dealing

Current EU consumer contract law does not include a general duty to deal fairly or to act in good faith8. Including such an overarching general clause applicable to consumer contracts would provide the courts with guidance as to how specific provisions should be interpreted and how gaps in legislation should be filled. The Commission has also suggested that a general "good faith and fair dealing" provision could be incorporated into the legislation whereby due regard is given to the specific situation of certain consumers. One possible drawback to the introduction of such a general clause is that it might be interpreted differently from Member State to Member State.

Extending Protection to Services

In addition, the European Commission is seeking to address new challenges, such as whether current consumer protection legislation should be extended to cover not only contracts for products but also contracts for the supply of services, including software and data (for example, contracts for the supply of digital content). An extension of the coverage of consumer protection rules to such situations would allow consumers to make use of the remedies for non-conformity and to obtain damages. From a practical standpoint, this would mean that a consumer who downloads music from the Internet (a contract for a service) would enjoy the same type and level of protection as a consumer who purchases a CD from a shop (a contract for a product): both consumers would benefit from a guarantee it if does not work.

Comment

With only 6% of EU consumers currently shopping from suppliers beyond their national borders9, the evidence suggests that consumers in the EU are not yet comfortable enough in the digital and on-line world to seize its full potential. With the help of the feedback from the Green Paper, the Commission hopes to boost consumer confidence and facilitate the emergence of one single on-line, cross-border market and discourage the emergence of what Kuneva has described as "27 mini on-line markets in Europe, denying consumers choice, opportunity and competitive prices".

Harmonising and simplifying the consumer protection legislation across Europe could, however, have a number of potentially costly disadvantages: on-line businesses in the UK could, in effect, have to comply with a greater volume of provisions as the European Commission seeks to achieve consumer certainty in a number of areas which are currently unregulated, and, in seeking to harmonise laws across Europe, the European Commission could chose to adopt laws which have been implemented by a number of Member States to a higher level than that in the UK, leaving on-line businesses in this country with the task of having to increase the level of protection that they currently offer to consumers.

Concrete proposals for action will be finalised once feedback from the relevant stakeholders has been received.

Useful URLs

Green Paper
Europa Press Release

Footnotes

1 The eight Directives under review include: The Directive on Sale of Consumer Goods and Guarantees; The Unfair Contract Terms Directive; The Distance Selling Directive; The Doorstep Selling Directive; The Directive on Injunctions; The Price Indication Directive; The Package Travel Directive; and The Timeshare Directive.

2 Eurobarometer on Consumer Protection in the Internal Market - Commission Eurobarometer September 2006; and Business Attitudes towards cross-border sales and consumer protection – Commission Eurobarometer February 2007.

3 Europa Press Release: Frequently Asked Questions: The Review of EU Consumer Protection Rules "The Review of the Consumer Acquis".

4 Ibid.

5 Commission of the European Communities "Green Paper on the Review of Consumer Acquis", Brussels, 08.02.2007 COM (2006) 744 final.

6 Stakeholders to include women's groups, older consumers, consumer organisations, SMEs, Members of the European Parliament, Member State Governments and major retailers.

7 Responses are due by 15 May 2007.

8 A general clause referring to the concept of fairness exists in Article 5 of the Directive on Unfair Commercial Practices, but it relates to marketing practices and not contracts. Article 3(1) of the Unfair Terms in Consumer Contracts Directive constitutes a general clause referring to fairness which is applicable to that Directive only.

9 Eurobarometer on Consumer Protection in the Internal Market - Commission Eurobarometer September 2006.

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