4 Consumer rights
| (a)
(30036)
14183/08
COM(08) 614
+ ADDs 1-3
(b)
(32354)
16933/10
—
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Draft Directive on consumer rights
Commission staff working documents: Impact Assessment (IA), summary of the IA, and annexes to the IA
Draft Directive on consumer rights: the Council's general approach
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| Legal base | (a) Article 95 EC; co-decision; QMV
(b) Article 114 TFEU; co-decision; QMV
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| Document originated | (a) 8 October 2008
(b) 10 December 2010
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| Deposited in Parliament | (a) 16 October 2008
(b) 17 December 2010
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 5 January 2011 and Minister's letter of 11 January 2011
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| Previous Committee Report | HC 16-xxxiv (2007-08), chapter 3 (5 November 2008)
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| To be discussed in Council | Mid-January 2011
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared, but waiver under paragraph 3(b) of the scrutiny reserve resolution granted; further information awaited
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Background
4.1 In 2008, the Commission proposed a Directive on consumer rights
— document (a) — which would repeal four existing
Directives on Doorstep Selling, Unfair Terms in Consumer Contracts,
Distance Selling and the Sale of Consumer Goods and Guarantees
and replace them with a single Directive applicable to contracts
between consumers and businesses for the supply of goods and services.
The Commission believed that changes were needed because the four
existing Directives set minimum standards, leaving Member States
with considerable latitude to enact more stringent requirements.
Resulting differences in national laws created confusion for consumers,
added to traders' compliance costs and discouraged cross-border
trade. The Commission therefore proposed a new approach based
on fully harmonised EU rules which would prevent Member States
from maintaining or introducing domestic laws which diverged from
the provisions of the Directive.
Previous scrutiny of document (a)
4.2 Our predecessors considered the Commission's proposal in November
2008 and expressed concern that the introduction of fully harmonised
EU rules might result in a reduction in the level of consumer
protection provided in some Member States. For example, consumers
in the UK would lose the right to reject sub-standard or faulty
goods and get their money back. Under the Commission's proposal,
the trader would be able to decide either to offer to repair the
goods or provide a replacement. The Committee decided to keep
the Directive under scrutiny and to request progress reports on
the negotiations.
4.3 Progress since then has been slow. While Member
States generally supported the principle of full harmonisation,
many (including the UK) were unwilling to accept a reduction in
consumer protection safeguards provided by their national laws.
The Minister for Consumer Affairs (Mr Edward Davey) informed the
Committee in July 2010 that the Government:
"supports full harmonisation where there is
evidence that divergent rules are shown to be creating barriers
to cross-border trade, or unacceptable confusion or complexity
for consumers and/or business. Our aim is to secure fully harmonised
solutions to achieve our objectives; where this is not possible
we would seek amendments which would allow the UK to retain a
higher level of consumer protection in certain areas. In particular,
we are continuing to seek amendments to the Directive to provide
an EU-wide 'right to reject' and longer liability periods which
provide a level of consumer protection equivalent to that currently
enjoyed by UK consumers. We are clear that the Directive cannot
lead to a loss of these key consumer rights."[22]
4.4 The Minister added that, in an attempt to move
negotiations forward, Member States and the Commission were considering
a new approach based on full harmonisation in certain areas (establishing
uniform laws in all Member States) and minimum harmonisation in
others (enabling Member States to exceed the minimum standards
specified in the Directive).
4.5 The Minister wrote again in October to tell the
Committee that he thought it would be "necessary to adopt
a minimum harmonisation approach in a small number of areas in
order to secure existing national consumer protections or to provide
Governments with the flexibility to apply additional protections
to address consumer detriment in particular market sectors in
the future."[23]
He added that the Belgian Presidency hoped to agree a general
approach in December.
4.6 In further letters dated 30 November and 9 December,
the Minister explained that substantial progress had been made
during the Belgian Presidency and that the Council was likely
to be asked to endorse a "general approach" based on
a compromise Presidency text on 20 December. However, the text
to be agreed by the Council would entail a significant reduction
in the scope of the draft Directive. The provisions in the Commission's
original proposal on the sale of consumer goods and guarantees
and on unfair contract terms would be deleted and the existing
Directives on the Sale of Consumer Goods and Guarantees and on
Unfair Contract Terms would remain in force. The new Directive
would therefore only apply to distance and off-premises contracts.
4.7 The Minister explained that most provisions on
distance and off-premises sales would be fully harmonised but,
in a small number of areas, Member States would retain the flexibility
to maintain or introduce their own requirements. This would enable
the UK to continue to limit the application of rules on off-premises
contracts to those exceeding a certain monetary threshold. He
said that the Presidency text provided "greater clarity on
the scope of the Directive and the relationship with national
general contract law" as well as with other EU laws. For
example, the UK would be able to maintain and add to or amend
its existing information requirements for energy supply contracts.
4.8 The Minister said that the Government supported
the (lengthy) list of sectors which were to be excluded from the
scope of the draft Directive, although he considered the proposed
definition of off-premises contracts to be too broad. However,
he judged the overall package to be satisfactory as it would provide
additional protection for UK consumers without placing unreasonable
burdens on UK businesses. The Minister asked the Committee to
grant a waiver to enable the Government to agree a general approach
on 20 December, notwithstanding that the draft Directive remained
under scrutiny. He added:
"The UK Government will not agree the General
Approach unless we are convinced that the package of measures
in the Directive will secure a high level of consumer protection
for UK consumers, provide the necessary flexibility for the UK
Government to adopt or maintain additional legislation in certain
areas and does not place unreasonable burdens on UK business.
Whilst it is disappointing that the scope of the Directive has
been reduced in this way I believe that the UK should still support
the Directive. Negotiations in Council have shown that reaching
agreement on the deleted chapters would have been extremely difficult
and there is a risk that consumer protections in the UK could
have been reduced and/or unwarranted burdens on business could
have been increased."[24]
4.9 We noted the Minister's disappointment at the
significant reduction in the scope of the proposed Directive and
accepted that Member States' differing views on what should constitute
core consumer protection standards meant that agreement on the
Commission's original proposal was likely to present formidable
difficulties. Nonetheless, we expressed deep regret that such
significant changes to the scope of the Directive were proposed
at such a late stage in the Belgian Presidency, providing minimal
opportunity for national parliaments and others affected by the
changes to consider their impact. We therefore decided to hold
document (a) under scrutiny while asking the Minister to deposit
for scrutiny the Presidency compromise text which provided the
basis for the proposed general approach and to provide an Explanatory
Memorandum setting out the reasons for the change in the scope
of the Directive, the likely impact of those changes on existing
levels of consumer protection in the UK, and an indication of
the views of businesses and consumers.[25]
Document (b) — the Council's general approach
4.10 Document (b) is a Presidency compromise text
which sets out the Council's proposed general approach to the
Commission's original proposal and includes some significant changes.
The text was agreed by a qualified majority in COREPER in December
and, if approved by the Council, will form the basis for negotiations
between the Council and the European Parliament with a view to
reaching a First Reading agreement.
4.11 The most significant change introduced by the
compromise text concerns the scope of the proposed Directive.
It would only apply to sales or service contracts between consumers
and traders concluded by means of distance communication (such
as mail order, internet or telephone sales) or away from the trader's
business premises (for example, at the consumer's home or workplace).
It would repeal existing EU Directives on distance selling and
door-step selling and replace them with a set of harmonised rules
stipulating the pre-contractual information to be provided to
consumers and consumers' right of withdrawal. However, more extensive
rules on the sale of goods to consumers, including remedies available
in the event that goods do not conform to the sales contract,
and on product guarantees and unfair contract terms, have been
omitted in the compromise text. Existing rules contained in Directives
on Unfair Contract Terms and on Consumer Guarantees will remain
in force.
4.12 The compromise text is based on the principle
of full harmonisation but some provisions give Member States the
option of maintaining or introducing more (or less) stringent
consumer protection measures. For example, Member States may decide
that the requirements contained in the Directive for contracts
concluded away from a trader's business premises should only apply
if the value of the contract exceeds €60; or they may stipulate
that no payment shall be made during the 14-day withdrawal period.
The Government's view on document (b)
4.13 The Minister of State at the Department for
Business, Innovation and Skills (Mr Mark Prisk) says in his Explanatory
Memorandum of 5 January that the reduction in the scope of the
Directive was proposed by the Presidency on 30 November 2010 because
"it has proved extremely difficult for Member States to agree
rules on sale of goods and unfair contract terms despite agreement
that certain parts of these chapters would be subject to minimum
harmonisation to allow Member States to retain existing levels
of consumer protection in national law."[26]
4.14 He says that, while the Government supported
the Commission's review of EU consumer law, it had "strong
concerns that the Directive as originally proposed would have
resulted in a reduction in key UK consumer protections. The deletion
of the chapters on sale of goods and unfair contract terms largely
remove these concerns."[27]
Existing Directives on unfair contract terms and consumer guarantees
will remain in force, as will additional protections conferred
under domestic law, such as the right to reject sub-standard goods.
4.15 The Minister highlights a number of "substantial
improvements" in the compromise text, including:
- an optional monetary threshold
enabling Member States to exempt off-premises contracts for €60
or less from complying with the Directive's requirements;
- new provisions enabling a consumer to ask for
the provision of a service or the supply of water, gas or electricity
to start during the 14-day withdrawal/cooling-off period without
losing the right to withdraw; but, in the event of withdrawal,
requiring the consumer to pay for services received (this does
not apply to one-off online services contracts if the service
is provided immediately and in its entirety during the withdrawal
period, e.g. digital downloads);
- a total exclusion for financial services contracts;
and
- greater clarity as to the areas in which Member
States may maintain or introduce additional national rules.
4.16 The Minister believes that the compromise text
as a whole would improve consumer protection in the UK, principally
by extending the withdrawal/cooling-off period from seven to 14
days and requiring consumers to be given more comprehensive pre-contractual
information, especially on price. Further benefits include:
- "wider definitions of
distance and off-premises selling bringing more contracts within
scope of the protections;
- "a clear rule that the consumer will not
pay any additional charges unless the consumer was notified of
them and had consented to them prior to conclusion of the contract;
- "for e-commerce contracts a requirement
that the consumer gives explicit confirmation that they have received
information on price and duration of the contract before being
bound by the contract;
- "an extended withdrawal period of 6 months
if certain pre-contractual information is not provided (currently
a 3 month extension applies only to omission of information on
the right of withdrawal);
- "a model withdrawal form consumers can use
to notify of withdrawal, plus the opportunity to complete this
online if the trader allows; and
- "a rule providing that consumers are not
obliged to pay for unsolicited goods and services (although it
is already against the law, so this is merely a further remedy)."[28]
4.17 The Minister also draws attention to a small
number of provisions which, he says, "could be seen to reduce
consumer protection or lessen the gains. For example, consumers
will be obliged to pay any diminished value of goods where they
use or handle them more than is necessary to ascertain the nature
and functioning of the goods during the withdrawal period and
will in the majority of cases be obliged to pay the cost of returning
goods in the event of withdrawal unless the parties agree otherwise.
Consumers would also be required to allow an additional period
for delivery where the trader has failed to deliver on time unless
it is clear that delivery on or by a certain date is essential."[29]
4.18 The Minister says that the Government has consulted
consumer and business groups throughout the negotiating process
and that they are "generally content" with the approach
proposed in the compromise text, although there is some disappointment
that the broader scope of the Directive has been lost. He notes
that replacing two existing Directives with a single one should
help to simplify consumer law, ensuring greater consistency in
definitions and greater alignment of rules on distance and off-premises
sales. Changes will also be needed to UK implementing legislation.[30]
The Minister's letter of 11 January
4.19 The Minister for Employment Relations, Consumer
and Postal Affairs (Mr Edward Davey) informs us that the general
approach proposed in the Presidency compromise text — document
(b) — was withdrawn from the Council agenda on 20 December.
The Agriculture Council will be asked to agree the text on 24
January. The Minister says that he remains content that the revised
text will provide additional protection for UK consumers while
avoiding any unreasonable burdens for UK businesses. He asks us
to grant a waiver from scrutiny to enable the UK to form part
of the qualified majority needed to approve the general approach.
He adds that, if the UK were to abstain, it is likely that there
would be a blocking minority opposing the Presidency compromise
text. The Minister says that he will continue to provide us with
progress reports on the negotiations and that he expects the European
Parliament's First Reading plenary vote to take place in March.
Conclusion
4.20 When the Minister wrote, at the end of last
year, to ask us to grant a waiver to enable the Government to
agree a general approach on 20 December, notwithstanding that
the Commission's original proposal — document (a) —
remained under scrutiny, we were unwilling to do so because we
thought that the changes introduced by the Presidency's compromise
text were significant and required proper analysis and scrutiny.
In the event, the text was withdrawn from the Council agenda and
a breach of the scrutiny reserve was avoided.
4.21 Since then, the Minister has formally deposited
the Council's proposed general approach — document (b) —
and provided an Explanatory Memorandum which indicates that the
overall impact of the draft Directive on consumer protection in
the UK is likely to be beneficial because there will be a longer
withdrawal/cooling-off period and more comprehensive pre-contractual
information provided for contracts concluded at a distance or
away from a trader's business premises. Existing consumer safeguards
provided under our domestic law, notably the right to reject sub-standard
or faulty goods, will remain intact. On this basis, we are willing
to grant the waiver requested by the Minister, under paragraph
(3)(b) of the Scrutiny Reserve Resolution, to enable the Government
to agree the proposed general approach. However, as it is not
yet clear whether the European Parliament will seek a First Reading
agreement based on the Council's general approach or press for
the reinstatement of the provisions in the Commission's original
proposal on the sale of consumer goods and guarantees and on unfair
contract terms, we intend to keep both documents under scrutiny
and we ask the Minister to continue to provide us with progress
reports.
22 Minister's letter of 25 July 2010. Back
23
Minister's letter of 4 October 2010. Back
24
Minister's letter of 9 December 2010. Back
25
See the letter of 15 December from the Chairman of the European
Scrutiny Committee: http://www.parliament.uk/documents/commons-committees/european-scrutiny/Ministerial-Correspondence-2010-11.pdf. Back
26
See paragraph 3 of the Minister's Explanatory Memorandum. Back
27
See paragraph 20 of the Minister's Explanatory Memorandum. Back
28
See paragraph 23 of the Minister's Explanatory Memorandum. Back
29
See paragraph 24 of the Minister's Explanatory Memorandum. Back
30
The distance and doorstep selling Directives are implemented in
the UK by the Consumer Protection (Distance Selling) Regulations
2000 (SI 2000/2334) and the Cancellation of Contracts made at
a Consumer's Home or Place of Work, etc Regulations 2008 (SI 20089/1816).
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