Documents considered by the Committee on 12 January 2011 - European Scrutiny Committee Contents


4 Consumer rights

(a)

(30036)

14183/08

COM(08) 614

+ ADDs 1-3

(b)

(32354)

16933/10


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

Legal base(a)  Article 95 EC; co-decision; QMV

(b)  Article 114 TFEU; co-decision; QMV

Document originated(a)  8 October 2008

(b)  10 December 2010

Deposited in Parliament(a)  16 October 2008

(b)  17 December 2010

DepartmentBusiness, Innovation and Skills
Basis of considerationEM of 5 January 2011 and Minister's letter of 11 January 2011
Previous Committee ReportHC 16-xxxiv (2007-08), chapter 3 (5 November 2008)
To be discussed in CouncilMid-January 2011
Committee's assessmentPolitically important
Committee's decisionNot cleared, but waiver under paragraph 3(b) of the scrutiny reserve resolution granted; further information awaited

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).  Back


 
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