Not cleared from scrutiny; updates requested
(a) Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee: A New Deal for Consumers; (b) Proposal for a Directive of the European Parliament and of the Council amending Council Directive 93/13/EEC of 5 April 1993, Directive 98/6/EC of the European Parliament and of the Council, Directive 2005/29/EC of the European Parliament and of the Council and Directive 2011/83/EU of the European Parliament and of the Council as regards better enforcement and modernisation of EU consumer protection rules; (c) Proposal for a Directive Of The European Parliament And Of The Council on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC
(a) —; (b) (c) Article 114 TFEU, Ordinary legislative procedure; QMV
Business, Energy and Industrial Strategy
(a) (39619), 7875/18, COM(18) 183; (b) (39618), 7876/18 + ADDs 1–4, COM(18) 185; (c) (39617), 7877/18 + ADDs 1–5, COM(18) 184
1.1Following a regulatory fitness (REFIT) review of European consumer and marketing law, which found that action should be taken to improve enforcement of EU consumer protection rules as well as consumers’ awareness of their rights, the European Commission has adopted a “New Deal for Consumers”, which consists of two proposed directives and a communication.
1.2The first of the two proposals for a Directive (7876/18), would amend the four main consumer Directives: the Consumer Rights Directive (CRD), the Unfair Contract Terms Directive (UCTD), the Unfair Commercial Practices Directive (UCPD) and the Price Indications Directive (PID). This proposed Directive envisages the following key changes to the consumer protection acquis:
1.3The former Parliamentary Under Secretary of State and Minister for Small Business, Consumers and Corporate Responsibility at the Department of Business, Energy and Industrial Strategy (Andrew Griffiths) indicated in an explanatory memorandum regarding the package that the Government had worked closely with the EU on its REFIT review of EU and consumer marketing law and its parallel review of the CRD, and supports EU efforts to ensure that consumers’ rights are robust and that they can be enforced effectively.
1.4In the explanatory memorandum the Minister emphasises that the Member States retain significant levels of discretion under the proposal: regarding redress, for breaches of the UCPD, Member States would retain discretion as to which remedies they make available, subject only to the requirement to provide both contractual remedies (as a minimum, the right to termination) and non-contractual remedies (as a minimum, the right to compensation); for penalties, Member States would also retain discretion to set a higher cap than the 4% minimum, and the criteria to be used in deciding whether to impose a fine and at what level are non-exhaustive.
1.5The Minister also notes that the package addresses many of the same themes which the UK is currently consulting on in the ‘Consumer Green Paper: Modernising Consumer Markets’. The Green Paper confirms the Government’s intention to bring forward domestic legislation which will, according to the Minister:
1.6The second element of the New Deal for Consumers is the proposed Directive (EU) 7877/18 which would replace the existing Injunctions Directive with an instrument for the protection of consumers’ collective interests. The proposed Directive would cover both horizontal and sector-specific EU instruments which relate to the protection of consumers’ collective interests across sectors including financial services, energy, the environment and telecommunications. It would enable ‘qualified entities’, designated by Member States, to bring forward representative actions on behalf of consumers seeking measures which would oblige the trader to provide the consumer with compensation, a repair, replacement, price reduction, contract termination or a reimbursement of the price they have paid, as appropriate.
1.7In a separate explanatory memorandum submitted in relation to this proposal, the Minister notes that the Commission has made clear that it intends to avoid the potential for abusive litigation under the instrument, and that the entities should, as a minimum, be not-for-profit and have a legitimate interest in protecting consumers’ collective interests. The Minister states that the Government will work closely with the Ministry of Justice to ensure that any new rules introduced at EU level are proportionate to tackle consumer detriment and that the rules provide legal certainty.
1.8As drafted, both proposals provide for an 18 month period for the Member States to transpose them into national law (once the proposal has been negotiated and adopted); Member States would have to apply the provisions after a further 6 month period. If the transitional arrangements in the current draft Withdrawal Agreement become applicable, whether or not the UK will have to implement these provisions in national law, and to apply the provisions, before the transitional period ends, will depend on whether the institutions can make significant progress on the proposals before European Parliament elections in 2019, and whether there is an extension to the transitional period.
1.9The Communication which accompanies the legislative proposals also signals the Commission’s intention to agree bilateral or multilateral agreements for consumer-protection enforcement cooperation between the EU and third countries such as the USA, Canada and China. This cooperation would be facilitated by the stronger framework for the coordination of public enforcement authorities within the EU established by the revised CPC Regulation, which can be used as a basis for seeking cooperation agreements with third countries.
1.10On EU exit, the Minister states only that “the way consumer protections apply across the border with the EU in future is a matter for negotiations” and that it is not in either party’s interest “for rogue traders to target citizens based in the UK or EU.” On 12 July 2018 the Government published the White Paper “The Future Relationship between the United Kingdom and The European Union”, which set out the Government’s vision for the future economic partnership. In relation to consumer protection, the report states that that the UK “is committed to maintaining high standards”, and:
“To ensure that open trade between the UK and EU economies is not at the expense of consumers, and in the context of the future economic partnership, the UK proposes to commit to maintain reciprocal high levels of consumer protection. There should be cooperation on enforcement, including provisions to allow mutual exchange of information and evidence, and a framework to work collectively on areas of wider consumer detriment.”
1.11We have taken note of the Minister’s assessment of the New Deal for Consumers. The Minister emphasises that the Government has worked closely with the EU on its REFIT review of EU and consumer marketing law and its parallel review of the CRD, and that the package addresses many of the same themes which the UK is currently consulting on in its green paper on modernising consumer protection—including consumer protection in digital markets, redress, and penalties. The Government identifies no significant concerns with either of the proposed Directives, both of which it accepts comply with the principle of subsidiarity.
1.12The principal effect of the package is to strengthen enforcement of EU consumer protection rules. Enabling Member States’ competent authorities to impose fines of 4% (or more, at Member State discretion) of a business’s annual turnover for breaches of consumer law under each of the four cross-cutting consumer protection Directives will bring enforcement of consumer protection rules in line with the current data protection and competition enforcement in this respect. The proposed instrument that would replace the existing Injunctions Directive would enable consumer rights organisations to bring forward representative actions on behalf of consumers across the full range of horizontal and sector-specific EU consumer protection instruments. Taken together, these measures would significantly increase businesses’ incentives to comply with EU consumer protection rules.
1.13A variety of further updates and clarifications are proposed to ensure that consumer protection rules adequately reflect recent market developments. The proposed adaptations to developments in the digital economy are modest in scope, and would provide consumers with greater transparency when transacting online and also extend protections to online transactions in which the consumer pays for a service with their data. The removal of two disproportionate regulatory obligations is based on the Commission’s public consultation with SMEs and consumer associations. The provisions regarding the misleading marketing of ‘dual quality’ products will address widespread concerns about this practice in some Member States.
1.14Although the Minister does not identify any specific concerns, he indicates that the Government intends to closely monitor the proportionality of a number of aspects of the proposals as they develop, to ensure that:
1.15On EU exit, the Minister states that “the way consumer protections apply across the border with the EU in future is a matter for negotiations” but that it is not in either party’s interest “for rogue traders to target citizens based in the UK or EU.” We note that the Government’s White Paper “The Future Relationship between the United Kingdom and The European Union” published on 12 July 2018 states that, as part of the future economic partnership, “the UK proposes to commit to maintain reciprocal high levels of consumer protection” including “cooperation on enforcement, including provisions to allow mutual exchange of information and evidence, and a framework to work collectively on areas of wider consumer detriment.”
1.16We ask the Government to provide the Committee with an update regarding both proposed Directives when the shape of any anticipated General Approach or mandate becomes clearer. As part of this update, we particularly request that the Government clarify whether the text achieves satisfactory outcomes on the three points which the Minister identified as requiring further monitoring (see paragraph 14).
1.17In the same update, we ask the Government to provide further clarification of how it envisions UK-EU consumer protection working in practice within the context of the future relationship. We particularly ask the Government to clarify:
1.18We would also request the Government to clarify whether there is any overlap or conflict with the proposed Directive (b) and:
i)the proposed Directive concerning contracts for the supply of digital content currently being negotiated;
both generally and in relation to the proposed extension of the existing Consumer Directive to digital services for which a consumer has paid using their personal data?
1.19We retain these proposals under scrutiny. In the meantime, we ask for a response to the above EU exit implications by 19 September 2018, and an update in relation to the two draft Directives when sufficient progress has been made in Council negotiations for the outline of any General Approach to be clear.
(a) Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee: A New Deal for Consumers: (39619), 7875/18, COM(18) 183; (b) Proposal for a Directive of the European Parliament and of the Council amending Council Directive 93/13/EEC of 5 April 1993, Directive 98/6/EC of the European Parliament and of the Council, Directive 2005/29/EC of the European Parliament and of the Council and Directive 2011/83/EU of the European Parliament and of the Council as regards better enforcement and modernisation of EU consumer protection rules: (39618), 7876/18 + ADDs 1–4, COM(18) 185; (c) Proposal for a Directive Of The European Parliament And Of The Council on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC: (39617), 7877/18 + ADDs 1–5, COM(18) 184.
1 European Commission, A New Deal for Consumers: Commission strengthens EU consumer rights and enforcement ().
2 Directive (EU) of the European Parliament and of the Council of 25 October 2011 on consumer rights.
3 Directive (EC) on unfair terms in consumer contracts.
4 Directive (EC) concerning unfair business-to-consumer commercial practices in the internal market.
5 Directive (EC) on consumer protection in the indication of the prices of products offered to consumers.
6 Explanatory Memorandum from the Minister, BEIS ().
7 BEIS, Modernising consumer markets: Consumer Green Paper ().
8 Explanatory Memorandum submitted by the Minister, BEIS ().
9 Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee: a New Deal for Consumers .
10 of the Council and European Parliament of 12 December 2017 on cooperation between national authorities responsible for the enforcement of consumer protection laws and repealing Regulation (EC) No 2006/2004.
11 HM Gov, The future relationship between the United Kingdom and the European Union ().
12 Association Agreement between the European Union and its Member States, of the one part, and Ukraine, of the other part
13 See (37389), + ADDs 1–2, COM (15) 634: Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content. The Committee already has under scrutiny
14 We note that the Consumer Rights Act 2015 only applies to digital content/services supplied for money and not personal data.
Published: 24 July 2018