Explanatory Memorandum to COM(2008)614 - Consumer rights - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2008)614 - Consumer rights. |
|---|---|
| source | COM(2008)614  |
| date | 08-10-2008 |
Grounds for and objectives of the proposalThe proposal is a result of the review of the Consumer Acquis which covers a number of Directives on consumer protection.The Review was launched in 2004 with the objective to simplify and complete the existing regulatory framework. The overarching aim of the Review is to achieve a real business-to-consumer internal market striking the right balance between a high level of consumer protection and the competitiveness of enterprises, while ensuring respect of the principle of subsidiarity. The Directives under review contain minimum harmonisation clauses meaning that Member States may maintain or adopt stricter consumer protection rules. Member States have made extensive use of this possibility. The outcome is a fragmented regulatory framework across the Community which causes significant compliance costs for businesses wishing to trade cross-border. The conflict-of-law rules like those included in the Regulation on the law applicable to contractual obligations ("Rome I") do not address this problem. Under Rome I, consumers contracting with a foreign trader cannot be deprived of the protection stemming from the non-derogable rules of their home country.The internal market effects of the fragmentation are a reluctance by businesses to sell cross-border to consumers which in turn reduces consumer welfare. If consumers are precluded access to competitive cross-border offers they do not fully reap up the benefits of the internal market in terms of more choice and better prices.The level of consumer confidence in cross-border shopping is low. One of the causes of this phenomenon is the fragmentation of the Consumer Acquis. The fragmentation and the related uneven level of consumer protection make it difficult to conduct pan-European education campaigns on consumer rights and to carry out alternative dispute resolution mechanisms.The objective of the proposal is to contribute to the better functioning of the business-to-consumer internal market by enhancing consumer confidence in the internal market and reducing business reluctance to trade cross-border. This overall objective should be attained by decreasing the fragmentation, tightening up the regulatory framework and providing consumers with a high common level of consumer protection and adequate information about their rights and how to exercise them. To this end, the European Commission will put in place a process in order to look for the most appropriate way to inform consumers on their basic rights at the point of sale.
General contextThe costs incurred by business to comply with the fragmented Consumer Acquis are significant. Surveys have shown that for the majority of traders, such compliance costs constitute an important barrier to cross-border trade which reduces their incentive to sell cross-border, particularly to consumers in small Member States. If no legislative action is taken at Community level, such costs will continue to be passed on to consumers in the form of higher prices or, worse, businesses will continue to refuse to sell cross-border or create geographical discriminations between consumers depending on their country of residence. The European Parliament, in its Resolution of 16 July 2007 recommended that legislative action is taken and expressed its preference for the adoption of an instrument taking the form of a horizontal Directive based on full targeted harmonisation.In its Communication A single market for 21st century Europe of 20 November 2007, the Commission stated that the single market needs to deliver better results and tangible benefits for consumers and SMEs.
Existing provisions in the area of the proposalThe proposal aims at revising Directive 85/577/EEC on contracts negotiated away from business premises, Directive 93/13/EEC on unfair terms in consumer contracts, Directive 97/7/EC on distance contracts, Directive 1999/44/EC on consumer sales and guarantees. These four Directives provide for consumer contractual rights. The proposal merges these four Directives into a single horizontal instrument regulating the common aspects in a systematic fashion, simplifying and updating the existing rules, removing inconsistencies and closing gaps.The proposal moves away from the minimum harmonisation approach followed in the four existing Directives (i.e. Member States may maintain or adopt stricter national rules than those laid down in the Directive) to embrace a full harmonisation approach (i.e. Member States cannot maintain or adopt provisions diverging from those laid down in the Directive).
Consistency with the other policies and objectives of the UnionDirective 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market contains some basic information requirements which have to be fulfilled by traders before contract conclusion. Directives 85/577/EEC, 97/7/EC and 99/44/EEC also contain some information requirements. In line with the Better Regulation objective, the proposal ensures consistency between these various Directives and regulates the legal consequences of a failure to comply with such requirements.The proposal achieves a high level of consumer protection in consumer contracts. Therefore, the proposal complies with fundamental rights, in particular Article 38 of the Charter of Fundamental Rights of the European Union.The proposal also complies with the fundamental principles of the EC Treaty, such as the principles of the free movement of goods and the freedom to provide services which will not be restricted by stricter national rules in the field harmonised by the Directive, except for the necessary and proportionate measures which Member States may take on grounds of public policy, public security, public health or the protection of the environment, in accordance with Community law.
Consultation of interested parties
Consultation methods, main sectors targeted and general profile of respondentsOn 8 February 2007, the Commission adopted the Green Paper on the Review of the Consumer Acquis, summarising the Commission's initial findings and initiating a public consultation focusing on the cross-cutting issues (i.e. the horizontal issues) of the Directives under review.The Green Paper attracted responses from a wide range of stakeholders, i.e. business, consumer, European Parliament, Member States, academics and legal practitioners.The Commission also published two consultation documents on Directive 97/7/EC and on Directive 85/577/EEC focusing on the specific issues (i.e. the vertical issues) pertaining to these Directives. All interested parties were invited to submit replies to the Commission, respectively by 21 November 2006 and 4 December 2007. The Commission received respectively 84 and 62 replies from all relevant stakeholders. The outcome of these two specific consultations is available at the website: ec.europa.eu/consumers/rights/gen_rights_enThe Commission held a full-day stakeholder conference on 14 November 2007.On 20 December 2007, two questionnaires (the first one targeted at businesses, the second one targeted at consumers) were sent out by the Commission's contractor to stakeholders. The current problems and the envisaged legislative changes with different options have been discussed with business and consumer stakeholders who were invited to answer questions on the likely impacts of each option in the context of workshops held in February 2008.
Summary of responses and how they have been taken into accountThe majority of respondents to the Green Paper called for the adoption of a horizontal legislative instrument applicable to domestic and cross-border transactions, based on full targeted harmonisation; i.e. targeted at the issues raising substantial barriers to trade for business and/or deterring consumers from buying cross-border. The horizontal legislative instrument should in the view of most respondents be combined with vertical revisions of the existing sector-specific directives (for example revision of the Timeshare and Package Travel Directives). There was a strong support for tightening-up and systematising the Consumer Acquis, e.g. introducing common definitions of consumers/traders and delivery, harmonised rules on information and withdrawal rights and the insertion at Community level of a 'black' list of unfair contract terms (i.e. terms banned upfront) and a 'grey' list of such terms (i.e. terms presumed to be unfair) instead of the current purely indicative list.
This Green Paper consultation was conducted over the internet from 08/02/2007 to 15/05/2007. The Commission received 307 responses. The results are available on ec.europa.eu/consumers/rights/cons_acquis_en.
There was no need for external expertise.
Impact assessmentSix options have been subject to an impact assessment. All policy options take into account, as a baseline, the recently-adopted Rome I. Policy Option 1 is the status quo option, meaning that the minimum harmonisation of the Consumer Acquis is maintained. The economic impact of this option is negative. The key problem of the fragmentation of the regulatory framework would persist.Policy Option 2 is a non-legislative option consisting of Community funding for awareness raising campaigns and self-regulation. As a standalone package, it would not bring any positive impact since the key problem of legal fragmentation would remain, unless the codes of conduct were based on the highest common standards and covered the whole Community. Policy Option 3 includes a total of 4 legislative proposals, based on full harmonisation and which could fit in a horizontal instrument. It focuses on a limited number of inconsistencies in Community legislation. Clearer and up to date definitions simplify the legislation but have very limited impact on the contribution to the better functioning of the internal market, minimising the burden on business and enhancing consumer confidence.Policy Option 4 includes 16 legislative changes based on full harmonisation and combined with the four legislative changes proposed under Policy Option 3. It addresses all the relevant consumer protection issues which traders have to take into account when designing their marketing materials, drafting their standard contract terms and operating their business with consumers. The full harmonisation of those issues would considerably reduce the administrative costs for distant and direct traders selling cross-border and would have a positive impact on the functioning of the internal market. Such legislative changes are relevant for consumer confidence in cross-border shopping. Furthermore, this Policy Option includes an update of the legislation to new market developments. This Policy Option has positive economic impacts, enhance consumer confidence and improve the quality of legislation.Policy Option 5 includes 3 legislative proposals based on full harmonisation and granting new consumer rights in addition to the 20 legislative changes proposed under Policy Options 3 and 4. The negative impact on the costs borne by business and on the contribution to the better functioning of the internal market do not appear to be outweighed by the benefits it would bring to consumers.Policy Option 6 includes the legislative proposals covered by Policy Option 3 or 4 and an internal market clause applying to the non-fully harmonised aspects. The internal market clause would allow the contracting parties, for those aspects covered by the clause, to choose the law of any Member State even where that law provides for a lower level of consumer protection than the law of the country where the consumer resides. Given its conflict with Article 6 of Rome I, such a clause would cause a legislative amendment and involve a major policy change a few months after the adoption of Rome I which contains a review clause (review to be completed by 2013). Furthermore, this policy option, while supported by business, has been opposed by the great majority of Member States and all consumer organisations in their response to the Green Paper. While this option would remove regulatory barriers in the internal market and result in a reduction of the burden for business, it would transfer the problem of legal uncertainty to consumers resulting in negative impacts on consumer confidence; it would also create problems for national courts and enforcement bodies who would have to apply a foreign law.
The Commission carried out an impact assessment listed in the Work Programme, whose report is accessible on:ec.europa.eu/consumers/rights/cons_acquis_en.
Contents
Summary of the proposed actionThe purpose of the proposal is to contribute to the proper functioning of the business-to-consumer internal market and achieve a high common level of consumer protection by fully harmonising the key aspects of consumer contract law which are relevant for the internal market.
Legal basisArticle 95 of the Treaty.
Subsidiarity principleThe subsidiarity principle applies insofar as the proposal does not fall under the exclusive competence of the Community.
The objectives of the proposal cannot be sufficiently achieved by the Member States for the following reasons.
The legal fragmentation problem cannot be solved by the Member States individually since it is the different implementation by the Member States of the minimum harmonisation clauses contained in the existing Directives that is at the root of the problem. Likewise, addressing new market developments, regulatory gaps and inconsistencies in Community consumer laws in an uncoordinated manner generates more fragmentation and exacerbates the problem. Only a coordinated Community intervention can contribute to the completion of the internal market by solving this problem.
Action by Member States alone in an uncoordinated manner would not allow the internal market to deliver results both for business, in particular SMEs and consumers. Indeed such an uncoordinated action would not use the potential of the business-to-consumer internal market, particularly the high potential of growth of cross-border distance selling which SMEs could directly benefit from. It would also deprive consumers from reaping up the benefits of the internal market with more choice and better prices from cross-border offers. Finally, it would restrict the development of competitive enterprises, especially SMEs who would like to expand their business across the Community.
Community action will better achieve the objectives of the proposal for the following reasons.
The proposal is based on full harmonisation of Community consumer contract law. Its positive impact on the retail market would be considerable. As shown by the Impact Assessment Report, the savings in terms of administrative burden on business wishing to sell cross-border would be high. The proposal would create a single set of rules ensuring a high common level of consumer protection across the Community and allowing traders to sell to consumers in 27 Member States as they would do at home with for example the same standard contract terms and the same information materials. The proposal would therefore significantly reduce traders' compliance costs while granting consumers a high level of protection. The discrepancy between the growth in domestic and cross-border sales is particularly significant for Internet sales for which the potential of further growth is high. This proposal could therefore be one of the main tangible results of the business-to-consumer internal market.
The legal fragmentation resulting from the implementation by Member States of the minimum harmonisation clauses in the Directives under review has been shown by a comparative law analysis of the implementation of the Consumer Acquis in all 27 Member States. This analysis has been published on the website: ec.europa.eu/consumers/rights 2008 Eurobarometer survey indicates that this legal fragmentation constitutes an important barrier to cross-border trade.
The scope of the proposal is limited to consumer protection rules in contracts concluded between traders and consumers. It fully harmonises all the consumer protection aspects which are relevant for cross-border trade, i.e. the aspects which are key for traders when they draft their standard contract terms and design the information materials as well as for the operation of their business (e.g. the management of returns in distance or direct selling).
The proposal therefore complies with the subsidiarity principle.The Commission recognises that the full harmonisation approach successfully pursued with the Unfair Commercial Practices Directive in the field of consumer protection marks a new departure in the area of consumer contractual rights. This causes for an appropriate communication strategy to explain the impact and benefits of the proposal. In addition to the interinstitutional dialogue with Parliament and Council, the Commission intends to engage actively with all stakeholders in the months ahead in the various Member States.
Proportionality principleThe proposal complies with the proportionality principle for the following reasons.
The proposal regulates only the key aspects of consumer contract law and does not interfere with more general contract law concepts such as the capacity to contract or the award of damages. The proposal applies both to domestic and cross-border contracts, in line with the outcome of the Green Paper. The inclusion of domestic transactions within the scope is proportionate to the objective of simplification of the Community regulatory framework, since it avoids a dual regime which would have created further fragmentation and distortions of competition between businesses trading only domestically and those trading both domestically and cross-border.
The administrative burden on public authorities would be negligible since it would merely consist in notifying to the Commission the national case law on unfair contract terms in the context of a comitology procedure. The Community traders who wish to expand their business cross-border would significantly reduce their administrative costs due to full harmonisation. Some of the companies trading only domestically with no interest to take advantage of the internal market would marginally lose out due to their small one-off costs of adaptation to the regulatory changes. For face-to-face retailers, a minor additional burden can be expected for specific types of face-to-face businesses, such as second-hand shops acting as intermediaries of consumers. If the proposal fosters consumer protection and increases competition in the retail market through more cross-border offers, then consumers will win through having more choice, better quality and lower prices.
Proposed instruments: directive.
Other means would not be adequate for the following reasons.The problem of fragmentation of the Community regulatory framework can only be overcome at Community level by a legislative initiative. Self-regulation or co-regulation would not solve this legal fragmentation problem. A Directive is preferred to a Regulation since its transposition would allow a smoother implementation of the Community law into the existing national contract laws or consumer codes. It would give the Member States the necessary margin of appreciation to maintain national legal concepts and basic principles of national contract law which comply with the objectives of the Community legislative proposal. Unlike a Regulation, the implementation of a Directive may give rise to a single and coherent set of law at national level which would be simpler to apply and interpret by traders, easier to enforce by public authorities and more in line with the subsidiarity principle.
The cost of the future Committee on unfair terms includes the salary of one official valued at € 117,000 to support the comitology process. It also includes the cost of the plenary session with one participant from the 27 Member States and three meetings scheduled per year, valued at € 20,000 each.
Simplification
The proposal provides for simplification of legislation.
The proposal considerably simplifies the Consumer Acquis. By merging together four Directives, it regulates in a systematic fashion the commonalities and eliminate the overlaps and inconsistencies. For example, the proposal consistently regulates common features such as common definitions, a core of pre-contractual information and rules on the contractual aspects of sales which are currently scattered across several Directives.
The proposal is included in the Commission's rolling programme for up-date and simplification of the acquis communautaire and its Work and Legislative Programme under the reference 2008/SANCO/001.
Repeal of existing legislationThe adoption of the proposal will lead to the repeal of existing legislation.
The proposal includes a review clause.
Correlation tableThe Member States are required to communicate to the Commission the text of national provisions transposing the Directive as well as a correlation table between those provisions and this Directive.
European Economic AreaThe proposed act concerns an EEA matter and should therefore extend to the European Economic Area.
Detailed explanation of the proposalChapter I contains the common definitions such as consumer and trader and lays down the principle of full harmonisation.Chapter II contains a core of information to be provided by traders prior to the conclusion of all consumer contracts as well as an information obligation on intermediaries concluding contracts on behalf of consumers. Chapter III which only applies to distance and off-premises contracts, provides for specific information requirements and regulates the right of withdrawal (length, exercise and effects) in a consistent manner. It also refers to a standard withdrawal form reproduced in Annex I(B).Chapter IV clarifies the provisions of Directive 99/44/EC. It maintains the principle that the trader is liable to the consumer for a period of two years if the goods are not in conformity with the contract. It introduces a new rule whereby the risk of loss or damage of the goods is transferred to the consumer only when he or a third person indicated by him other than the carrier acquires the material possession of the goods.Chapter V broadly reflects the provision of Directive 93/13/EEC. It applies to unfair contract terms which have not been individually negotiated, such as standard contract terms. Unfair terms are those creating significant imbalances in the rights and obligations of consumers and of traders and are not binding on consumers. In order to ensure legal certainty, the Directive contains two lists of unfair terms. Annex II contains a list of terms which in all circumstances are considered unfair. Annex III contains a list of terms which are deemed unfair unless the trader proves otherwise. These same lists apply in all Member States and may only be amended by the comitology procedure provided for by the Directive.