MEPs add to pressure for collective redress
MEPs and consumer groups are encouraging the European Commission to make proposals for an EU-wide collective redress system, amid warnings from businesses that it could be abused.
The idea is that it would be easier and less costly for consumers to obtain compensation if they joined forces to bring cases. Consumer groups argue that this would also reduce consumers’ reluctance to buy goods or services in other EU member states. Businesses are less keen, arguing that plans could be abused and would do little to benefit consumers.
Last month, two European Parliament committees – for the internal market and for economic affairs – called for the Commission to produce a proposal. A third – the legal affairs committee, which is leading the MEPs’ work on the issue – is due to vote on 19 December on a report drawn up by Klaus-Heiner Lehne, a German centre-right MEP.
Sylvna Rapti, a Greek Socialist MEP, who led the internal market committee’s work on the issue, said she wanted the system to be “simple and affordable”, but added that there needed to be “all necessary safeguards” to avoid abuse. The Parliament’s economic affairs committee reported that collective redress could “contribute to consumer confidence” and would boost the functioning of the internal market and online trade.
The Commission is expected to present a plan in February or March, but it has yet to make a final decision on whether to draw up a proposal for a system of collective redress.
Joaquín Almunia, the European commissioner for competition, has spoken out several times in support of collective redress. He is one of three commissioners examining the possibility of legislation. John Dalli, the European commissioner for health and consumer policy, is also thought to be broadly in favour. Viviane Reding, the European commissioner for justice, fundamental rights and citizenship, is seen as less positive about the idea.
Business groups are lobbying strongly against the idea, claiming that its impact on businesses has been underestimated. They are also warning of the threat of third-party hedge-funders financing litigation cases, a phenomenon that has increased the number of ‘frivolous’ cases in the US and other parts of the world.
“We all want an effective, quick and cheap system, but it would be terrible if the system is abused by third parties that have nothing to do with consumers or the people who were harmed,” said Scévole de Cazotte, the executive director for international initiatives of the Institute for Legal Reform, part of the US Chamber of Commerce. “There should be safeguards to prevent those who are not interested in the welfare of consumers, but rather in the thickness of their wallets.”
BEUC, the European consumers’ organisation, said that safeguards could be put in place to prevent US-style class actions. It wants the system to cover both national and cross-border cases, and have an ‘opt-in’ procedure – where consumers would have to come forward and declare that they want to join the collective process – as well as an ‘opt-out’ procedure, where all consumers affected are automatically regarded as belonging to the group, unless they explicitly declare that they do not want to participate.
The Parliament’s internal market committee favoured the new system applying to cross-border cases only, and only on an ‘opt-in’ basis.
Monique Goyens, BEUC’s director-general, said that, without collective redress, the single market would remain incomplete, and she dismissed fears that the EU would go the way of the US as a “myth”. “An EU system would not replicate the excesses of the US class action,” she said.
“Punitive damages would not be introduced and the decisions would be judge-led, not jury-led. The three commissioners leading work on this issue have constantly emphasised such safeguards.”
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