For years, consumer groups have been pointing out that the opportunities for consumers in respect of bundling their claims regarding rights violations by corporations in form of collective redress, had to be improved Europe-wide. The scandals surrounding Volkswagen and Cambridge Analytica gave the debate new impetus. They were a sobering reminder as to how limited the rights of European consumers are with regard to collective law enforcement. While consumers in USA received substantial compensation, Europe did not have any uniform and efficient law enforcement proceedings. The response of the European Commission in April 2018 was its package for a “New Deal for Consumers”, which as one of two legislative acts included a proposal for a new Directive on collective redress.

Trilogue negotiations achieve positive result

In accordance with the agreement reached in the so-called “trilogue negotiations” between Commission, Parliament and Council, the new Directive obliges all EU Member States to introduce collective law enforcement proceedings. These include both injunction suits and suits for performance such as suits for compensation or warranty. These suits can be brought by so-called “qualified entities”. Depending on whether they are domestic or cross-border proceedings, they are subject to different quality criteria. In case of cross-border proceedings, entities must have – among other – non-profit characteristics and prove that they have already been working on behalf of consumer interests for at least 12 months. In Austria, at least the Chamber of Labour and Austrian Consumers’ Association (VKI) fulfil these criteria. With regard to domestic proceedings, Member States can either assume the criteria of “qualified entities” for cross-border proceedings or determine their own criteria. The Commission shall also review whether a European ombudsperson for cross-border collective redress should be appointed.

It is also very positive that the trilogue negotiators agreed on another scope of the Directive: this includes, apart from general consumer rights, also infringements by traders in respect of data protection, financial services, travel and tourism, energy, telecommunication, environment and health services also air and rail passenger rights. The latter had been an issue between the institutions until the end. The inclusion of data protection also makes - among other - collective redress against large online corporations possible.

Agreement of Parliament and Council and national implementation

The next step is for the plenary of EU Parliament and Council to agree to the result of the trilogue negotiations. Afterwards, Member States have two years to transpose the Directive into national law and another six months for the relevant laws to come into effect. Even if a faster implementation in Austria would have been welcomed, it is important to ensure practicability and the positive involvement of (national) consumer associations.

Chamber of Labour and BEUC: Positive negotiation result

The European Consumer Organisation (BEUC) called the agreement on the Directive on collective redress an “historic deal”. However, at the same time BEUC pointed out that now also Member States had to make a contribution within the scope of their national implementation to create a successful regulation.

The Chamber of Labour too welcomes the agreement in accordance with its long-term demands. Right from the start, the AK had supported the proposal by the Commission on a collective redress Directive and promoted a legislative act on collective redress during the course of the negotiations. On behalf of investors, car owners and passengers, the AK has been involved in representative action and collective redress for years. However, these have been – until now – very lengthy and expensive lawsuits, which in addition represent an enormous burden for local courts. Even so and given the current legal situation, the AK has been able to achieve quite a lot for consumers: for example, thanks to the AK’s involvement, investors, who suffered losses due to Bank Meinl European Land, received compensation amounting to 13 Million Euro. Currently the Chamber of Labour, subsequent to the insolvency of the construction group Alpine, is involved in a total of 11 class action lawsuits on behalf of ca. 1,500 investors against Austrian banks. The amount involved is 27 Million Euro. From the AK’s point of view, the agreement is also to be welcomed because it enables an EU-wide implementation of consumer rights in case of infringements at European level. This ensures that at last foreign companies too can be held liable in future. Such a tool would have made dealing with the Diesel scandal significantly easier.

Further information:

AK EUROPE Position Paper on the New Deal for Consumers

AK EUROPE: Directive on representative actions on the home straight

AK EUROPE: New Deal for Consumers: Important decisions at the end of the election period

BEUC: EU institutions reach historic deal on EU-wide collective redress law