Empowering David vs Goliath: consumer protection and the new representative actions directive

On 24 November 2020, the European Parliament approved the new EU Directive on representative actions for the protection of the collective interests of consumers in the European Union (the Directive).

This groundbreaking directive will facilitate cross border collective actions in Europe, allowing EU consumers to better defend their rights.

It covers a wide range of areas and will address breaches of over 50 pieces of EU legislation, including; data protection, product liability, financial services, the provision of food information (e.g. allergy and food labelling rules), telecoms, environment and health, travel and tourism (including air, sea and rail passenger rights), as well as general consumer law issues.

The Directive

The measures included in the Directive will create a standard model for representative action in all member states, meaning claims can be brought in individual countries, as well as across Europe.

Cross-border claims will be run on an opt-in basis, with individuals able to decide whether or not they wish to join the proceedings. Under the Directive, claimants can seek a number of remedies including injunctions, compensation, and in the context of product liability - product repair, replacement and refund. Only claims for actual loss are viable under the Directive, as opposed to for punitive damages.

As part of this model, each Member State will have at least one “Qualified Entity” which can launch actions on behalf of claimants. The EU Commission has already committed to facilitating improved access to justice for consumers by providing that each ‘Qualified Entity’ will have access to financial support in order to launch claims.

’Qualified Entities’ capable of bringing legal actions under the new Directive may include public bodies. However, they will have to meet certain criteria to be able to launch a cross-border case, such as;

  • demonstrable activity in protecting, for example consumers interests, in the previous 12 months
  • being not-for profit
  • proving that they are independent from third parties with opposing economic interests to consumers (although the Directive includes provision for third party funding where it complies with a Member State’s national law and the economic interest doesn’t divert away from the protection of the collective interests of consumers).

Beyond those central criteria, Member States will generally be able to set their own requirements as to the credentials required of prospective Qualified Entities wishing to engage in collective actions at a national level.

The EU has introduced a number of safeguards to prevent the system from being abused. For example, national courts will be permitted to dismiss manifestly unfounded cases in accordance with their national laws, and a ‘loser-pays’ principle will govern the issue of costs. The Qualified Entities will also be required to disclose the source of funds used to support each representative action, and actions against business must not be funded by their competitors or other parties with financial interest (subject the exceptions mentioned above).

Making sure justice gets done

Parties will be able to select the jurisdiction with the most favorable regime and the most appropriate Qualified Entity. Although this isn’t an unqualified right, but multiple entities are permitted to combine actions across the EU, for example, organisations in Italy, the Netherlands and Spain could work together and bring all claims in the courts of one of those member states.

Moreover, the Directive preserves a high degree of autonomy for Member States in relation to procedural elements. It will be for each country to determine its own rules on matters such as the admissibility of evidence, means of appeal and the minimum number of consumers required to bring a claim.

Lionizing David

The Directive is a vital step forward in the world of consumer rights. It has the potential to facilitate more cost-effective group actions by providing a legislative conduit through which claims across the EU can be consolidated, thereby empowering consumers to enforce their legal rights irrespective of the size and reach of any defending ‘Goliath’ entity.

It comes too late to impact UK consumers directly, but as we move into 2021 and out of Europe the Directive may well inspire better consumer protection legislation in the UK. In the sphere of product liability, the IMMDS Review published in July 2020 found that those injured by medicines and medical devices in the UK had not been well-served by the existing justice system. Against that backdrop the UK government has a formal diagnosis of the problem in the UK, and perhaps, in the form of the Representative Action Directive a potential cure if it serious about improving access to justice for consumers in the UK.