EMOTA, the European E-commerce and Mail Order Trade Association, studied carefully the new Green Paper aimed at providing options to close any gaps to effective redress identified in cases where many consumers are likely to be affected by the same legal infringement of a trader.

As the organisation which represents 23 national distance selling associations across Europe, EMOTA supports any initiative that removes uncertainty by simplifying and harmonising legislation in the European Single Market, that promotes consumer confidence via a well-balanced high level of protection and prevents excessive burdens on distance sellers.

In our comments below we will focus on two points:

1. the evidence of need and
2. the suggested policy options.

1. Evidence of need

EMOTA misses the required evidence that Community action is needed in this field.

EMOTA has already expressed on several occasions its serious concerns vis-à-vis any initiative aiming at introducing collective redress mechanisms at European level as long as the need for action is not proven. The principles of subsidiarity and better regulation must be respected (Q1).

a. Cross-border collective redress would not necessarily increase cross-border trade.

There are two studies available which have been produced by outside contractors for DG Health & Consumer Protection.

The first one is devoted to the evaluation of the effectiveness and efficiency of collective redress mechanisms in the EU (“Evaluation study”), and the second to the problems faced by consumers in obtaining redress for infringements of consumer protection legislation, and the economic consequences of such problems (“Problems study”)[1].

None of them clearly evidences that the Commission’s aim, to encourage cross-border purchases by overcoming consumers’ lack of trust in other legal systems regarding the means of satisfactory redress, could be achieved by introducing a European collective redress mechanism.

Indeed, we do not question the usefulness of collective redress mechanisms where they exist. This is the more so as the “Evaluation study” rightly concludes that the existing collective redress mechanisms may decrease rather than increase litigation costs for businesses, in that a multitude of separate litigations, potentially in different courts, is replaced by one collective procedure.

We do however question the need to introduce an EU collective redress system covering cross-border cases. As said before, we doubt this would be the missing link to make consumers and retailers as confident shopping cross-border as in their home country. The best redress mechanism cannot overcome the fact that European Member States differ in legal, cultural, political and economic terms. The “Problems study” concludes that “obstacles for consumers to obtain redress in other Member States are likely to contribute to a reduction of direct cross-border consumer transactions and competition in the internal market. This should however not be taken to imply that improvements in consumer redress would by themselves produce a dramatic change in the removal of actual barriers to consumer cross-border trade in Europe. Even with a reduction of obstacles to obtaining redress, and relatively effective legal redress schemes in place, cross-border transaction costs in at least some consumer markets may remain high.”

We have on several occasions mentioned the various elements which increase cross-border transaction costs compared to national transactions costs. The impact of the “Rome I” regulation[2] requiring from companies respect of the consumer country’s rules, with which they may not be familiar, should be highlighted again as one of those elements. Hence, our expectations are high regarding the full harmonisation approach followed by the new proposal for a directive on consumer rights, (COM 2008) 614 final. Uniform consumer rules are indeed suited to help overcoming barriers to cross-border business.

The “Evaluation study” further assesses whether obstacles to trade caused by differing approaches on collective redress could emerge. It concludes that up to now, the impacts of differing collective redress approaches on trade and competition between Member States appear to have remained very limited so far. Different approaches to collective redress across Member States do not appear to have had a significant influence on firms’ cross-border commercial strategies and on the resulting trade flows.

b. There is no evidence for cross-border infringement cases which could be bundled and would justify the need for EC action.

The “Problems study” mentions the lack of exposure to liability as incentive for companies to violate consumer law. It even talks about companies which “routinely” infringe consumer rules, confident that consumers would not engage in redress actions. There are however no precise examples attached to those theoretical assumptions.

c. There are already redress possibilities available at both European and national level.

Again, we would like to stress the existence of EU legal instruments capable of helping to resolve cross-border mass claims, such as the Injunctions Directive 1998/27, Regulation 2006/2004 on the cooperation between national authorities responsible for the enforcement of consumer protection and Regulation 861/2007 on European Small Claims. (Q7)

In addition, there are national and international alternative dispute resolution mechanisms (ADR) in place, such as the European Consumer Centres (ECC-Net) to which the Commission explicitly refers in the Green Paper, and ombudsman systems at companies’ and associations’ level. In this context, we would like to draw attention to the codes of conducts and trust marks which EMOTA and quite a few of its members have adopted for the benefit of consumers. There is more information on them publicly available on our website (www.emota.eu).

2. The suggested policy options

The arguments set out above would suggest EMOTA giving preference to Option 1, “No EC action”.

Although the Commission services underline that the Green Paper represents a consultation document and that the Commission has no predetermined view, we do however understand that “do nothing” is not considered by the Commission as an acceptable option, as it strongly feels to have detected a problem to which a solution is needed.

With this in mind and in the strong interest of avoiding any new legislation with new implementation costs for companies which is not based on evident need, we would suggest the Commission focuses on

• improving ADR mechanisms,

• encouraging businesses to improve, if need be, their complaint handling schemes and

• taking actions to raise consumers' awareness of existing means of redress.

Those actions are mentioned in Option 3 (Q2), whereby preference would be given to non-binding instruments, as they would allow for proper fitting of measures into the national environment (Q6).

The aforesaid “Evaluation study” concludes that ADR may provide significant efficiency advantages compared with individual judicial redress, and this is reflected in lower threshold amounts. ADR mechanisms of a collective form could also produce, according to the study, reductions in per-case costs of resolving disputes over the benchmark of pure individual redress of the same kind of cases: the sharing of services and time of the necessary actors in the proceeding can provide scale economies in mass claims/mass issues.

We agree with those assessments.

The Commission could thus take measures designed to increase the efficiency gains from ADR and to encourage availability of ADR schemes and participation of firms in them.

The European Commission has recently assigned external consultants to carry out a study on the use and functioning of Alternative Dispute Resolution in the European Union.

We look forward to the results of this survey, as they may reveal new aspects to be explored in this context.

Finally, we would like to stress that there is also room, in our view, for increasing consumers’ awareness of the aforementioned European Consumer Centres Network (EEC-Net) to which consumers can turn if they have a problem with a product they bought in another European country. The Centres help efficiently in solving disputes with traders. (Q4)