New Deal for Consumers, no deal for businesses

In April, the European Commission proposed a New Deal for Consumers which should strengthen EU consumer rights and enforcement. But who is it for and how significant is it?

Actually, it will bring a small benefit to consumers and it could seriously harm businesses. So called class actions or collective redress have showed that in practice they can create a profitable business for a category of lawyers whose interests are not necessarily matching those of the consumers they are supposedly representing.

According to figures from the US Chamber Institute for Legal Reform, a consumer in the United States who gets relief in a class action receives on average only $32, whereas class action lawyers have an average recovery to the tune of $1 million. This cannot be the objective. When creating such a legal instrument it should be safeguarded against misuse or unwanted results.

However, many of the safeguards which were included in the Commission’s own Recommendation on collective redress of 2013 were discarded. One example is the introduction of an opt-out regime, whereas the Recommendation was championing an opt-in system. Businesses stress that the focus should continue to be on public enforcement, efficient out-of-court dispute resolution tools and awareness of the many rules among both consumers and businesses, rather than creating new rules that are not well-balanced.