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IP/04/655

Brussels, 18 May 2004

Commission welcomes agreement to crack down on rogue traders: EU-wide enforcement network to be created
The European Commission has welcomed the Competitiveness Council’s endorsement of a new EU law that will help prevent unscrupulous traders from evading consumer protection authorities by targeting consumers living in other EU countries. Council today endorsed legislation that will create an EU-wide network of national enforcement authorities capable of taking co-ordinated action against rogue traders who abuse the freedom of the EU's Internal Market in order to run cross border scams. The new law, which was initially proposed by the Commission in July 2003 (see IP/03/1067), will remove barriers to information exchange and cooperation and empowers enforcement authorities to seek and obtain action from their counterparts in other Member States. Council and Parliament were able to reach agreement on the legislation at the first reading stage, the European Parliament having accepted a Council compromise at its April plenary session. Political negotiations between the institutions having been completed, final adoption of the law will take place later this year once the legal texts have been finalised. The new EU-wide enforcement network will start work in 2006

“Cross-border scams don’t just cheat consumers. They also undermine confidence in the EU’s Internal Market. Member States need to work together to root out the rip-off merchants. Our EU-wide enforcement network gives them the means to do that. “ said David Byrne, the European Commissioner for Health and Consumer Protection. “Rogue traders have been put on notice: they will soon have no hiding places in the EU.”

Cross-border scams: a growing problem

Catching rogue traders is hard enough in a single Member State but it can become almost impossible when they relocate to another country, as increasing numbers appear to be doing. Cooperation between national consumer protection authorities is the only way to ensure such rogue traders are brought to justice.

Cross-border problems appear to be growing as rogue traders adapt to new technologies and opportunities. For example, the European Advertising Standards Alliance (EASA) estimates that around 63% of the cross-border complaints received between 1992 and 2002 concerned rogue or peripheral traders, and this rises to about 86% for cross-border direct mail. These problems and the inability of national systems to deal with them have been recognised both at European and international level.

The Organisation for Economic Cooperation and Development (OECD) adopted a recommendation in 2003 underlining the need for action and the European Parliament also heard evidence about this growing problem at a hearing it organised in February 2004[1].

Another factor with the potential to drive up the number of cross-border rip-offs is an expansion in the number of cross-border transactions as citizens become more mobile and as they take more advantage of the possibilities offered by e-commerce. Research published by the Commission today looking at attitudes to cross-border shopping in the EU25 and 3 other countries demonstrates a continuing significant interest in cross-border shopping among consumers Europe wide. Interest in cross-border shopping appeared to be particularly strong among consumers in the EU’s new Member States.

Recent examples of rogue traders operating in the EU’s Internal Market include misleading and threatening clairvoyancy services, modem ‘hi-jacking’, deceptive prize draws, mailings concerning unsolicited goods 'waiting' for consumers, unsolicited first aid kits accompanied by demands for payment, direct marketing of slimming products to children and misleading marketing by ‘holiday clubs’.

Seamless co-operation between Member State authorities

The aim of the new EU regulation is to enable national authorities to exchange information and cooperate with counterparts in other Member States as easily and seamlessly as with other authorities in their own country. The regulation will guarantee that each Member State effectively enforces EU law in its territory on behalf of all European consumers. This should boost the confidence of consumers and business in the Internal Market. It should also give national governments confidence to open up the Internal Market further in areas such as services.

The regulation will tackle the barriers to effective cooperation between national enforcement authorities when dealing with traders targeting consumers across internal EU borders, through the Internet, by direct mail, telephone or other methods. Existing national systems of enforcement are not geared up to the challenges posed by rogue traders who operate across borders. Existing informal cooperation initiatives, such as the International Consumer Protection Enforcement Network (Europe), face legal barriers such as rules in many countries restricting the sharing of information with other national authorities.

The regulation will require each Member State to designate a public enforcement authority to be part of a mutual assistance network. Each of these competent authorities will then be able to call on other members of the network for assistance in investigating a possible breach of consumer laws, finding information or, ultimately, ensuring a rogue trader is stopped. In return for receiving these rights, each competent authority will, in turn, be obliged to provide assistance to its counterparts in other Member States. This reciprocity ensures a balance between the benefits and responsibilities of each member of the network. Rogue traders who break the law will, therefore, be detected, investigated and stopped quickly and effectively before they cause widespread harm to consumers and honest traders. To address the situation of those Member States with a tradition of publicly-funded enforcement by consumer NGO’s, the regulation will allow them to delegate certain cross-border cases to these NGO’s.

The regulation also sets out supporting measures to foster expertise, trust and cooperation between competent authorities as well as the possibility of international cooperation agreements between the EU and third countries.

Scope of the co-operation

The regulation will apply only to cross-border breaches of EU consumer protection laws and not to domestic problems. Health and Safety issues are not included. Only the public authorities designated by the Member States will acquire the rights and responsibilities provided in the proposal. The existing rights and obligations of consumers, businesses and consumer associations are unchanged. In order to protect honest traders, investigated by mistake, all communications between the competent authorities will remain confidential. Similar EU legal instruments can be found in customs, taxation, competition and financial services.

Further Information

The new regulation on enforcement cooperation builds on ideas put forward in the Commission’s Green Paper on EU Consumer Protection of October 2001 (see MEMO/01/307) and the Follow-up to the Green Paper, which was published in 2002 (see IP/02/842, IP/02/1683 and MEMO/02/135). Further information about the regulation, and the policies underlying it, can be found at:

http://ec.europa.eu/consumers/prot_rules/admin_coop/index_en.htm

The full text of the Commission’s Qualitative Study on Cross Border Shopping in 28 European Countries can be found at:

http://ec.europa.eu/consumers/topics/facts_en.htm


[1] http://europarl.europa.eu/hearings/default_en.htm


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