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MEMO/01/307

Brussels, 2 October 2001

Questions and answers on the Green Paper on Consumer Protection

Why is the Commission taking this initiative and publishing a Green Paper?

The Commission wants to stimulate a wide debate on options to improve the functioning of the "business-to-consumer" (B2C) Internal Market. While the business-to-business (B2B) Internal Market is fairly well-developed, the potential of B2C Internal Market is not fully realised as indicated by the large divergences in prices of consumer goods between Member States and the limited volume of cross-border shopping. In short, the cross-border offer of consumer goods is insufficient. Consumers lack the confidence to take up the offers that do exist and businesses hesitate to directly offer their goods EU-wide because of the wide differences in national consumer protection rules and the limited scope of EU consumer protection legislation.

Why is a Community initiative called for? Are adequate EU/national rules not in place already?

The existing EU rules are not adequate to the challenge. They cover only a limited number of commercial practices, are often out-dated and lagging behind new market developments, and often designed to address one specific problem consumers were confronted with, such as for example the package travel or time-share directives. There are many national rules and a wealth of national jurisprudence to protect consumers. The problem lies in their diversity. Consumers do not necessarily have the same rights in one Member State than in another. In addition, there currently is no formal framework for co-operation between the bodies enforcing consumer rights in the Member States.

Why do current EU level consumer protection rules cover only fragmented bits and pieces of consumer-business transactions?

Although the importance of developing the B2C internal market has in the past been acknowledged by the Commission in the past, the need for a more comprehensive set of EU rules to protect consumers was not generally recognised. Three developments have forced the consumer Internal Market up the agenda and made it a priority: the euro, e-commerce and Enlargement. The introduction of euro notes and coins and consumer prices in euro take away a main obstacle for consumers seeking bargains and for businesses making offers cross-border. E-commerce makes it a lot easier for consumers to shop across borders. Enlargement without further harmonisation of consumer protection rules would mean an further widening of diversity in national rules. In addition, making the Internal Market deliver more concrete benefits for consumers fits in with the political emphasis on bringing to EU closer to its citizens and enhancing their quality of life.

What options are set out for debate?

The main choice in the Green Paper is between:

  • a strategy based on further harmonisation addressing specific issues - a continuation of the past strategy - and

  • a strategy based on setting out core principles of consumer protection in a framework directive to complement specific legislative measures.

The paper also seeks views on priority areas for harmonisation and on the various aspects of the possible framework directive. It also sets out options for ensuring and improving enforcement of consumer protection rules.

Would self-regulation by business through codes of conduct not be sufficient to protect consumers ?

The Green Paper sets out some ideas for the use of self-regulatory codes, but within a legislative framework. A legal backup to codes of conduct is necessary so that firms who break the rules are punished and consumers can be more certain they are respected. Business organisations that have experience with codes of conduct have said so explicitly themselves. The UK Advertising Association for example has stated that statutory and self-regulatory control is not an 'either/or' question, and that "there is a genuine role for 'over-arching' framework legislation that defines the parameters in which self-regulation operates." Legislative back-up, according to the Association, "adds weight, authority and ultimate sanction".

How does this initiative fit in with the Commission's White Paper on governance?

The Green Paper attempts to bring home the key aims of the Governance White Paper to consumer protection. The Governance White Paper calls for a greater use of framework directives and co-regulatory mechanisms and for more simple EU-level regulation. These preoccupations are at the heart of the Green Paper and the options presented.

Why not simply apply mutual recognition to all these national rules?

This would do little for business or for consumers and is unlikely to be politically acceptable. It would do little to increase consumer confidence in cross-border shopping. Rather it would discourage it, since they could no longer be so sure of their rights or the means to exercise them. Businesses would still need to adapt their marketing and other commercial practices to each national market.

Will this initiative end in setting up a European equivalent of the U.S. Fair Trade Commission? And if so what should its remit be?

No. The Commission has neither the resources, inclination or Treaty mandate to assume the FTC role as a public enforcement body in this area.

Have you consulted with stakeholders on this? Certain industry lobbies criticised the initiative even before the Green Paper has been published? What is the position of consumer associations?

The Green Paper is a consultation document par excellence. The Commission's aim is to consult industry now. Any views expressed until now were based on inaccurate, incomplete and misleading information. We await with interest the response of business and consumers to the consultation.

What are the next steps after this Green Paper?

The Commission is organising a hearing and an intensive consultation process. The next steps will be shaped by the outcome of the consultation - it is too early to say what they will be.

What evidence does the Commission base its analysis on?

The Commission has carried out three extensive studies on national and EU legislation on B2C commercial practices. They can be consulted at http://ec.europa.eu/consumers/policy/developments/fair_comm_pract/fair_comm_pract_index_en.html

Would a framework directive on principles of fair trading and consumer protection erode key existing consumer rights and be a step backwards for consumer protection?

No. The framework directive would be a "win-win" for businesses and consumers in the EU. Consumers in the EU are not better protected for having fifteen different regimes. Nor is effective consumer protection measured by weight of legislation and jurisprudence. The status quo has imposed considerable costs on consumers in terms of lost opportunities as it reduces the effectiveness of the Internal Market in delivering better price, choice, quality and service.

What are the advantages of a framework directive?

A framework directive would have several advantages over the status quo, in addition to the harmonisation foreseen. It would be more adaptable and responsive to changes in market practices - new unfair or misleading practices could be tackled quickly. It would also strengthen enforcement - both by putting in place safeguards for codes of conduct and by enforcement co-operation between Member States, as foreseen in the Green Paper. Finally existing consumer rights are poorly understood, in particular across borders, anyway. In combination with the practical guidance foreseen a legal framework will give consumers a clearer sense of their rights.

Would a framework directive cover all B2C commercial practices?

The aim of a framework would be to ensure good practice (either based on fairness or non-misleading practices) in B2C commercial practices. There may be reasons for wanting to regulate these commercial practices in further detail, but that would be outside the scope of a framework directive. For example, a framework directive would not include rules concerning health and safety (like tobacco or alcohol advertising) or decency. Equally it would not aim to cover pure social policy aspects, such as shop opening hours. Practices regulated by national contract law will not be covered, leaving national laws which invalidate a contract or establish rules on redress unaffected. The Commission's recent Green Paper on contract law addresses this.

The Commission has also proposed a regulation on sales promotions? Why couldn't sales promotions be regulated through such a framework directive?

Although a framework would cover all commercial practices, specific legislation can be useful to address specific practices in more detail. The proposed sales promotion regulation is an example of this. The Commission felt that there was a need for a specific piece of legislation to establish a common set of ground rules for these price related promotional instruments due both to the introduction of the euro and the fact that particular obstacles to the Internal Market have arisen with respect to sales promotion practices.

Aren't commercial practices already regulated in directives such as those on e-commerce, TV without frontiers, timeshare etc.?

These directives include rules about the fairness of B2C commercial practices. In so far as that is the case, those specific rules will take precedence over the general rules of a framework directive. A framework directive would supplement sector-specific provisions and apply to aspects which are not regulated by such legislation.

What would happen to the misleading advertising directive and the unfair contract terms directive in the case of a framework directive ?

The scope of a framework directive would in any event be broader than that of the misleading advertising directive, which would be repealed. All existing consumer protection directives (e.g. timeshare directive, door-to-door sales directive) would need to be reviewed in time to ensure consistency with the framework directive.

What kind of principles of fairness does the Commission have in mind for a possible framework directive?

This is the central question for consultation. The Green Paper offers a choice between the concepts of "fair commercial practices" or "misleading and deceptive practices". Both concepts have some basis in existing EU law, notably in the misleading advertising directive and the unfair contract terms directive. The concept of fair commercial practices, is broader than the misleading and deceptive practices concept. It covers the principle of good faith in the pre-contractual phase (e.g. disclosure of material information). For the post-contractual phase, it covers unfair and dishonest practices (e.g. those which unfairly deter consumers from switching suppliers would be targeted).

Will general EU rules on fair trading not increase fragmentation as national judges will interpret them differently?

Fragmentation is what we have now in this area of the Internal Market - it would be difficult to fragment it further. At present, national judges base their decisions on the various different general legal principles in national systems. EU-wide core rules would significantly reduce this margin for fragmentation and ultimately give the European Court of Justice (ECJ) a much clearer basis for resolving remaining inconsistencies.

How would the framework directive interact with the Commission's strategy on services?

The directive would make a significant contribution to meeting the goals of the strategy. Of the six stages identified in the strategy, one will be fully covered by the sales promotion proposal. The other two remaining categories relevant to consumers (advertising and after-sales service) would be covered by the framework directive.

The Green Paper is available on the Internet:

http://ec.europa.eu/consumers/policy/developments/fair_comm_pract/fair_comm_pract_index_en.html


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