Questions and answers on EU Consumer Policy strategy 2007-2013

Commissioner Meglena Kuneva on 13 March set out more than 20 legislative and non legislative initiatives to boost the retail side of the European Union’s Single Market by 2013. The Commission says this will move forwards in the coming months with: a comprehensive overhaul of cross border shopping rights, an in-depth assessment of how best to strengthen consumer collective redress; new proposals to strengthen the Timeshare Directive; and a pledge to open the market for better cross border deals for credit (Consumer Credit Directive). The new Consumer Strategy 2007-2013 aims to boost confidence in the Single Market so that consumers can shop freely across borders – travelling or online – to get the best price, the best quality and for the product best suited to their needs.

What are the main challenges of the internal market for EU consumers?

The 493 million EU consumers are central to the two main challenges facing the EU. They are the lifeblood of the economy as their consumption represents 58% of EU GDP. Confident, informed and empowered consumers are the engine of economic change as their choices drive innovation and efficiency. But it is also in their role as consumers that the EU can most directly connect to the daily lives of our citizens and demonstrate the benefits of the EU. The response to these challenges lies in equipping the consumer with the skills and tools to fulfil their role in the modern economy; in making markets deliver for them and in ensuring effective protection from the risks and threats they cannot tackle as individuals.

The internal market has played a central part in meeting Europe’s economic challenges and delivering tangible benefits for EU citizens. But until now the consumer dimension of the internal market and retail markets in particular have been less developed. The new economic, social, environmental and political context calls for a change in focus of EU policy towards consumers. The place of EU consumer policy will be at the heart of the next phase of the internal market, as set out in the Commission’s communication to the Spring European Council on the Single Market Review.

Why do we need EU action on this?

The internal market has the potential to be the largest retail market in the world. Today, it remains largely fragmented along national lines, forming 27 mini-markets instead. The advent of the e-commerce revolution, which has still not reached critical mass, has transformed the potential for integration of retail markets in the EU to give a major stimulus to competitiveness and expand the opportunities for EU citizens. While the technological means are increasingly in place, business and consumer behaviour lags far behind, restrained respectively by internal market obstacles and a lack of confidence in cross-border shopping.

As well as tackling the fragmentation of the internal market, a stronger consumer dimension is needed to improve the functioning of consumer markets. Final outcomes for consumers in economic and non-economic terms are the ultimate arbiter of whether markets are failing or succeeding in terms of citizens’ expectations. Markets that respond more efficiently to consumer demand will perform better in competitiveness terms and be more in tune with the lives and goals of EU citizens. EU consumer policy can do much to shift the focus of regulation towards citizen-friendlier results. It can also address market failures that harm consumer welfare and social and economic inclusion by guaranteeing access to essential services at affordable prices. It can provide the market tools to enable citizens, as consumers, to make sustainable environmental choices.

What are the key statistics on consumer spending?

• The 493 million EU consumers are central to the two main challenges facing the EU. They are the lifeblood of the economy as their consumption represents 58% of EU GDP.
• There are signs that the cross-border retail market is growing in the EU. In 2006, 26% of consumers bought products in another EU country in the previous twelve months, compared to 12% in 2003.
• E-commerce is becoming a more popular sales channel: in 2006 27% of people with internet access bought a product or service online.
• This figure doubled to 50% for those people who had an internet connection at home.
• However, the vast majority of these internauts were buying from their home country – only 6% made a cross-border e-commerce purchase.
• 26% of consumers have bought a financial service online or over the phone or by post domestically but only 1% have done so cross-border.
• 57% of consumers did not see a single cross-border offer in the previous twelve months, and only 19% of retailers advertised across borders.
• 57% of EU retailers (mostly SMEs) sell through e-commerce and 49% of them would be prepared to sell cross-border in at least one other EU country. But only 29% actually do so.

How can complex markets be addressed, and consumers empowered?

Consumer policy is increasingly at the crossroads of the main challenges that face our citizens, economy and societies. The sophistication of retail markets is increasing the role of consumers. The greater empowerment of consumers has also led to greater responsibilities for them to manage their own affairs. While many can benefit, the most vulnerable are less well equipped – and the growth in consumption by children and an ageing population are increasing the number of more vulnerable consumers. Our need for confident consumers to drive our economies has never been greater.

Services in general and liberalised services in particular are set to grow, as electricity, gas, post and telecommunications liberalisation develops further. While considerable benefits can be expected, the transition will pose challenges for consumers and regulators to ensure consumer welfare is maximised.

The technological revolution brought about by the Internet and digitalisation will also grow even faster. The key driver is the rollout of broadband technology, which is likely to give a significant boost to e-commerce. E-commerce has great potential to improve consumer welfare, by making a greater range of products available, boosting price competition and developing new markets. It also brings significant new challenges for consumers, business and consumer protection. In particular it weakens the grip of traditional advertising and retail mediums over consumer markets. This will challenge traditional modes of regulation, self-regulation and enforcement. SMEs will have more direct access to consumers and goods and services will be increasingly tailored to the individual. But traditional consumer rights will be less and less adapted to the digital age.

Globalisation of production will also continue; leading to ever more goods consumed in the EU being imported. Traders will increasingly sell to EU consumers via e-commerce from anywhere in the world. This increases the challenge, but also the need to ensure effective market surveillance.

What are the objectives of the new EU Consumer Strategy?

In the period 2007-2013, consumer policy is uniquely well placed to help the EU rise to the twin challenges of growth and jobs and re-connecting with its citizens. The Commission will have three main objectives over this period:

• To empower EU consumers. Putting consumers in the driving seat benefits citizens but also boosts competition significantly. Empowered consumers need real choices, accurate information, market transparency and the confidence that comes from effective protection and solid rights.
• To enhance EU consumers’ welfare in terms of price, choice, quality, diversity, affordability and safety. Consumer welfare is at the heart of well-functioning markets.
• To protect consumers effectively from the serious risks and threats that cannot be left to individuals. A high level of protection against these threats is essential to consumer confidence.

The Commission’s aim is to achieve in this way by 2013 a radical change in the internal market. Consumers will have an equally high level of confidence in products, traders, technologies and selling methods in retail markets throughout the EU based on an equally high level of protection. Consumer markets will be competitive, open, transparent and fair; Products and services will be safe; Consumers will have access to essential services at affordable prices; Traders, but especially SMEs, will be able to market and sell simply to consumers throughout the EU.

In achieving these three objectives the Commission will be guided by the relevant articles of the Treaty which are also reflected in the operational objectives of the new consumer financial programme 2007-2013:

(a) To ensure a high level of consumer protection through a simple legal framework, improved evidence, better consultation and better representation of consumers’ interests.

(b) To ensure the effective application of the rules notably through enforcement cooperation, information, education and redress.

How will these priorities be turned into concrete actions?

• Better monitoring of consumer markets and national consumer policies, with a focus on developing indicators and statistics, national benchmarks, and collecting data on, for instance, accidents and injuries, and the risk associated to products and services;
• Better consumer protection regulation: this priority includes the Review of the Consumer Acquis (see separate Communication Plan), the review of the Timeshare Directive, the proposal for a new consumer credit Directive, and reporting on the Directive on distance marketing of consumer financial services. The Commission will also report on the operation of the General Product Safety Directive (GPSD), with a focus on better standards. It will keep supporting EU-level consumer organisations and consulting national consumer organisations through the European consumer consultative group (ECCG).
• Better enforcement and redress: this will include monitoring transposition of the unfair commercial practicesDirective. The Training for enforcement officials and the judiciary as well as a database of emerging case law will be developed. This priority will focus on the operation of the Rapid Alert System for non-food products (RAPEX) and the new Consumer Protection Co-operation regulation. The Commission will also encourage Alternative Dispute Resolution (ADR) schemes. On the basis of the “injunctions” Directive, the Commission will consider action on “collective redress”.
• Better informed and educated consumers: this priority covers the European Consumer Centres Network (ECC-Net), information campaigns, the development of a Consumer Portal and internet exchange of best practices between consumer broadcasts, the publication of the annual School diary, adult education modules and post-graduate education courses in consumer issues.
• Putting consumers at the heart of regulation: the Commission will issue a White Paper on mortgage credit; it will focus on services of general interest (SGIs), in particular in the areas of sector-specific SGI legislation, with regards to price, complaint handling and redress. It will promote consumer safety across all EU policies and ask other Commission departments to appoint a “consumer liaison officer”.
• Better protection of EU consumers in international markets: the Commission will ensure the follow-up to recent agreements with the US Consumer Product Safety Commission and the General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China (AQSIQ). It will seek to negotiate other international agreements on product safety, under the provisions of the CPC regulation, with third countries. It will follow closely accession negotiations with candidate countries to ensure consumer policy is duly taken on board, and keep working in international fora such as the OECD committee on consumer policy and within the EU neighbourhood policy.

What is collective redress and what are the next steps?

What can a consumer do if he/she wants to take a company to court over a dispute but the costs of litigation are higher than the possible damages he/she would win? The answer at the moment is – very little. EU consumers who have small or scattered claims often refrain from taking individual court action due to worries over the costs, and collective redress could be a means of addressing this. The Commission is currently examining the different possibilities and systems that already exist in some Member States, and hopes to bring forward policies on this important issue in 2008.

Why do we need a new Timeshare proposal, when is it due?

Timeshare, within the meaning of the Timeshare Directive, is the right to spend a set period of time, e.g. one week, in a holiday property each year for three years or longer. The Directive gives consumers rights, such as the right to withdraw. Since the adoption of the Directive in 1994, new holiday products and services have appeared, some of which deny consumers the basic rights afforded to them by the EU-wide Directive. The Commission is planning to bring forward new proposals mid-2007, which would address these gaps in the scope of the current Directive.

What about consumer credit cross-border?

The Commission is working to reach a compromise with Member States on proposals to introduce new EU-wide consumer credit rules. The aim is to make it easier for consumers to be able to take out loans in other EU countries for items such as washing machines or cars. Making cross-border credit a reality could give a real boost to economic competitiveness across Europe.

What about the review of online shopping rights?

In February 2007 the Commission launched a consultation on eight major pieces of EU consumer legislation setting out basic EU consumer rights on issues from guarantees to cooling off periods to unfair contract terms. As part of this consultation, the Commission asked for views on the extent to which rules on, for instance contract terms, should be adapted to cater for the new, online world. For example, should a consumer who buys a song or a piece of software online have the same product guarantees as a consumer who buys a CD from a shop? Such questions will be addressed in the review of consumer rules from 2007-8.

Source: European Commission