The EU Parliament has approved a new Directive that will allow consumers to pursue collective lawsuits against companies in the bloc.
The UK will not be directly affected as the Representative Action Directive comes into force after the end of the transition period on 31 December 2020. However, UK B2Cs trading in the EEA should take note.
Who can take action?
Collective action will only be taken by "qualified entities", such as consumer bodies, who will represent consumers and bring claims against traders on their behalf seeking either injunctions or compensation.
Qualified entities must be constituted under the law of a member state and be able to demonstrate a certain degree of stability, as well as 12 months of actual public activity in the protection of consumer interests prior to its designation request. They must also be not-for-profit.
Each EU country will need to have at least one such qualified entity and such bodies will receive additional funding and support for so-called qualified entities.
What areas of law are covered?
Collective actions can be brought in a broad range of areas of law including:
- the sale of consumer goods, digital content and digital services
- liability for defective products
- data protection
- travel and tourism
- financial services
What safeguards are there for traders?
The law has, unsurprisingly, been extremely unpopular with trader lobbying organisations. The European Parliament insists that there are strong safeguards in the law.
As well as the requirements for qualified entities set out above these include:
- Courts will be able be able to dismiss “manifestly unfounded” cases immediately.
- The "loser pays principle" will be used to deter vexatious litigation.
- Punitive damages will be avoided.
For a more detailed overview, have a read of our earlier coverage of the Directive.
"With this new directive, we found a balance between more consumer protection and giving businesses the legal certainty that they need. At a time when Europe is being severely tested, the EU has demonstrated that it can deliver and adapt to new realities, better protect its citizens and offer them new concrete rights in response to globalisation and its excesses." Geoffroy Didier (EPP, FR)