EN Official Journal of the European Union C 61/1

GREEN PAPER

on the Review of the Consumer Acquis

(2007/C 61/01)

CONTENTS

1. Introduction

2. Background

2.1. Objective and status of the Review

2.2. Relationship between the Review and other Community legislation

3. The main issues

3.1. New market developments

3.2. Fragmentation of rules

3.3. Lack of confidence

4. Possible options for the future

4.1. Option I: the vertical approach

4.2. Option II: the mixed approach (horizontal instrument combined, where necessary, with vertical action)

4.3. Option III: ‘no legislative action’

4.4. Possible scope of a horizontal instrument

4.5. Degree of harmonisation

4.6. The consultation contained in Annex I

ANNEX I: Issues for consultation

ANNEX II: Consumer Directives under review

1. INTRODUCTION

With this Green Paper the European Commission calls on all interested persons to express their views on the issues identified in the context of the Review of Consumer Acquis by sending in their replies (marked Response to the Green Paper on the Review of Consumer Acquis) by no later than 15 May 2007 to the following address:

European Commission Directorate-General Health and Consumer Protection Rue de la Loi 200 1049 Brussels Belgium

Or by e-mail to SANCO-B2@ec.europa.eu

Replies and observations will be published on the web site of the Health and Consumer Protection Directorate-General of the European Commission unless respondents clearly indicate their objections. The Commission will examine the contributions and publish a summary thereof in the first half of 2007. On the basis of the outcome of the consultation, the Commission will decide whether there is a need for a legislative initiative. Any legislative proposal will be accompanied by an impact assessment.

2. BACKGROUND

2.1. Objective and status of the Review

The Commission launched the Review of the Consumer Acquis in 2004 (1) with the objective to better achieve its Better Regulation goals by simplifying and completing the existing regulatory framework. The review process is outlined in the 2004 Communication on European Contract Law and the revision of the acquis: the way forward. (2)

This Review covers eight directives aiming at protecting consumers (3). The overarching aim of the Review is to achieve a real consumer internal market striking the right balance between a high level of consumer protection and the competitiveness of enterprises, while ensuring the strict respect of the principle of subsidiarity. At the end of the exercise it should, ideally, be possible to say to EU consumers ‘wherever you are in the EU or wherever you buy from it makes no difference: your essential rights are the same’. This is in line with the approach taken by the Commission in its Communication ‘A citizens’ agenda — Delivering results for Europe’. (4) In other words, consumers’ confidence in the internal market must be stimulated by ensuring a high level of protection across the EU. Consumers should be able to rely on the equivalent rights and have resort to equivalent remedies if something goes wrong.

We must also make sure that businesses, not least SMEs, may benefit from a more predictable regulatory environment and simpler EU rules in order to decrease their compliance costs and more generally to allow them to trade more easily across the EU, irrespective of where they are established.

The Review of the Consumer Acquis can provide a unique opportunity to modernise the existing consumer directives, in order to simplify and improve the regulatory environment for both professionals and consumers and improve or extend if necessary the protection offered to consumers. This is fully in line with the modernisation of the Internal Market. To this end, the directives are being reviewed as a whole and individually to identify regulatory gaps and shortcomings affecting all of them as well as problems specific to individual directives. As envisaged in the First Annual Progress Report (5), this Green Paper concludes the diagnostic phase of the review, sums up the Commission’s initial findings and calls on views on some options to review the consumer acquis. The Commission findings are the result of the following activities:

— a comparative analysis on how the Directives are applied in the Member States, including case-law and administrative practice (6),

— in December 2005, the Commission established a standing working group of experts from the Member States. Three meetings dedicated to the review of specific Directives were held in 2006,

— a number of stakeholder workshops organised in the context of the work on the Common Framework of Reference on contract law (7) were held throughout the first semester of 2006. These workshops concentrated on contract law issues directly relevant for the Review of the Consumer Acquis (8),

— analysis of consumer and business attitudes towards existing legislation in the area of consumer protection and its effects on cross-border trade (9).

In addition, the Commission evaluated how the various Directives under review have been transposed in the Member States. Implementation reports were published on the unit pricing (10) and distance selling Directives (11); the implementation reports on the Directive on sale of goods and guarantees (consumer sales Directive) as well as on the injunctions Directive are to be published shortly.

In addition to the work conducted, all interested parties will be consulted on the specific problems which were identified by the Commission in the course of the review of the package travel and doorstep selling Directives. These will be addressed in working documents to be published on the website of the Health and Consumer Protection Directorate-General. The Commission identified a number of problems related to long-term tourism products which require a quick solution. To this end, the Commission has begun work on a proposal for a revision of the timeshare directive. (12)

2.2. Relationship between the Review and other Community legislation

Given the breadth of the ground covered by the consumer acquis and the overlaps with other internal market directives the impact of any proposed follow-up to the Green Paper on areas such as e-commerce or intellectual property rights will need to be assessed. In particular, the follow up to the Green Paper should not prejudice the operation of the internal market clause of the e-commerce Directive.

The review will not affect Community rules on the conflict of laws. In this field, the Commission has presented two proposals for Regulations: a proposal for a Regulation on the law applicable to non-contractual obligations (Rome II) and a proposal for a Regulation on the law applicable to contractual obligations (Rome I). This latter proposal includes a provision proposing a conflict rule on consumer contracts consisting of applying only the law of the place of the consumer’s habitual residence under certain conditions.

In accordance with what has been announced in the White Paper on financial services policy (2005 to 2010), the Commission is undertaking various initiatives in the financial services sector, in particular in the field of retail financial services. In the light of the results of the consultation the Commission will examine to what extent any follow-up legislative action will apply to financial services. It may thus be necessary to exclude the application of all or part of any legislative follow-up to the financial sector.

This Green Paper seeks to collect views from all interested parties on the possible policy options for the Review of the Consumer Acquis as well as on a number of specific issues.

3. THE MAIN ISSUES

3.1. New market developments

Most directives that are part of the Consumer Acquis are prescriptive rather than principle-based. Most of them no longer meet fully the requirements of today’s rapidly evolving markets. This is particularly important in the face of the growing importance of digital technology and digital services (e.g. music downloads), which raise controversial issues relating to user rights, as compared to the sale of physical goods.

Technological developments are creating new channels for transactions between businesses and consumers, which are not covered by consumer legislation. On-line auctions are a good example of this phenomenon. The distance selling Directive, for instance, which was prepared before the recent expansion of e-commerce, allows the Member States to exempt auctions. As confirmed by the evaluation of the national laws, the different usage of this regulatory option by the Member States creates fragmentation and has led to a rise in consumer complaints in respect of these online auctions (13). The exclusion of software and data from the scope of the consumer sales Directive may prompt professionals to try to avoid responsibility for possible damages/non conformity of such products through conditions in End User Licences Agreements (EULA), preventing consumers from making use of remedies for non-conformity and invoking damages (14).

3.2. Fragmentation of rules

The existing EU consumer protection rules are fragmented basically in two ways. Firstly, the current directives allow Member States to adopt more stringent rules in their national laws (minimum harmonisation) and many Member States have made use of this possibility in order to ensure a higher level of consumer protection. Secondly, many issues are regulated inconsistently between directives or have been left open. During the preliminary phase of the Review, business and consumer stakeholders have pointed out a number of examples of regulatory fragmentation which create problems. These are illustrated in Annex I. The differences usually trigger extra compliance costs for businesses, including costs of acquiring relevant legal advice, changing information and marketing material or contracts, or in the event of non-compliance, possibly litigation costs. This is often cited by enterprises as one reason among others for not conducting business cross-border. While 19 % of EU retailers (15) market and advertise to at least another EU country, 48 % of the companies are prepared to make cross-border sales. As many as 55 % of retailers that express interest in cross-border sales consider extra costs of compliance with different national laws regulating consumer transaction to be very important or fairly important. 43 % of all EU retailers think harmonisation of consumer protection laws should have a positive effect on their cross-border sales and their cross-border marketing budget.

There are even cases where professionals refuse to sell to customers in other Member States: a recent Eurobarometer (16) shows that 33 % of consumers report that businesses refused to sell or deliver goods or services because the consumer was not resident in their country.

3.3. Lack of confidence

According to the abovementioned Eurobarometer survey, 26 % of EU consumers purchased goods and services from businesses established in other EU Member States (17). While distance selling is a growing phenomenon only 6 % made purchases by Internet from a supplier in another Member State (18). One reason to this is that as many as 45 % of the consumers feel less confident in making purchases on the Internet from businesses located abroad (in one Member State this figure amounted to 73 %). This is further demonstrated by the fact that 44 % of those who had internet access at home made a domestic e-commerce purchase whereas only 12 % made a cross-border e-commerce purchase. In general terms, 56 % of consumers were of the opinion that, when purchasing goods and services from businesses in other Member States, businesses are less likely to respect consumer protection laws. 71 % believed it is harder to resolve problems such as complaints, returns, price reductions, guarantees etc. when purchasing from businesses in other Member States. 65 % considered it to be more problematic returning a product bought by distance selling within the cooling-off period when purchasing from a supplier in a different Member State.

Different rules resulting from minimum harmonisation may have a negative impact on the internal market. One reason for consumers being reluctant to make cross-border purchases is that consumers cannot be sure that the level of protection that they enjoy at home will apply when they buy cross-border. For example, the length of the cooling-off period for cross-border distance selling varies between the Member States, creating uncertainties for consumers. The same applies to the modalities of exercising the right of withdrawal and the cost of returning goods.

4. POSSIBLE OPTIONS FOR THE FUTURE

In the First Annual Progress Report on European Contract Law and the Review of the Acquis of 2005 (19), the Commission identified two main strategies for the revision of the consumer acquis: a vertical approach consisting of the individual revision of the existing directives, or a more horizontal approach consisting of the adoption of one or more framework instruments to regulate common features of the acquis, underpinned whenever necessary by sectoral rules.

When translating the review into concrete policy proposals, the Commission will examine carefully the impact of such proposals, including the impact on business.

4.1. Option I: the vertical approach

Under the vertical approach, the existing directives could be amended separately in order to adapt them to market and technological developments. The gaps specific to the individual directives could be filled in and particularities to these directives could be addressed. The inconsistencies between the different directives could be eliminated. It could, however, take much longer and not be able to achieve the simplifying effect of the horizontal approach. The EU would have to address the same issues in the course of the different legislative procedures. The Commission would also have to make sure that the same issue is transposed consistently by the Member States for each of the directives. The volume of legislative acts would not diminish and the same common concepts would continue to be contained and regulated in the various directives. However, it would allow for respect of the specificity of each area by improving the existing legislation and reviewing it when necessary.

4.2. Option II: the mixed approach (Horizontal instrument combined, where necessary, with vertical action)

Consumer protection legislation until the adoption of the unfair commercial practices Directive (UCP) (20) in 2005 has mostly been based on the vertical approach, intended to provide specific solutions to particular problems. This approach, however, has given rise to a fragmented regulatory environment. The relation between the different instruments is sometimes unclear as the legal terminology, as well as the relevant provisions, is not sufficiently coordinated. For instance, if timeshare is sold by a door-to-door salesman, it is unclear which of the different information and withdrawal provisions of the doorstep selling and timeshare Directives apply (21).

A more integrated, ‘horizontal’ approach has begun with UCP.

There are a number of issues which are common to all directives forming part of the Consumer Acquis. Definitions of basic notions such as consumer and professional, the length of cooling-off periods and the modalities for the exercise of the right of withdrawal are examples of issues that are of relevance in the context of several directives. These common issues could be extracted from the existing directives and regulated in a systematic fashion in a horizontal instrument. Together with the provisions of the unfair terms Directive, given its horizontal character, they could form the general part of the instrument since they would apply to all consumer contracts. A second part of the horizontal instrument could regulate the contract of sale, which is the most common and broad consumer contract. For this reason, the consumer sales Directive would be included in the horizontal instrument. This approach would simplify and rationalise the consumer acquis in line with the Better Regulation principles (22). It would repeal, through a recasting exercise, the existing consumer directives fully or in part, and so reduce the volume of the acquis.

The horizontal instrument will have to be complemented by a certain number of vertical actions (e.g. revision of timeshare directive to address its specific problems, such as the definition of timeshare) whenever needed (mixed approach).

4.3. Option III: ‘no legislative action’

Both the horizontal and the vertical approaches require legislative action. No legislative action would mean that existing regulatory fragmentation would remain or could increase through Member States’ use of minimum harmonisation clauses. Inconsistencies between different directives would continue to exist.

4.4. Possible scope of a horizontal instrument

If Option II is followed, an important issue to consider will be the scope of the horizontal instrument. Under the mixed approach, a possible solution would be to adopt a framework instrument with a broad coverage, applicable to both domestic and cross-border transactions. Creating one instrument for all consumer contracts would simplify the regulatory environment significantly, both for consumers and businesses. However, where sector specific rules exist (such as, for instance, in financial services and insurance) they will continue to prevail, unless provided otherwise. Examples of these rules are the provisions regulating the cancellation period and the definition of consumer in the financial services area (23).

An alternative could be to introduce a horizontal instrument applying exclusively to cross-border contracts. The notion of cross-border contract would then have to be defined (e.g. all distance contracts concluded by a consumer and a professional from two different Member States). As a result, consumers dealing with a foreign professional would benefit from a uniform protection across the EU. This alternative could, on the one hand, increase consumer confidence in cross-border trade but on the other hand it could increase legal fragmentation, subjecting consumers and professionals to different sets of rules depending on whether the transaction is cross-border or domestic. It would also reduce the better regulation value of the horizontal instrument.

Another alternative could be a horizontal instrument limited to distance shopping whether cross-border or domestic, which would replace the distance selling Directive. This could create a set of uniform rules for distance contracts. Again, the main disadvantage would be that different conditions would apply to distance and face-to-face transactions, thereby increasing the legal fragmentation, and decreasing its better regulation value.

4.5. Degree of harmonisation

Independently of the option chosen to revise the acquis, the degree of harmonisation would also need to be decided.

The current consumer protection directives, which are under review, are based on minimum harmonisation, i.e. they contain clauses under which Member States are allowed to have higher protection levels than those provided for by the directives. Many Member States have made use of this possibility, e.g. by providing for longer cooling-off periods than the minimum periods laid down in the Directives on distance selling, doorstep selling and timeshare.

Consequently consumers cannot be sure that the level of protection they are used to in their home country will apply when they shop cross-border, whereas businesses may be deterred from marketing their products or services across the EU by the fact that they have to comply with different rules in each Member State.

To remedy this problem, one option would be to revise the Consumer Acquis with a view to achieving full harmonisation. This would mean that no Member State could apply stricter rules than the ones laid down at Community level. Full harmonisation would not only entail the repeal of the minimum harmonisation clauses; it would also imply the elimination of the regulatory options available to Member States on specific aspects by some provisions in the directives, which could result in modifying the level of consumer protection in some Member States.

For instance, when regulating the time limits of the legal guarantee imposed on the seller, Article 5 of the Directive on sale of consumer goods allows Member States to provide that, in order to benefit from their rights, consumers must inform the seller of the lack of conformity within a period of two months from the date of detection. Such options for Member States would disappear. The transposition checks have confirmed that a significant number of Member States have made use of such regulatory options. On the basis of the full harmonisation approach, a choice will have to be made between different solutions, for instance by eliminating or generalising the duty to notify the seller of the lack of conformity within a specified time period.

Nevertheless, given that it may be difficult to achieve full harmonisation on all aspects, and in order to avoid the recreation of barriers to the internal market, a harmonisation approach might on a case-by-case basis be complemented by a clause providing for mutual recognition for certain aspects covered by the proposed legislation but not fully harmonised.

Another option could therefore be the combination of minimum harmonisation with a mutual recognition clause. In this case, Member States would retain the possibility to introduce stricter consumer protection rules in their national laws, but they would not be entitled to impose their own stricter requirements on businesses established in other Member States in a way which would create unjustified restrictions to the free movement of goods or to the freedom to provide services.

Finally, another option would be minimum harmonisation eventually combined with the country of origin approach. This combination would mean that a Member State would retain the possibility to introduce stricter consumer protection rules in its national law, but businesses established in other Member States would only have to comply with the rules applicable in their home country.

However, these options would not simplify and rationalise the regulatory environment. Regulatory fragmentation would continue to exist and its negative effects on consumers' confidence in the internal market would not be removed. In the absence of a rule designating the law of the trader as the applicable law, the judge having jurisdiction over a cross-border lawsuit (i.e. normally the judge of the country of destination) would have to compare systematically the law of the country of the consumer with that of the country of origin. He would then have then to assess to what extent the country of destination law goes beyond the level of protection provided in the law of the country of the trader and, if the divergence constitutes an unjustified restriction, disapply the stricter requirements. This cumbersome procedure would not enhance legal certainty.

These two options would also not provide for a solution ensuring the high common level of consumer protection required by the Treaty.

4.6. The consultation contained in Annex I

Annex I contains the list of issues and questions put to consultation. The majority of questions relate to the cross-cutting or horizontal issues which could be dealt with in the context of the mixed approach. The vertical approach, which concerns the specific directives, does not require an extended list of issues or questions; these have been dealt with in the context of the different consultations organised by the Commission, as described in point 2.1. of the Green Paper.

A number of cross-cutting issues have emerged from the review. These issues reflect regulatory shortcomings and consumer protection lacunae in the acquis. In most of the cases, which have been brought to the Commission’s attention by various consumer and business stakeholders, the issues arise from the use of the minimum clauses and regulatory options by the Member States.

The issues are grouped in two categories; those which are common to the whole of the acquis (e.g. definition of consumer) or to more than one directive (e.g. right of withdrawal), and those which are specific to the contract of sale, which is by far the predominant consumer contract.

As to the first group, the Commission feels that a consistent definition of the notions of consumer and professional is important since it permits to delimit the scope of the acquis more accurately.

A more far reaching option is the possible introduction of a general principle of good faith and fair dealing in contractual transactions. The inclusion of such a principle, which would act as a safety net, would fill in any future regulatory gap and ensure that the acquis remains future proof.

A number of issues refer to the unfair contract terms Directive, which is the only directive applying to all types of consumer contracts, covering both goods and services. The practical importance of these issues is demonstrated by the noticeable proportion of complaints received by the European Consumer Centres concerning contract terms (24). In this context, the Commission wishes, amongst others, to raise the question whether the protection afforded by the directive should be extended to cover individually negotiated terms.

Issues such as the right of withdrawal, which is a typical remedy afforded to the consumer by several directives, and the conditions for its exercise are also addressed.

The introduction of general contractual remedies, including a generalised right to damages is also touched on. The absence of general remedies in the acquis may create a consumer protection deficit, which could be addressed in this context.

As regards the sale of goods, some important questions refer to the clarification and possible extension of the scope in order to include intangible goods, such as software and data. Some other questions cover key concepts such as delivery, the passing of risk and the hierarchy of remedies. Finally, the possible introduction of the producer’s direct liability, and the content of commercial guarantees are also raised.

Annex I describes each of the following issues:

1 General legislative approach 2 Scope of a horizontal instrument 3 Degree of harmonisation 4.1 Definition of ‘consumer’ and ‘professional’ 4.2 Consumers acting through an intermediary 4.3 Introduction of a general clause of good faith and fair dealing 4.4.1 Extension of the scope of the unfairness test to negotiated terms 4.5 The legal effects of the list of unfair terms 4.6 Scope of the unfairness test: price and subject matter of the contract 4.7 Providing for contractual effects of the failure to provide information 4.8.1 Harmonisation of the length of the cooling off periods 4.8.2 Harmonisation of the modalities of exercising the right of withdrawal 4.8.3 Harmonisation of cost imposed on consumers in the event of withdrawal 4.9 Introduction of the general contractual remedies 4.10 Introduction of the right to damages 5.1 Extension of the scope of application to other types of contracts 5.2 Second-hand goods sold at public auctions 5.3 Definition of delivery 5.4 Passing of risk 5.5.2 Time limits for lack of conformity 5.5.3 Specific rule on recurring defects 5.5.4 Specific rule on second-hand goods 5.6 Burden of proof 5.7 Modification of the order in which remedies may be invoked 5.8 Notification of the lack of conformity 5.9 Direct producers’ liability for non-conformity 5.10.1 Introduction of default rules on the content of the commercial guarantee 5.10.2 The transferability of the commercial guarantee 5.10.3 Commercial guarantees for specific parts 6 Other issues

(1) COM(2004) 651 final, OJ C 14, 20.1.2005, p. 6.

(2) COM(2004) 651 final, OJ C 14, 20.1.2005, p. 6.

(3) Listed in Annex II. It is important to note that what is commonly referred to as the ‘Consumer Acquis’ does not cover all consumer protection legislation in the EU. The recently adopted Directive on unfair commercial practices falls outside the Consumer Acquis for instance. In addition, many provisions aiming at protecting consumers can be found in sector-specific EU legislation, such as legislation in the field of e-commerce, financial services.

(4) COM(2006) 211 final.

(5) Commission’s First Annual Report on European Contract Law and the Acquis Review, COM (2005) 456 final.

(6) The Comparative Analysis of the EC Consumer Law is available on http://ec.europa.eu/consumers/cons_int/safe_shop/acquis/index_en.htm

(7) See the Commission’s Communication on European Contract Law and the revision of the acquis: the way forward, COM (2004) 651 final, and the Commission’s First Annual Report on European Contract Law and the Acquis Review, COM (2005) 456 final.

(8) Discussed topics included: consumer sales of goods (including direct producers’ liability), unfair contract terms, pre-contractual information duties in consumer contracts, consumer rights of withdrawal and consumer’s rights to damages. See the Second Annual Progress Report on Common Framework of Reference […], to be published in 2007 at the website of DG Health and Consumer Protection.

(9) Eurobarometer Consumer Protection in the Internal Market, survey conducted February to March 2006, published in September 2006. (http://ec.europa.eu/consumers/topics/eurobarometer_09-2006_en.pdf)

(10) available on http://ec.europa.eu/consumers/cons_int/safe_shop/price_ind/index_en.htm

(11) available on http://ec.europa.eu/consumers/cons_int/safe_shop/dist_sell/index_en.htm

(12) See the Commission’s Consultation Document on the Timeshare Directive at http://ec.europa.eu/consumers/cons_int/safe_shop/timeshare/consultation_paper010606_en.doc

(13) See the Communication from the Commission on the implementation of Directive 1997/7/EC on Distance Selling.

(14) For more information on the problems encountered by consumers in respect of the EULA see the report by the Federation of German Consumer Organisations (vzbv) available on http://www.vzbv.de/mediapics/anlage_pm_digitale_medien_06_2006_copy.pdf.

(15) Flash Eurobarometer 186 on Business attitudes towards cross-border trade and consumer protection, conducted in October 2006. The survey will be published in its totality on the DG Health and Consumer Protection web page.

(16) The survey was conducted from February to March 2006. The survey is published in its totality at the DG Health and Consumer Protection web page.

(17) This figure refers to cross-border purchases during the period February/March 2005 to February/March 2006.

(18) The number of consumers purchasing from other Member States by Internet varies from only 1 % in Greece, Hungary and Slovakia, up to 28 % in Luxemburg followed by Denmark with 19 %.

(19) COM (2005) 456 final.

(20) Directive 2005/29/EC.

(21) This situation is addressed in the ECJ case Travel Vac, Case C-423/97.

(22) The review of the consumer acquis is listed in the Rolling Simplification Programme attached to the Commission’s Communication on simplification of 25 October 2005. COM (2005) 535 — implementing the Community Lisbon programme — A strategy for the simplification of the regulatory environment.

(23) E.g. Article 35 and Annex III of the Recast Life Assurance Directive 2002/83/EC; Article 31 of the Third Non-life Insurance Directive 92/49/EEC.

(24) European Consumer Centres report that 10 % of complaints made in 2005 concerned unfair terms.