August 14, 2022

Europe Explores Passage of Consumer Rights Bill

When it comes to what is called contract law in the European Union, the single market is actually a patchwork of 27 national legal codes offering varying degrees of protection to consumers and merchants. Those differences, and the costs of overcoming them, have limited cross-border trade primarily to multinational companies with the legal staffs to negotiate the maze.

This autumn, the European Commission is expected to propose creating a single European Union contract law that consumers and merchants can use to supersede national laws, in some cases offering better terms and more protection.

The author of the proposal, Viviane Reding, the commissioner for justice, fundamental rights and citizenship, said the alternative — and optional — legal regime would encourage cross-border purchases. Currently, only 7 percent of European consumers make purchases across borders.

That is usually because consumers are uncertain of their rights under foreign contract laws, or because many small and midsize businesses, wary of the costs of adapting their sales contracts to several national legal regimes, refuse to serve foreign markets, she said.

“We need to do something to give consumers more purchase options, and to give merchants greater access to more markets,” Mrs. Reding, a conservative from Luxembourg, said in an interview. “An optional E.U. contract law would have the effect of opening up the single market, giving traders and consumers the opportunity to transact in a secure environment.”

Mrs. Reding led the drive in 2007 to cap mobile phone roaming charges for consumers across the European Union. She said the new initiative was modeled in part on the Uniform Commercial Code used in the United States, the set of common rules that have been used by all 50 states since 1952.

Mrs. Reding said she developed the idea for the European proposal in part after consulting with experts at the American Law Institute in Philadelphia. “We could learn a lot from America about how to utilize and develop a single market,” she said.

But in Europe the proposal, which Mrs. Reding plans to present in October to the European Parliament and Council of Ministers, faces opposition from some lawmakers who question whether a new legal framework will cost more than it is worth. Associations representing contract lawyers and national consumer rights groups, whose livelihoods depend in part on advising on how to navigate the fragmented status quo, also say they are skeptical.

But the proposal gained momentum in May in a public consultation that attracted comments from 500 companies, governments and interest groups. Small-business groups, like the Federation of Small Businesses in Britain, spoke out in favor of the change, which they said would lower the costs of doing business and open new markets for small companies.

Mrs. Reding would need a majority of the Council of Ministers and the Parliament for the law to be enacted. If approved, it would be up to merchants to decide whether to offer it to consumers.

On June 8, the European Parliament, in a nonbinding vote, endorsed the concept. On July 7, the presidents of the 27 national supreme courts in the European Union sent a letter to Mrs. Reding in support of the approach. So did a German lawyers’ group and the multinational companies Audi, eBay and LVMH Moët Hennessy Louis Vuitton.

“The single market in Europe has been in place for many years, but only big businesses have been able to benefit, not small businesses, because they have the resources and legal staffs to navigate the fragmented landscape,” said Andrew Cave, a spokesman for the Federation of Small Businesses, which represents more than 200,000 British companies. “This would allow small businesses for the first time to take advantage of the E.U. single market.”

But even in Britain, one of the largest European exporters, the plan remains controversial. Mr. Cave said Britain’s conservative-liberal government coalition, along with governments in Denmark and the Czech Republic, criticized the proposal during the commission’s public consultation. Opposition in Britain, Mr. Cave said, is being led by the main lawyer’s group, the Law Society, and the Confederation of British Industry, which represents large businesses.

Discussions to resolve the impasse are taking place with the government and relevant interest groups behind the scenes, Mr. Cave said. A spokeswoman for the Law Society and the Confederation of British Industry said the group was still soliciting its members to take a position on the issue.

“We are hopeful that we will be able to convince the government of the benefits of this proposal to British small businesses and exporters,” Mr. Cave said.

Malcolm Harbour, the chairman of the European Parliament Committee on Internal Market and Consumer Protection, one of several parliamentary panels that will consider the legislation this autumn, said he was skeptical the proposal would achieve its intended effect.

“My overall view about this is I am not sure that the cost-benefits of what are required to put this into effect are worth it,” said Mr. Harbour, a representative from Woking, England.

Mrs. Reding said her staff was preparing the details of the proposal, which would emphasize the voluntary nature of the regime and its benefits. All European Union consumers, for example, would gain the right to refunds and exchanges, not just repairs, in the case of defective merchandise, and also the right to cancel contracts when merchants did not deliver on time, among other things.

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