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The European Commission has published a Green Paper on Consumer Collective Redress on how to facilitate redress in situations where large numbers of consumers have been harmed by a single trader’s practice which is in breach of consumer law.

Violations of consumer rules could include overcharging consumers – through hidden charges or overbilling – misleading advertising on websites, or failing to provide compulsory information on financial products. These kinds of illegal practices, if they occur to a large number of consumers, can cause considerable damage to consumers, generate unfair competition and distort markets.

The Green Paper identifies barriers to effective consumer redress in terms of access, effectiveness and affordability and presents various options to close the gaps identified. The options set out in the Green Paper seek to ensure that consumers who are victims of illegal commercial practices can get compensated for their losses, while avoiding unfounded claims.

EU Consumer Commissioner Meglena Kuneva said: “Consumers who are victims of illegal activities, such as overcharging, misleading advertising or outright scams, have a right to compensation. Currently, particularly where there are small scattered claims, this right is often theoretical because of the obstacles to exercising it in practice. There is a justice gap, a welfare gap and there are black holes in our redress system that is leaving consumers with nowhere to go. The present situation is clearly unsatisfactory. We must find a way to make the basic right to consumer redress a reality for more people.”

The current situation is that as mass consumer markets expand in size and even become cross- border, very large numbers of consumers can be harmed by the same or a similar practice of a trader.

The effect of a malpractice can be so widespread as to distort markets. In the UK, banks are under investigation for having systematically imposed excessive charges on hundreds of thousands of consumers whose accounts became overdrawn.

A group of consumers in Portugal took action against a telecom company which had charged its 3 million clients a ’start up fee’. Following their joint complaint, the Lisbon Court ruled that the charge was illegal and had to be refunded to the clients. The compensation awarded to consumers has been in the order of 70 million Euros.

The problem faced by consumers is that when consumers affected by a malpractice want to pursue a case, they face substantial barriers in terms of access, effectiveness and affordability.

Collective redress can potentially provide a useful complementary means of reducing consumer detriment.

The Green Paper focuses on collective redress as a tool that could help solve the problems that consumers face in obtaining redress for mass claims both in national and cross-border contexts. 76% of consumers would be more willing to defend their rights in court if they could join together with other consumers.

The proposed Green Paper will strengthen the ability of consumers to access effective redress. It ensures that consumers harmed by illegal commercial malpractice are compensated for their losses and it enhances the overall level of respect for EU law by discouraging companies from engaging in illegal activities which give them an unfair competitive advantage against other operators.