The so-called “New Deal for consumers” and the draft of a new EU class action

Last April, the European Commission presented a proposal for a comprehensive reform of the existing legislation on consumer rights within the European Market. The initiative, named "New Deal for Consumer" by the Commission itself, has the declared intent of harmonizing the current legislation through the adoption of a common set of rules, aimed at ensuring a more penetrating protection of the consumers’ rights.

It is, indeed, a complex and ambitious project that revolves around four areas of action: to establish a regime of greater transparency in online markets; to provide appropriate tools to ensure greater protection at both a contractual and judicial level for consumers; to introduce sanctions for violations of consumer protection rules laid down by Community law; and to counteract the difference in quality between consumer products.

The proposal immediately reached a high interest from both market operators and the public opinion. The utmost attention, however, was reserved to the intention of the European Union of introducing a uniform judicial instrument of protection inspired by the class action of American law. The idea, as it was explained by the Commission, stems from the difficulties encountered by consumers of some Member States in obtaining compensation for the damage suffered as a result of Volkswagen’s conduct relating to the so-called “dieselgate scandal”.

However, despite being inspired by the U.S. legal system, the Commission designs an instrument with very different characteristics from those of the American collective redress. Indeed, the action resembles the one designed by art. 140bis of the Italian consumer code as last amended with L. n. 27 of 2012.

More specifically, common figures between the newly drafted EU instrument and the Italian class action can be found in the preference for the opt-in mechanism, according to which after the issuing of a court order by which the consumers’ class is identified, the consumer who possesses the requirements may decide to join (thus, opting-in) the action within a defined period of time. Instead, the American solution is based on the opt-out mechanism according to which the action binds the whole class regardless of the number of consumers who have effectively decided to join. Furthermore, U.S. law allows individual consumers to withdraw from the action in case they have no interest or intend to claim redress individually.

A further similarity between the European solution and the Italian class action lies in the role representative associations are afforded. But, apart from the fact that both under Italian law and the EU Directive draft those legal entities are entitled to act as plaintiff in class action proceeding the scheme adopted is somehow different. In fact, while Italian law allows also other subject to act as plaintiff, the EU project seems to recognize the right to act for the class only to consumers’ representative entities.

The aforementioned similarities with the Italian collective redress, which according to some has betrayed the expectations, may compromise the ambitious project arisen within the EU. In this regard, the use of class action in Italy has experienced a very modest use, compared to expectations. According to some, the poor success gained by collective action in Italy, compared to the success the instrument as gained the United States should be found in both the choice for the opt-in mechanism and in some rules of Italian law, such as the bar of champerty and the “losers pay” principle.

More specifically, on the one hand litigation fees seem to discourage consumers from claiming redress, especially where the claim is of modest value and on the other hand, the possibility of agreeing a quota of the damage award as legal fees is what makes the class action appealing for large overseas law firms.

It is true that that the aforementioned obstacles pertain to rules belonging to the Italian legal system, but it is also true that the same rules are generally known to most legal systems of civil law and therefore, also to most Member States. Accordingly, bearing in mind the Italian experience, the Commission could have structured its class action in order to make it more attractive to both consumers and legal professionals.

Nonetheless, it should be noted that, apart from the Commission’s choices, the strength of the project should rather be found in introducing a judicial action which in several Member States does not exist yet. Further benefit of the initiative must be seen in its aim of harmonizing the existing national regulations. In fact, even among those countries whose legislation knows the class action differences exists. Unfortunately, it must be noted that the choice of harmonizing through a Directive, in reason of the discretion it affords Member States, may determine significant differences within the EU class action rules adopted at a national level.