17 December 2020

EU Parliament approves new collective redress mechanisms for consumers

On 24 November 2020, the European Parliament endorsed a new directive on representative actions for the protection of the collective interests of consumers ("Collective Redress Directive" or "CRD"). The CRD is part of the "New Deal for Consumers", an initiative to strengthen EU consumer law enforcement and to modernise EU consumer protection rules. The CRD introduces new cross-border and domestic redress mechanisms allowing collective actions against traders for violating a broad range of EU laws, such as data protection, travel and tourism, financial services, energy and telecommunications. The CRD will enter into force 20 days after its official publication. Member states will then have two years to implement the directive and a further six months to apply the new provisions. This means that these changes are expected to be in full effect in the EU from mid-2023 onward.
The CRD introduces the following key changes to existing consumer redress rules:
  • an EU-wide harmonised mass claims regime for domestic and cross-border "mass harm" – this allows designated consumer organisations ("qualified entities") to bring claims with or without a consumer mandate (in other words, both on an opt-in and opt-out basis)
  • the possibility to seek both injunctive and redress measures through mass claims
  • safeguards protecting businesses against lawsuits that abuse the system – these safeguards include:
  • the "loser pays principle"
  • extensive requirements for entities qualified to bring mass claims, such as limitations on external funding
  • exclusion of punitive damages.
The CRD complements, but does not replace, existing EU and domestic collective redress mechanisms in specific areas, such as data protection. It remains to be seen how the EU member states will implement the CRD into national law, as they have wide discretion in deciding whether to incorporate the CRD into existing or new legislation.