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Document Ares(2022)6673866

Proposal to amend Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and to repeal Regulation (EU) No 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes

CALL FOR EVIDENCE

FOR AN EVALUATION AND IMPACT ASSESSMENT RUN IN PARALLEL

This document aims to inform the public and stakeholders on the Commission's future legislative work so they can provide feedback on the Commission's understanding of the problem and possible solutions and give us any relevant information that they may have, including on possible impacts of the different options.

Title of the initiative

Consumer rights – adapting out-of-court dispute resolution to digital markets

Lead DG (responsible unit)

DG JUST, E3

Likely type of initiative

Legislative proposal to amend a Directive and repeal a Regulation

Indicative timetable

Q2 2023

Additional information

https://ec.europa.eu/info/live-work-travel-eu/consumer-rights-and-complaints/resolve-your-consumer-complaint/alternative-dispute-resolution-consumers_en 

This document is for information purposes only. It does not prejudge the final decision of the Commission on whether this initiative will be pursued or on its final content. All elements of the initiative described, including its timing, are subject to change.

A. Political context, problem definition and subsidiarity check

Political context

Ensuring that consumers can easily solve their disputes with traders across borders in the EU is a pre-requisite for a well-functioning Single Market. Data shows that consumers are generally not willing to go to court to resolve low-value disputes, and therefore it is necessary to have an effective mechanism to reach amicable settlements in consumer disputes. To facilitate amicable settlements for low-value disputes in the Single Market, the EU promotes alternative, out-of-court settlements through the intervention of a neutral third party. The Alternative Dispute Resolution (ADR) Directive 1  provides common quality and fairness criteria for out-of-court dispute mechanisms in the EU and requires Member States to ensure people have access to ADR entities that meet these criteria in all retail economic sectors. Moreover, the Online Dispute Resolution (ODR) Regulation 2 sets up a free-of-charge, multilingual EU-wide ODR platform, managed by the Commission, for consumers to resolve disputes with traders about online purchases without going to court.

Digital markets, however, are posing new challenges. Action 7 of the Commission’s New Consumer Agenda, adopted in 2020, aims to ‘to analyse whether additional legislation or other actions are needed in the medium-term in order to ensure the same level of fairness online and offline’. The present Call for Evidence is part of this activity and concerns the fitness of the ADR Directive, notably in relation to breaches of consumer rights occurring in digital markets. According to the Consumer Conditions Survey 2021, up to 77% of EU consumers declare that they have been exposed to at least one unfair commercial practice online. Recent behavioural research on dark patterns and the 2021 sweep carried out by consumer authorities about online consumer reviews show that in the digital environment, EU consumers are being widely exposed to unfair practices through manipulative interfaces (dark patterns), hidden advertising, etc. This means there is an increased need for a robust ADR mechanism to maintain consumers’ trust.

The first application report on the ADR Directive, adopted by the Commission in 2019, outlined that it had achieved its objective (full coverage of ADR for consumer disputes stemming from contractual relations between consumers and traders in the EU/EEA). However, due to a number of factors that vary across Member States and economic sectors (such as whether traders’ participation in ADR is compulsory or not, how much it costs for traders or consumers, how complex the procedure is, awareness, etc.), the report concluded that the use of ADR procedures remained limited and uneven across the EU/EEA.

Article 26 of the ADR Directive requires a second application report to be adopted by the Commission in 2023, which may be accompanied by a legislative proposal. Our initial insights (such as from the ADR assembly that took place in September 2021 and from targeted discussions with national competent authorities, ADR practitioners, traders’ associations, academics and other consumer protection stakeholders) concluded that there are enough reasons for studying how to modernise the ADR Directive.

On the other hand, despite a high visiting rate (over 2 million people per year since 2016), the Commission’s Online Dispute Resolution (ODR) platform, which aimed to facilitate the uptake of ADR procedures for digital markets, is hardly used, with less than 400 cases eventually processed by ADR entities across the EU/EEA per year. Sweeps carried out by consumer authorities keep finding that the majority of EU online traders do not comply with the requirement to include the link to the ODR platform on their website, either because they are not aware of the requirement or because they do not intend to use it anyway and want to avoid confusing their users. Therefore, this Call for Evidence also concerns the question of whether the ODR Regulation is still relevant.

Evaluation

The Commission is currently carrying out an evaluation analysing quantitative and qualitative data and evidence from the various relevant actors including: a) Member States’ responses to a standardised questionnaire elaborating on national ADR procedures and architecture, activities of ADR entities (case-handling statistics) and best practices, shortcomings and recommendations; b) targeted interviews; c) case studies; d) stakeholders’ position papers; e) the results of a backward-looking open public consultation which was open until 27 June 2022; and f) academic literature.

The evaluation, in line with the Better Regulation Guidelines, will analyse:

·the progress in ADR/ODR across all EU/EEA countries since the transposition of the ADR Directive and the direct application of the ODR Regulation in 2015; 

·shortcomings of this legal framework, notably in view of external trends e.g. the increase in online shopping, including from non-EU countries; 

·the impact of COVID-19 on increased digitalisation; 

·the rapid developments in digital markets and the costs incurred by all parties in implementing ADR/ODR;

·the relevance of ADR/ODR for current and future consumer and trader needs; and

·the coherence with wider EU policy objectives stipulated in the recently agreed Digital Services Act (DSA) and Digital Markets Act (DMA), which introduced ground-breaking new rules for digital markets and other legislation with a strong consumer angle. 

Problems the initiative aims to tackle

The complexity of consumer disputes has evolved. Online markets are characterised by the growing number of online intermediary services (whether or not directly paid by consumers via fees or remunerated by commissions paid by traders); the market share of traders from non-EU countries is growing rapidly; pre-contractual information (e.g. on withdrawal rights) is increasingly unclear or missing; and consumers increasingly face other issues related to accessing an online service or switching service providers. As a result:

·consumers are in need of effective redress systems suited to their increased online activities and the high prevalence of online unfair practices;

·because only contractual disputes are covered by the ADR Directive, there are a number of disputes arising from issues not set in the contract (as pre-contractual information or switching rights as described above) for which consumers may be denied out-of-court redress;

·consumers buying from non-EU traders may be denied the benefit of an ADR procedure as such traders are not covered by the ADR Directive;

·online consumers largely use the redress systems put in place by large platforms but these may not follow the same fairness criteria as established in the ADR Directive for accredited ADR entities;

·vulnerable consumers are increasingly obliged to use digitalised dispute resolution mechanisms proposed by traders and may need specific assistance;

·resources available to fund ADR systems are unlikely to increase in the future and therefore the costs of such systems need to be adapted to the low value of digital disputes (as the average order value online is EUR 110).

The rate of development of online markets means it is likely that these problems will continue to increase, leading consumers and traders to more frequent use of digitalised dispute resolution systems or to have problems that fall outside of the scope of the ADR Directive. In practice, this hinders their access to fair dispute resolution in the Single Market for consumer goods and services. In addition, despite the improvements already made, the workflow of the current ODR platform seems to be outdated and inefficient as an ADR entity can only intervene after the trader agrees to enter into an ADR process. Better understanding of what an ADR is, awareness and accessibility are needed to promote ADR at EU level, according to the backward-looking public consultation carried out by the Commission.

Basis for EU action (legal basis and subsidiarity check)

Legal basis

Article 114 of the Treaty on the Functioning of the European Union (TFEU).

Practical need for EU action

Online markets are cross-border by nature. Hence, common criteria for dispute resolution adapted to such markets are needed to ensure that consumers and traders can access fair mechanisms, including in a cross-border context and/or when a trader from a non-EU country or an online intermediary is involved. Furthermore, for an efficient Single Digital Market for consumers, EU ADR legislation needs to ensure that the redress mechanisms applied in online markets are as fair as in offline markets, and that the use of artificial intelligence in dispute resolution is also fair.

B. Objectives and policy options

The objectives of the future legislative proposal to amend the ADR Directive and repeal the ODR Regulation will take into account the evolution of online markets, extending the Directive’s scope while reducing its complexity and providing for alternative options to governmental certification of ADR entities active on online and cross-border markets. In particular, the proposal considers:

·widening the scope or providing clarifications regarding pre-contractual information requirements (e.g. from the Consumer Rights Directive) from the moment a contract has been concluded; how to ensure that the role of intermediaries is taken into account where there is no direct contractual obligation with the consumer; how intermediaries can facilitate dispute resolution in peer-to-peer trade; and how to secure access for non-EU traders willing to engage;

·incentivising online platforms to offer quality dispute resolution systems, including the mechanisms to ensure that quality criteria in line with the ADR Directive, such as self-certification or independent audits, are respected; incentivising specialised bodies such as trade associations to provide cross-border ADR structures and clarifying the rules for their certification; and facilitating how ADR entities develop efficient cross-border and collective procedures;

·reducing costs by simplifying some reporting obligations and reducing eligibility barriers for ADR entities;

·clarifying rules on the links with judicial procedures (e.g. enforceability of ADR outcomes; suspension of limitation periods; application of EU statutory rights) to make ADR an effective solution;

·boosting the uptake of ADR among consumers and traders by providing means to develop awareness-raising and signposting and by reviewing the role of ODR contact points;

·repealing the ODR Regulation, which is extremely rarely used, and replacing the ODR platform with a user-friendly system that helps consumers and traders to understand their redress possibilities and obligations and in improving signposting to quality ADR entities; and

·providing customised support to vulnerable consumers, notably through maintaining human intervention with those not able to use digitalised procedures.

These options propose notably to extend the use of quality criteria to systems provided by online businesses on a voluntary basis, also benefiting third-party traders on platforms, which are mostly SMEs. They would also simplify information obligations for traders, while repealing the ODR Regulation would suppress the obligation for EU online traders, whatever their size, to offer a link to the ODR platform, even if they do not intend to use it.

C. Likely impacts

Simplifying and widening the scope of the ADR Directive should not require Member States to change their current ADR landscape, and should preserve the principle of minimum harmonisation of the Directive. More use of ADR, including to resolve cross-border and collective disputes, should enable economies of scale for ADR entities and reduce costs for business users. Setting up online dispute resolution systems in line with ADR quality criteria should remain a limited investment for platforms in view of the systems most of them have already put in place, and would be beneficial in terms of boosting their reputation, increasing consumer trust and reducing the costs linked to handling complaints by unsatisfied customers. Member States would not need to enact specific legislation to cope with the current coverage gaps of the ADR Directive in respect of online markets, and this would reduce the risk of fragmentation of the digital market by national laws.

The repeal of the ODR Regulation will substantially reduce costs for SMEs and for the Commission, which runs the ODR platform. No significant environmental, equality or social impacts, nor any impact on fundamental rights are foreseen, while the level of consumer protection in the EU is expected to be higher. The proposal strongly seeks to simplify and reduce the costs of the existing ADR landscape in the Member States while making better use of digital possibilities and protecting vulnerable consumers. Repealing the ODR Regulation will offset the administrative burden and costs for online businesses which is in line with the Commission’s one-in, one-out approach to legislation.

D. Better regulation instruments

Impact assessment

An impact assessment will be carried out to analyse the problems and impacts of the proposed policy options, including the types of direct (compliance and enforcement) and indirect regulatory costs to be incurred. It will be supported, among others, by the findings of ongoing studies aiming to gather information on the current functioning and costs of ADR systems in the EU.

Consultation strategy

The Commission has already consulted with stakeholders, in particular:

-A virtual ADR assembly in September 2021 attended by over 300 ADR practitioners, ADR competent authorities, consumer and trader organisations, academics, etc.

-Targeted ADR discussions with the Consumer Policy Network and Consumer Policy Advisory Group in December 2021;

-A workshop at the 2022 Consumer Summit on the use of digital tools supporting consumers to enforce their rights;

-A cross-border ADR roundtable co-organised with the European Consumer Centres network in June 2022 attended by ADR practitioners, consumer and trader organisations (i.e. BEUC and Ecommerce Europe), ECCs and academics; 

-A backward-looking approach open public consultation (April – June 2022) on the CPC Regulation and the ADR Directive.

Further targeted consultation actions are planned with ADR entities handling energy-related cases (Q3 2022) and travel cases (October 2022), with ADR competent authorities (August 2022) and through a citizens’ panel.

A forward-looking public consultation will be launched in Q3 2022. The questionnaire will be available in all official EU languages, which can also be used for replies. The consultation will remain open for 12 weeks. The consultation will be promoted via the communication channels put in place by the Commission for exchanges across the ADR entities, ADR competent authorities and others (e.g. European Consumer Centres) and social media. After closing the public consultation, the Commission will publish a factual summary report on Have Your Say. In addition, a synopsis report covering all consultation activities will be annexed to the impact assessment.

Why we are consulting?

The consultation aims to collect the views of various interested organisations and businesses on how to improve consumer redress in the EU, how to ensure a level playing field among all traders operating in this market, from big-scale platforms to SMEs, and how to ensure that consumers enjoy the same level of fairness online and offline. 

Target audience

Contributions are welcome from anyone with a direct interest in consumer protection and the effective means available in the EU (and EEA) for consumers and traders to solve disputes out-of-court while ensuring fair treatment of the parties. This rapid and efficient process will ensure that the Single Market functions smoothly, will minimise the number and burden of disputes, ensure a high level of compliance with consumer legislation, ensure a level-playing field for all businesses concerned and increase trust in ADR among consumers and traders. 

(1)  Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution;   https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32013L0011 .
(2) Regulation (EU) No 524/2013 on consumer Online Dispute Resolution;  https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32013R0524 .
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