GENERAL OBJECTIVE

oTo develop more modern, efficient and effective CPC cooperation mechanisms to reduce the consumer detriment caused by cross-border and widespread infringements to consumer law in the EU and contribute to the completion of the Digital Single Market.

SPECIFIC OBJECTIVES

oReduce situations where important cross-border and widespread infringements are not detected or sufficiently addressed through the CPC framework (to address the limited scope and insufficient minimum powers described in section 1.3, insufficient mutual assistance mechanisms described in problem 1 and insufficient tackling of widespread infringements described in problem 2)

oReduce unnecessary delays and costs in the CPC cooperation (to address all the three problems)

oReduce situations where CPC authorities reach diverging outcome concerning the same malpractice (to address all the three problems)

1.Scope. The substantive consumer legal framework is expected to be reinforced through a new directive/regulation on contract rules for online purchase of digital content and tangible goods and a possible instrument to address consumer discrimination based on place of residence or nationality. Further, other legislative measures in the EU have been designed to ease private actions to get cross-border redress through out-of-court mechanisms. As from 15 February 2016, the Online Dispute Resolution is operational, which facilitates the online resolution of contractual disputes between EU consumers and traders over purchases made online. Thanks to this, consumers and traders will be more confident in trading online and across borders. Consumers will be encouraged to seek redress even for low-value purchases and enforce their rights. However, short-term infringements and infringements by subsidiaries of multinationals (i.e. happening in parallel in many Member States) would remain outside the scope of the CPC Regulation.

2.Powers and mutual assistance mechanism. The current minimum powers to cooperate would remain unchanged, as well as the CPC mutual assistance mechanism.

3.Widespread infringements. National authorities, with the facilitation of the Commission, would continue carrying out coordinated enforcement actions (such as screening of websites and common actions similar to the in-app purchases case) to address widespread infringements. The legal basis, procedure and the role of the Commission to address these widespread infringements would remain with deficiencies, as described in the problem section.

4.The current alert mechanism, market surveillance, priority setting and resources dedicated to the CPC cooperation would remain unchanged, as described in the problem section.

In 2006 the Commission adopted a decision regarding the mutual assistance mechanism of the CPC Regulation. It sets the information requirements, which include the minimum information to be included in requests for mutual assistance and in alerts, benchmarks for handling mutual assistance requests and the use of languages 79 . Although the implementing decision clarified the information requirements for the mutual assistance requests, it was insufficient to address the problems described in the problem section, as they mostly concern limitation of the current CPC legal framework available for consumer protection authorities to cooperate on a sound and formal legal ground that is necessary for them to act beyond their national jurisdiction boundaries.

1.Scope – the same outcome as under the baseline scenario. Implementing or soft law measures cannot alter the scope of the CPC Regulation, as this can be achieved only by the revision of the Regulation.

2.Powers and mutual assistance mechanism. Clearer, up-to-date and detailed implementing measures based on the existing CPC Regulation would clarify and streamline CPC cooperation, e.g. set time limits to answer mutual assistance requests; clarify further what information needs to be provided when an authority is making an information or enforcement request and what the content of the reply to this request should be. Through soft law measures common standards on gathering and use of evidence could be established. However, these measures would not provide for "digitally fit" powers for cooperation among enforcement authorities 80 (e.g. test purchases/mystery shopping, blocking of websites, sanctions in a cross-border context) and would not develop the mutual assistance mechanism and enforcement cooperation beyond the current CPC Regulation, as this can be achieved only by the revision of the Regulation in view of the need to give specific legal powers to national authorities to enable them to act in a cross border context.

3.Widespread infringements. Clearer, up-to-date and detailed implementing legislation based on the existing CPC Regulation would also complement and clarify the basic framework for coordinated enforcement actions under Article 9 of the CPC Regulation. The contribution of the Commission would be clarified, but would remain limited. The Commission's role in enforcement cooperation mechanisms, especially in cases in which traders refuse to cooperate or do not comply with their commitments, can only be legally extended through the revision of the CPC Regulation.

4.The current alert mechanism, market surveillance and priority-setting would be clarified and streamlined by these measures, e.g. the use of the alert mechanism. Soft law measures (recommendations and guidelines) could encourage prioritisation and project-based thinking. Voluntary benchmarking of resources per Member State could be put in place with an annual comparison and peer review. Member States could on a voluntary basis submit enforcement plans.

In addition to the national and EU consumer legislation, traders could adhere to voluntary codes of conduct, certification schemes and other self-regulation standards to ensure better compliance with consumer protection legislation.

Option 3 would be based on Article 114 TFEU, to which Article 169 TFEU refers, and would cover the following measures:

1.Extend the scope of the CPC Regulation to cover short-lived infringements, infringements by subsidiaries of multinationals (i.e. happening in parallel in many Member States), as well as infringements to Article 20 of the Services Directive (banning discrimination by service provider on the grounds of residence or nationality of the recipient). In addition, as mentioned under the options 1-2, the initiatives to implement the DSM Strategy would fall under the scope of the CPC Regulation.

2.Improve the enforcement cooperation tools. Extend the harmonised list of minimum powers for CPC authorities needed to cooperate in a cross-border context, in particular to address the misconducts described in the problem section 1.3.2. For example, to tackle infringements by traders hiding their identity – the power to adopt interim measures (e.g. to suspend a website temporarily, order suspension or retention of payments to a trader) and the power to obtain evidence irrespective of where it is stored and in which format, access to information held by other authorities and third parties. To tackle infringement by traders not respecting post sale requirements – the power to conduct test purchases/mystery shopping. To address repeated malpractices –the power to publish decisions establishing infringements and undertakings, name the trader responsible for the infringement, impose fines and other pecuniary sanctions reflecting the cross-border dimension of the infringement, take down a website, and facilitate redress for consumers. To address infringements concerning small amounts but affecting many consumers – the power to start investigation ex officio. The proposed powers are considered to be future-proof to cater for the effective enforcement in the digital environment. The revised Regulation would also introduce harmonised binding time limits 81 to respond to mutual assistance requests, as well as mutual recognition of evidence regarding intra-Community infringements.

3.Set up a harmonised framework for addressing widespread infringements involving more than two Member States. The following two situations can be distinguished depending on whether the threshold is met:

a)Threshold for a mandatorily initiated enforcement coordination procedure is met

The revised Regulation would provide for a new harmonised enforcement coordination procedure which would be mandatorily initiated at the EU level where a certain threshold is met. This threshold would need to be based on objective criteria that are easy to verify without in-depth investigation and would be "a reasonable suspicion of a widespread infringement in at least 3/4 Member States accounting together for at least 3/4 of EU population" 82 . This procedure would have the following main elements:

The Commission would control that the threshold is met. It would have a mandatory role to initiate the coordinated procedure and to assist CPC authorities. E.g. the Commission would establish joint investigation and surveillance plans, help conducting discussions with traders in view of obtaining undertakings to cease the infringement, help to prepare and disseminate documents among CPC authorities, and coordinate monitoring of traders' commitments (but the Commission would not have direct investigation or enforcement powers, as these powers would still remain the prerogative of national authorities).

The obligation of CPC authorities would include: mandatory participation in the coordination procedure provided the Member States are concerned by the widespread infringement.

The outcome of this procedure would be "a common enforcement position" agreed upon among authorities, identifying the malpractices at stake on the basis of EU consumer legislation included in the Annex of the CPC Regulation and assessing the solutions proposed by the traders concerned. This common enforcement position, as well as commitments submitted by the traders concerned on its basis would be binding, ensuring that it can be used, if need be, in subsequent national proceedings against these traders.

b)Threshold for a mandatorily initiated enforcement coordination procedure is not met

The revised Regulation would specify and clarify the format of coordinated enforcement actions under the current Article 9 of the CPC Regulation to tackle widespread infringements below the threshold described under the point a). In this case one authority might coordinate and/or take an enforcement action on behalf of other competent authorities against the widespread infringement or the Commission might be invited by national authorities to take up this coordination role. This procedure would allow parallel enforcement actions carried out by several competent authorities; however it would require simultaneous investigations and inspections to ensure consistency of enforcement measures adopted against the same infringement.

4.Provide for an effective market surveillance mechanism and prioritisation of enforcement actions. This measure would include the categorization of alerts (for action or for information only), which competent authorities notify to each other. Third parties (e.g. consumer and trade associations, European Consumer Centres) would be allowed to submit alerts for information only. The Commission would be allowed to submit alerts for both information and action. Instead of the current reporting requirements under Article 21 of the CPC Regulation, national authorities would submit to the Commission multi-annual enforcement plans, on the basis of which the Commission could suggest European enforcement priorities and benchmarks of best practices.

This option would be based on Article 114 TFEU and would, in addition to Option 3, contain the following new elements:

1.Provide for additional minimum powers for enforcement cooperation needed to address intra-Community and widespread infringements involving deceitful commercial practices 83 : powers to freeze assets or ban an economic activity of a trader, disqualify the directors and managers of the company found responsible for the infringement, and publicly name traders suspected of an infringement even before a final decision was adopted.

2.Set up an audit system, similar to the one in the EU food area, to verify the enforcement performance of Member States 84 . Audits would assess based on multi-annual enforcement plans national authorities' enforcement efforts in terms of their effectiveness and allocation of resources. This additional measure would further strengthen the actions of the effective market surveillance mechanism and prioritisation of enforcement under the option 3.

Specific objectives

Reduce situations where important cross-border and widespread infringements are not detected or sufficiently addressed through the CPC framework

Neither the scope nor the minimum powers to cooperate can be extended by implementing measures or soft law. If the scope of the CPC Regulation is not extended (e.g. short-lived and infringements happening in parallel in several Member States) and reinforced powers to cooperate are not introduced, the CPC authorities would find it difficult or impossible to investigate certain cross-border/widespread infringements in the digital environment and offline, particularly where test purchases/mystery shopping exercises are required to obtain the evidence of the infringement or where the infringement can only be stopped by closing down the website or the social media account concerned (e.g. because the trader is located outside the EU).

Reduce unnecessary delays and costs in the CPC cooperation

Reduce delays

Binding time limits for mutual assistance requests, common standards on gathering and use of evidence established through soft law measures and the clarified purpose and use of the alert mechanism would ensure a faster and more systematic detection of infringements and their follow-up. Together with the clarification of the framework for coordinated enforcement actions under Article 9 (steps, time-limits and roles of actors involved), they would result in reduction of delays in the CPC cooperation.

Currently, mutual assistance requests are not handled within the benchmarks set in the Operating Guidelines. 40% of information requests take more than three months to handle. 50% of enforcement requests take more than one year to handle and 26% of them take even more than two years to handle. The time limits for dealing with mutual assistance requests would ensure that some requests are handled faster. However, without extended powers and mutual recognition of evidence, this measure would not result in significant reduction of delays as these are mainly caused by the two elements mentioned above.

Reduce costs

Clarifying the framework for coordinated enforcement actions would slightly improve the effectiveness of CPC cooperation compared to the baseline. However, the mechanism to tackle widespread infringements would remain a combination of 28 national actions and no cost savings could be achieved for authorities. 

Reduce situations where CPC authorities reach diverging outcomes concerning the same malpractice

 Compared to the baseline scenario, this option would ensure a slightly more consistent assessment of traders' practices as the need for cooperation would be clarified. Voluntary preparation and submission to the Commission of multi-annual enforcement plans, or benchmarking of resources would encourage further prioritisation and project-based thinking but would depend on Member States' participation in such voluntary activity.

However, as important infringements involving multinational traders would risk remaining outside the radar screen of the CPC network, different enforcement approaches regarding widespread infringements (such as the Apple guarantee case, cf. Box 8) would still occur. Multiple Member States would continue carrying out investigations, taking action at different times with possibly diverging outcomes concerning the same malpractice (without even knowing about it). Traders would still face 28 national proceedings and possibly 28 different interpretations of EU consumer protection rules that are mostly principle based.

General objective

Reduction of non-compliance rate and related consumer detriment

The non-compliance rate is likely to slightly decrease (thanks to a slightly more efficient cooperation and voluntary self- regulation – see below).

Self-regulation and compliance with consumer legislation

Traders could be encouraged to adhere to voluntary codes of conduct, certification schemes and other self-regulation standards to support compliance with EU consumer protection laws. In certain areas, it is considered to have limited long term effects on compliance with consumer protection laws 88 ; in other areas results are mixed or positive. E.g., in the financial services sector an informal self-regulation scheme progressively turned into a self-regulation with oversight by the Securities and Investment Board, and then into direct public regulation by the Financial Services Authority, as self-regulation was not sufficient 89 . Another example in the consumer protection area where self-regulation is applied at national level concerns environmental claims. On the occasion of the European Consumer Summit on 29 May 2012, the Commission gathered views from stakeholders on the use of green marketing, green-washing and misleading green claims in different European markets, and views on the possible way forward. One of the key conclusions was the need to focus on enforcement, in particular in a cross-border context: i.e. further support for national enforcers to properly implement the requirements of the Unfair Commercial Practices Directive and prevent misleading environmental claims by traders including via better guidance, a more pro-active surveillance and a strengthened cooperation between self- or co-regulation and public enforcement. A recent study concluded that self-regulatory systems at national level can be considered effective in both preventing and removing misleading green claims, especially for advertising 90 .

Other impacts

Economic impacts (SMEs, competiveness, functioning of the Internal Market and competition)

This option is expected to have limited impact on the overall macroeconomic context as the level of non-compliance to consumer laws, and the negative consequences this has on consumers' confidence and welfare or a healthy business environment, is not expected to change significantly.

Environmental impacts

No significant environmental impacts are expected.

Social impacts

No significant impacts on employment or vulnerable consumers are expected.

Impacts on Fundamental Rights (EU Charter of Fundamental Rights)

No significant impacts on fundamental rights, such as freedom to conduct business (Article 16 of the Charter) or personal data protection (Articles 7 and 8), because implementing/soft law measures cannot extend the authorities' powers for cooperation to tackle cross-border and widespread infringements.

Compliance costs (for the Commission, Member States and traders)

30% FTE (ca. EUR 40,000) for the Commission to implement the measures under this option, which could be covered by redistribution and refocusing of existing personnel.

Minimal compliance costs for Member States' authorities to get familiar with the new implementing/soft law measures: 1 day of training would cost ca. EUR 870 per authority 91 .

No costs for traders.

Impacts on legal systems

Minor impacts and they would be felt equally among Member States.

Feasibility

Feasibility of this option from the legal and technical perspectives is considered to be high. However, the option would not be in line with the expectations from stakeholders (see below).

Stakeholder support

Stakeholders request stepped-up enforcement cooperation. Thus the option would go against the expectations of stakeholders expressed in the public consultation and in different meetings of networks dedicated to consumer protection.

Specific objectives

Reduce situations where important cross-border and widespread infringements are not detected or sufficiently addressed through the CPC framework

The problem definition section presents the figures which show the incidence of short-lived infringements in the digital environment 92 and the potential caseload for CPC cooperation if they were included in the scope. Inclusion of such type of infringements within the CPC Regulation's would reduce the number of situations when such infringements (e.g. regarding misleading advertising of "free" or "limited in time" promotional offers which then turn out to be unwanted long-term subscriptions, or "super cheap" offers whose availability is very limited) go undetected and unaddressed.

The proportion of widespread infringements is projected to grow in the coming years due to e-commerce and cross-border retail expansion (see the baseline in the problem section) and with more traders operating in multiple countries 93 . Inclusion of such infringements in the scope of the CPC Regulation would remove doubts as regards their qualification as intra-Community infringements and would be a prerequisite to effectively tackling widespread infringements (new harmonised EU-level procedure to address them). This would reduce the situations where such infringements are not addressed by CPC authorities because of doubts about their intra-Community nature. The authorities would have to take into account the EU dimension of parallel domestic malpractices and the need for a coordinated EU-level action to offer a consistent approach across borders.

Thanks to the additional minimum powers, the CPC authorities would be able to act much faster to stop harmful online practices. They would be able to carry out more regular verification of whether websites respect consumers' rights when shopping online, including the right to withdrawal for instance. They would also be able to cooperate on the basis of evidence obtained by each other through investigative tools such as mystery shopping for example. Authorities would also be in position to order interim measures so that websites with scams are taken down without waiting for the end of the investigation.

Inclusion of Article 20 of the Services Directive within the scope of the CPC Regulation would provide a cross-border enforcement tool to address unjustified discrimination based on place of residence or nationality of a consumer including unjustified geo-blocking practices, which are per se cross-border. Article 20 of the Services Directive prohibits all types of unjustified geo-discrimination, but sets only general principles. This provision had been poorly implemented and enforced in the past 94 partly because of the absence of a cross-border enforcement tool to enforce it and partly because Article 20 provides a list of justifications that is very broad. However, while the inclusion of Article 20 within the scope of the CPC Regulation would be beneficial to ensure coordinated enforcement across the EU, it would not be sufficient on its own to resolve the geo-blocking problems, as explained in the recently adopted Single Market Strategy.

The improved alert mechanism, where stakeholders (e.g. consumer and trade organisations, ECCs, as well the Commission) can warn enforcement authorities about emerging malpractices, as well as better prioritisation thanks to the multi-annual enforcement plan would ensure that more cross-border and widespread infringements are detected and addressed.

Reduce unnecessary delays and costs in the CPC cooperation

Reduce delays

Most delays result from slow detection, insufficient powers, inadmissible evidence and insufficient capacity on the part of competent authority. Thus, the improved CPC alert mechanism would ensure timely detection of emerging malpractices, while binding time limits for dealing with mutual assistance requests, recognition of evidence and additional powers to cooperate among authorities (e.g. to adopt interim measures, take down websites) would substantially reduce delays. Benchmarking of resources of the CPC authorities would also provide transparency about available resources and improve prioritisation so that cross- border needs are better resourced.

Currently mutual assistance requests are not handled within the benchmarks set in the Operating Guidelines. 40% of information requests take more than three months to handle. 50% of enforcement requests take more than one year to handle and 26% of them take more than two years to handle. The mandatory deadlines for dealing with mutual assistance requests would ensure that the cases are handled without delays i.e. for 50% cases the handling period would decrease by one or even two years, as Member States would be bound to resource their services adequately, while the improved cooperation mechanism would increase the speed of individual procedures and their cost (see below).

For widespread infringements, a harmonised cooperation procedure at the EU level would ensure that once the threshold to initiate such a procedure were met, it would be initiated without delay and all the efforts would be made to conclude such action within one year.

Reduce costs

Thanks to additional minimum powers to cooperate and more remedies available to address the infringement in question, the cost per enforcement case would decrease compared to the currently estimated average of EUR 4,700, as the proportion of cases concluded with traders' undertakings (ca. EUR 1,500 per case) would increase 95 . It is estimated that every year this would result in efficiency gain of EUR 155,000 (or 2.5 FTEs 96 ) for information requests and EUR 620,000 (10 FTEs) for enforcement requests for the entire CPC network, taken into account the current case load 97 .

 Furthermore, pooling of resources to address widespread infringements would save national authorities' resources: for instance, one coordinated enforcement action would replace 28 national actions, resulting in net savings of ca. EUR 180,000 (when negotiation is successful) and ca. EUR 815,000 (where the trader does not cooperate or does not subsequently implement the agreed commitments) 98 . If four coordinated enforcement actions 99 would take place annually, thanks to a new EU-level procedure to address widespread infringements, the savings for national authorities would be very significant, which would be a substantial benefit of the review of the CPC Regulation.

Reduce situations where CPC authorities reach diverging outcomes concerning the same malpractice

Thanks to the timely detection of parallel malpractices (e.g. via the improved alert mechanism and legal certainty that "parallel" domestic infringements fall within the scope of the CPC Regulation), combined with the extended minimum powers to cooperate and the new framework to address widespread infringements, more consistent enforcement decisions and sanctions would be taken across Member States for the same malpractice. Businesses would benefit from uniform enforcement and legal certainty for cross-border and online operations. The cases described in the problem section (cf. case on the misleading advertising of commercial warranties) would not occur.

In addition, an improved legal framework would increase legal certainty, transparency and access to justice for all stakeholders, in particular for traders accused of a widespread infringement.

General objective

Reduction of non-compliance rate and related consumer detriment

The option is expected to result in a significant reduction in consumer detriment. For example, an improvement of 10 points in the non-compliance rate 100 in the five screened sectors under the baseline scenario would lead to a 30% (or EUR 231 mln) decrease of the detriment.

The reduction in consumer detriment in individual cases would differ. The in-app purchases action of the CPC network alone saved EU consumers an estimated EUR 68 mln in financial detriment 101 . Assuming that four coordinated enforcement actions would take place every year 102 , the reduction in consumer detriment is expected to be significant (up to four times EUR 68 mln).

Thanks to better prioritization through multi-annual enforcement plans, CPC enforcement actions would be better prepared and targeted at infringements with substantial consumer detriment, ensuring that important intra-Community infringements are addressed without delay.

Thanks to additional powers, all CPC authorities could require traders to ensure consumer redress. Individual consumers would thus be more easily compensated for the suffered detriment from cross-border and widespread infringements.

Improved alerts, binding time-limits for mutual assistance requests and mutual recognition of evidence for intra-Community infringements would allow early detection of infringements and would substantially reduce enforcement delays. Infringements would be shorter and result in a smaller collective detriment. This is borne out by research by Parker and Lehmann 103 that found that increasing perception of the likelihood of detection is a powerful way to increase compliance.

The severity of possible sanctions and the fact that a trader ultimately will not profit from an infringement importantly influences compliance too. The reinforced powers to cooperate cross-border (e.g. the power to impose sanctions (fines) and to request restitution of illicitly obtained gains) would guarantee that traders which have been found responsible cannot profit from their infringements. This would further deter traders from repeating illicit conduct (specific deterrence), or dissuade other traders from committing an infringement at all (general deterrence).

Other impacts

Economic impacts (SMEs, competiveness, functioning of the Internal Market and competition)

This option is expected to have an overall positive impact on the business environment, especially on cross-border trade within the Single (Digital) Market. As the level of non-compliance with consumer laws would increase, consumer confidence that their rights would be respected wherever they shop would increase and their dispute resolution costs would decrease. Traders operating over several markets would benefit from equal enforcement conditions and lower litigation costs which would improve their competitiveness in an overall context of more competitive and transparent markets.

Impact on traders

Improved enforcement cooperation would not lead to additional costs for legitimate traders, as the review of the CPC Regulation would not change substantive consumer protection legislation and would not impose additional obligations directly on traders complying with the existing consumer legislation.

Coordinated enforcement actions, which result in negotiated undertakings at the EU level, will reduce the legal costs for non-compliant multi-national traders who would otherwise have to face these costs in each Member State. Traders would benefit from strengthened enforcement cooperation with more uniform enforcement outcomes offering legal certainty for cross-border and online operations, fairer competition, and a level playing field with competitors based in other countries as well as reduced potential litigation costs. The cost of court proceedings for traders was estimated to be an average EUR 2,208 per case 104 ; and, without enforcement coordination, especially in case the EU level coordination procedure fails, the trader could face potentially 28 enforcement proceedings instead of one.

Environmental impacts

No significant environmental impacts are expected.

Social impacts

Increase in consumer confidence in the Digital Single Market and more economic growth, as described above, are expected to have an indirect positive effect on the levels of employment.

Impacts on Fundamental Rights (EU Charter of Fundamental Rights)

Consumer Protection (Article 38) 

The right to a high level of consumer protection is a fundamental right of EU citizens (Article 38 of EU Charter of Fundamental Rights). This option would increase the level of consumer protection, boost legal certainty, and make EU consumer rights a reality.

Right to an effective remedy/due process (Article 47)

On one hand, this option would boost the possibilities for consumers to seek redress for financial detriment suffered from cross-border and widespread infringements. On the other hand, powers that would be newly available cross-border such as the power to conduct mystery shopping, suspend a website, name infringing traders, make public undertakings proposed by traders and request the supply of information from third parties/authorities could raise concerns as regards this right. However, in the light of Article 52 of the Charter, these limitations are justified by the objective of general interest of ensuring a high level of consumer’s protection. In addition national procedural law provides for effective remedies as regards these powers (legality review through courts, appeal procedures). These concerns could be further mitigated through the CPC Regulation obliging Member States to provide for effective remedies. Also, some of the powers concerned, such as interim measures or mystery shopping would be subject to conditions such as necessity, urgency or threat of serious and irreparable harm and would only be used where no other less onerous means were available.

Presumption of innocence and rights of defence (Article 48)

Naming of infringing traders and publication of decisions could raise concerns as regards the presumption of innocence. In the light of Article 52 of the Charter, under the CPC Regulation, the limitation to the exercise of this right are justified by the objective of general interest of ensuring a high level of consumer’s protection and guaranties are included so that the limitation to this fundamental right do not exceed what is needed to ensure the desired objective. The CPC Regulation provides in particular that only the publication of final decisions is allowed and public naming of traders is allowed only where the responsibility of the trader was established by a final and enforceable decision.

Property rights/Freedom to conduct business (Articles 16-17)

Some measures such as interim measures and the taking down of websites could raise concerns as regards property rights and freedom to conduct business. Given that these measures would only be used as a last resort, where no other less onerous measures were available and, in case of interim measures, only to prevent the risk of serious and irreparable harm to consumers, these concerns would largely be addressed by these safeguards. In addition, effective remedies exist under national law allowing traders concerned to challenge any enforcement measures.

Freedom of expression and information (Article 11)

Interim measures and the taking down of websites might raise concerns as regards the free flow of information. In accordance with Article 52 of the Charter, a careful balancing of the limitation to this right has to be made with the the objective of general interest of protecting consumers from harm caused by illegal practices. Given that websites could be taken down only as a last resort and that effective national remedies are available to the traders concerned, the concerns as regards these rights would be well addressed.

Personal data protection (Article 8)

The CPC Regulation already offers safeguards as regards processing of personal data in the alerts and CPCS system. These safeguards would be maintained in the future.

General consideration for fundamental rights

According to the Court of Justice 105 , neither the right to the protection of personal data (Articles 7-8 of the Charter of Fundamental Rights of EU), nor freedom to conduct a business (Article 16), nor the right to property (Article 17) are absolute rights. They must be considered in relation to their social function. Therefore, given the importance of consumer protection (Article 38 of the Charter and Article 169 TFEU that ensure a high level of protection for consumers in EU policies), the resulting fair balancing of rights leads to results in favour of the consumer. In accordance with Article 52 of the Charter, any limitation on the exercise of the rights would be subject to the principle of proportionality and necessity to protect consumers and subject to effective remedies in national courts.

Compliance costs (for the Commission, Member States)

Commission:

Assuming that there would be four coordinated enforcement actions per year, where the threshold to initiate the mandatory EU-level procedure would be met, the Commission would need two full-time officials 106 to coordinate the actions (currently the cost of the coordinated enforcement action is estimated at ca. 37.8% of FTE = ca. EUR 50,000 per action 107 ; however, the new procedure would require greater involvement of the Commission to coordinate the action and monitoring of its outcome, therefore a slightly higher cost per action is estimated). The required resources could be obtained through redistribution and refocusing of the existing personnel.

The Commission would also incur additional costs in distributing intelligence and moderating alerts placed in the CPC System by other stakeholders. By reference to the similar RAPEX database used by the EU authorities to post product safety alerts, it is estimated that this would cost ca. 20% of FTE = ca. EUR 27,000 per year 108 , which could be covered by redistribution and refocusing of existing personnel.

Therefore, the Commission's additional costs for its enhanced cooperation role are expected to be below EUR 300,000 per year.

Member States:

One-off familiarisation/training costs concerning additional powers: EUR 2,000 per CPC authority in the first year only 109 . The Member States, where these additional powers are currently not available would be mostly affected (in particular, AT, BE, DE, EL, FR, HR, IE and LT). In addition, there would also be costs related to the CPC authorities' decision on what course of action/remedy to take in a specific case because of a larger array of powers available for the authorities under this option. The latter cost would be EUR 1,000 per case in the first year only.

Regarding the cost of using the power to conduct test purchases/mystery shopping, the cost would be variable as it would depend on the item to be purchased. There would be initial (marginal) cost linked to the setting up of agreements with, e.g. bank/credit cards and/or internet/telecom operators. No additional specific equipment is needed (Internet investigation equipment is already available for the currently existing investigative and enforcement powers). In addition most purchases should be reimbursed as one of the objectives of test purchases would be to check compliance with withdrawal rights.

Being a leading Member State in a coordinated action to address a widespread infringement which does not meet the threshold for the initiation of the mandatory enforcement coordination procedure at the EU level, and taking an enforcement action on behalf of other competent authorities against the infringement would cost ca. 37.8% of FTE per action for that Member State 110 .

The cost of the coordinated enforcement action via the mandatory procedure would be ca. EUR 174,000 for all Member States per one coordinated action per year i.e. about half of what these costs are now.

There would be no additional costs for Member States to prepare and follow up the implementation of the multi-annual enforcement plan, as Member States are already under an obligation to prepare reports under Article 21 of the CPC Regulation. Enforcement plans would merely replace the existing reporting obligations.

Impacts on legal systems

This option, which would harmonise the procedures and powers for cooperation in a cross-border context, would neither affect the Member States' competences in enforcement nor would it fully harmonise national enforcement systems. Some Member States would need to slightly adapt their national procedural laws so that authorities can use the new powers in the updated list of minimum powers to cooperate in a cross-border context and use the mutual recognition of evidence/outcome of investigations. Greater changes would be borne by those Member States where CPC authorities do not have the proposed powers in the national context – AT, BE, DE, EL, FR, HR, IE and LT. The extent of adjustments would depend on the number of national laws and concerned authorities (see Annex V). In those countries, where substantive and procedural provisions, which are applicable to both national and intra-Community infringements, are contained in one act (e.g. UK, BE), adjustments would be minimal. However, more adjustments would be needed in those countries where several national laws will be concerned by the revised CPC Regulation (e.g. FR, LV, SK) 111 . Overall, in the medium term, savings are expected thanks to more coordinated EU wide actions.

Special considerations concerning principles of proportionality and subsidiarity regarding additional powers of competent authorities

The use of the additional powers of the competent authorities would be limited to cross-border situations in which the same powers available in national law cannot be used because their use is limited to domestic matters only. At the same time, where such powers are absent in national law, the Member States would not be required to introduce them for domestic infringements (in line with the principle of proportionality as the outcome would not go beyond of what is necessary to achieve that objective).

The additional powers cannot be introduced by each Member State individually because the jurisdictional boundaries between the Member States would not allow their use across national borders. For instance, the evidence collected through such individually introduced powers could not be used in another Member State because it would not be obtained in line with national law of that Member State. This is why the powers used in the cross-border context have to stem from the EU-level instrument that surpasses national jurisdictional boundaries (principle of subsidiarity – the outcome cannot be achieved through individual measures at the national level).

These jurisdictional limitations of enforcement actions of individual Member States are already recognised and explained in the recitals 2, 5, 6, 7 and 18 of the current CPC Regulation.

Feasibility

Feasibility of this option is considered high. The cost of its implementation is low, while the efficiency gains are high 112 . Any limitation on the exercise of the fundamental rights would be subject to the principle of proportionality and necessity to protect consumers and would be mitigated by further legal safeguards. Only minimal adaptation of national procedural laws would be needed.

Risks related for the Commission to take an action:

The Commission would have a mandatory role to initiate the coordinated procedure and to assist CPC authorities. The following risks could occur:

i) Mistakenly concluding that the threshold for the mandatory coordinated action has been met when the threshold in reality had not been met: the effect would be that the action would be ultra vires, as its outcome would be invalid for the companies and for the competent authorities. As regards the companies, given that the outcome of the action would be commitments from the companies, the companies concerned could simply refuse to give commitments and the action would be remitted to national enforcement. No damages would arise to the companies concerned. As for the authorities, the common enforcement position would be invalid. This could however be easily mitigated through national enforcement measures or enforcement requests under the CPC Regulation. The costs of this error would be an additional cost incurred by the national authorities when repeating some investigation/evidence collection steps at the national level.
 
ii) Mistakenly concluding that the threshold for the mandatory coordinated action was not met when the threshold in reality had been met: this could trigger an action for failure to act (Article 265 TFEU) from Member States and possibly from the companies or consumer associations (depending on their standing). This action would be stopped by the Commission reassessing the conclusion and initiating the action.

Stakeholder support

National consumer authorities, consumer and trade organisations, as well as the European Parliament have been consistently calling for stepped-up enforcement throughout the EU. In general measures included in this option received a high level of support based on the results of the public consultation and meetings with CPC authorities and consumer and trade associations.

Development of EU-level actions is clearly the most controversial issue: Member States, while agreeing there is a need to have efficient common solutions to address pan-European infringements, are keen to retain their enforcement prerogative. The retained option 3 takes this into account. More than half of enforcement authorities would be interested in a single EU procedure to tackle widespread infringements; supporters of stronger Commission role are mainly authorities in Spain, Austria, the Netherlands and France. Authorities from UK, Italy, Germany, Ireland, Czech Republic and Luxembourg are more sceptical about this measure, but do acknowledge that better coordination is needed to tackle such infringements effectively. Position of other authorities is shifting between these two groups.

Business organizations support the development of coordination of enforcement at the EU level as they clearly see the benefits of one-stop shop and uniform rules for their business.

Consumer organizations also strongly support the enforcement cooperation procedure at EU level. BEUC (comprising 41 consumer organisations from 31 countries) was particularly vocal on this. The minority view is UK consumer organisation Which? as they do not see a need for a centralized enforcement procedure. Which? believes resources should be focused on strengthening cross-border cooperation procedures.

Annex II (section 10.4) for more details concerning stakeholder consultation and their support concerning specific measures under the option 3.

Specific objectives

Reduce situations where important cross-border and widespread infringements are not detected or sufficiently addressed through the CPC framework

Thanks to further enhanced powers, this option would address more effectively than option 3 deceitful commercial practices. The exact number of such cross-border cases is not known, but they often concern free trial/test situations: according to the study procured by the Commission on misleading free trials and subscription traps, 1 in 5 consumers who ordered a free trial had problems afterwards (such as a subscription trap, and the website either disappeared or the trader could not be contacted).

Reduce unnecessary delays and costs in the CPC cooperation

Reduce delays

Thanks to powers to block a website or freeze assets, only deceitful commercial practices where the trader is deliberately hiding would be addressed faster than under option 3. Other practices would be addressed at the same speed as in option 3. The additional positive impact compared to option 3 is therefore lower.

Audits would provide for a systematic, in-depth and periodic review of Member States' enforcement efforts and systems. They would therefore go deeper than option 3 as they would identify and address the gaps and delays in cross-border enforcement, in the Member States' resources and enforcement capacity as well as in the Member States' enforcement systems as such.

Otherwise the impact of the option would be the same as for option 3.

Reduce costs

The same conclusions for option 3 remain valid for this option, as no further reduction in cost is foreseen.

Reduce situations where CPC authorities reach diverging outcomes concerning the same malpractice

The new auditing system would better align national enforcement strategies and ensure that they are implemented on the ground, which would improve consistency of enforcement actions across the EU and prevent more effectively than option 3 cases such as misleading advertising of commercial guarantees by Apple (cf. the problem definition Box 8).

General objective

Reduction of non-compliance rate and related consumer detriment

As this option provides for powers such as freezing assets, banning economic activity and disqualification/dismissal of directors for a fixed time period, it would allow the CPC authorities to address more effectively deceitful commercial practices in which the trader is deliberately hiding, such as in the case of scams and free trials with subscription traps. Compared to option 3, this option would ensure more effective tackling of the infringements mentioned in the problem section concerning online sales of cheap but not readily available design furniture (Box 3) and would better ensure that consumers do not suffer prolonged financial detriment.

The power to disqualify directors would reduce more effectively than option 3 repetition of infringements (recidivism), because the persons who are responsible for company management could have direct personal consequences if their company were responsible for such intentional infringement. Hence, they would be deterred from setting up a new company and repeating the infringement, hidden behind a new corporate structure.

Thanks to the power to name and shame traders before the final decision is taken, consumers would be warned about rogue traders' practices at an early stage. This would prevent and reduce detriment to consumers, beyond what is foreseen in option 3. This could deter traders from infringements as they would know that they would not be able to reap profit from the infringement once the public is informed about the infringement.

The new auditing system would ensure that authorities have sufficient resources to act effectively and fast. This would ensure that more infringements can be stopped faster, even if the trader hides his identity.

Other benefits, as per option 3.

Other impacts

Economic impacts (SMEs, competiveness, functioning of the internal market and competition)

Thanks to the additional powers available to enforcers, the overall deterrent effect of their action would increase further. The non-compliance rate in cross-border markets would be lower, offering efficient market conditions for traders and consumers operating in these markets, in turn developing their attractiveness and growth. Removal of unfair competition in particular from rogue traders would boost competitiveness of honest, law-abiding traders, encourage entry of new players and boost competition and level the playing field in the Internal Market.

Impact on traders

The same assessment as under option 3.

Environmental impacts

No significant impacts on environment are expected.

Social impacts

Given that scams and intentional infringements have a very negative impact on consumers' confidence (especially on the vulnerable consumers, i.e. the young and elderly), their timely removal would increase consumer confidence in the Digital Single Market and more economic growth, as described above, are expected to have an indirect positive effect on the levels of employment.

Special considerations as regards possible use of national criminal law measures to address these intentional and deceitful infringements

Although criminal law as described above means may be available in some Member States (e.g. BE, FR, HU, SK, UK) to address deceitful practices targeting consumers, these means may not be systematically employed because:

the threshold for criminal offence may not be triggered (e.g. many Member States do not accept criminal liability of legal persons in this context); the practice remains an administrative offence, but the penal authorities (e.g. police, state prosecution) may not be competent to deal with it;

it may be impossible to use domestic criminal law means for cross-border cases, because the penal authorities may not have jurisdiction to act across national jurisdictional borders;

penal authorities may not consider addressing such practices to be their priority in view of other kinds of crime that they have to address as a priority (e.g. violent crime).

As criminal law means may not be always available to tackle such deceitful practices the consumer protection authorities would not be able to investigate and stop these deceitful infringements without the powers proposed in option 4 and these infringements would continue to cause harm to consumers.

Impacts on Fundamental Rights (EU Charter of Fundamental Rights)

Consumer Protection (Article 38) 

The same assessment as under option 3. In addition, consumer protection would increase in particular for vulnerable consumers (elderly and children) that are often victims of scams, as the rogue traders often target such vulnerable consumer groups.

Right to an effective remedy/due process (Article 47)

This option would conflict more than option 3 with property ownership rights (as discussed below). These concerns would have to be mitigated through the CPC Regulation obliging Member States to provide for effective remedies similar to those available in criminal law.

Presumption of innocence and rights of defence (Article 48)

Naming and shaming of traders in all cases, even before a final decision is taken, would raise serious issues as regards the presumption of innocence and protection of good will and reputation of the traders concerned. The CPC Regulation would have to ensure that naming and shaming would be subject to the following conditions: serious suspicion of deceitful commercial practices, urgency and threat of serious and irreparable harm and no other less onerous means to stop the malpractice.

Property rights/Freedom to conduct business (Articles 16-17)

The additional powers under option 4 would go further in restricting private ownership rights than option 3. Such restrictions (freeze assets, suspend an economic activity) may be justified and needed to effectively tackle deceitful commercial practices, especially when the trader deliberately hides its identity, and to ensure that no irreparable harm to consumers occurs during the enforcement process. As above, these powers would be exercised as a last resort when no other less onerous means are available to address the malpractice.

Freedom of expression and information (Article 11)

The same assessment as under option 3.

Personal data protection (Article 8)

Additional concerns (than under option 3) may arise as regards the naming and shaming before the procedure has been concluded. As explained above this could be mitigated by imposing strict conditions for the use of this power.

General consideration for fundamental rights

The additional powers under this option would affect the balance between the two interests (respecting the fundamental right to property/freedom to conduct business on the one hand and ensuring a high level of protection for consumers on the other) to a much greater extent than under option 3. The use of such more intrusive powers could be justified only in infringements involving deception and concerning significant consumer detriment, when the other less onerous means had failed to ensure protection of consumers. These powers would be more complex to implement legally in order to ensure proportionality of action and respect for fundamental rights.

Compliance costs (for the Commission, Member States)

Commission:

In addition to the costs mentioned under option 3, the Commission would incur significant costs with regards to the setting up and maintaining the general auditing system. In similar audit systems in the food and feed area (Regulation 882/2004) the Food and Veterinary Office carries out ca. 150 audits per year in the EU, with a team of some 180 professionals, representing ca. 3,080 days spent on the ground by auditors 113 . It is estimated that in the CPC context, there would be a need for at least 28 full-time officials to conduct regular audits in each Member State, draft reports, make recommendations, and follow up Member States' actions to improve the situation. It is estimated that this would cost at least ca. EUR 3.5 mln per year.

Member States:

As the powers proposed under this option are not available for most of the CPC authorities in the domestic context (except for those who can use criminal proceedings in the consumer protection area, see the impacts on legal systems below), there would be higher costs for training/familiarisation concerning these powers and for choosing the right course of action/remedy in a particular case. These costs would however be incurred only in the initial period.

The increased intrusiveness of powers under this option would entail higher costs as greater burden of proof and more profound scrutiny of decisions would be needed before, e.g. an economic activity is suspended/ banned or a company's director is disqualified.

The auditing system would also entail higher costs as the Member States would have to be actively involved in the audits.

Impacts on legal systems

The majority of powers proposed under this option are not available for the CPC authorities, except for those who can use criminal proceedings in the consumer protection area: BE, FR and UK. Further, in AT, FI, HU, DK and SK criminal proceedings can be initiated also in certain data protection cases and/or in cases related to deceitful practices, respectively.

This means that most CPC authorities would have to adjust to the new powers. For instance, the power to freeze assets seems to be unavailable for most of CPC authorities, except UK and RO. The same applies for the power to disqualify directors and to name and shame traders before the final decision. The power to ban/suspend an economic activity of a trader seems to be unavailable for CPC authorities in AT, BE, CY, DE, EE, IE, LU, NL, PL, PT and SE.

The powers added in this option, even though very effective in tackling deceitful commercial practices, would be more costly and complex to implement legally in order to ensure proportionality of action and respect for fundamental rights.

Feasibility

The option would be costly to implement. In particular the general auditing system would involve substantial costs which, despite its several positive impacts, would not generate the corresponding increase in benefits. Authorities would need additional staff to carry out more complex procedures. Further, the additional powers would be more complex to implement legally to ensure the respect for fundamental rights.

Stakeholder support

Acceptance by stakeholders (traders and national authorities) of this option is also likely to be lower due to higher litigation risks in relation to private ownership rights and thus possibly higher costs than under option 3. However, some authorities 114 wished that such powers be available in the CPC context to effectively address deceitful commercial practices.

There was no specific question on auditing of enforcement efforts of Member States in the public consultation. Even if this measure would likely be supported by consumer and trade organisations, who wish for stepped-up and consistent enforcement throughout the EU, it might not be supported by Member States, who might perceive it as too intrusive.

Specific objectives

Reduce situations where important cross-border and widespread infringements are not detected or sufficiently addressed through the CPC framework

Compared to other options, option 5 would ensure that widespread infringements with EU dimension (i.e. meeting the threshold) are addressed more effectively.

Reduce unnecessary delays and costs in the CPC cooperation

In addition to the assessment provided under options 3 and 4:

Reduce delays

Thanks to a unified approach, it would take the least time to stop an EU-widespread infringement meeting the threshold, as the Commission would be able to take an immediate EU-wide action once the infringement is detected. The procedure could last between 6-9 months (based on the length of procedures in the EU merger control for two phased investigations). This would entail saving 3-6 months as compared to the mandatorily initiated enforcement coordination procedure under options 3 or 4.

Reduce costs

This option would have the greatest impact on removing the duplication of investigation/enforcement efforts in complex multijurisdictional cases concerning widespread infringements, as the Commission would address the infringement for the entire EU (it would be the sole authority to bear the costs of investigation and enforcement of widespread infringements with EU dimension). It would go beyond options 3 and 4 in removing duplication.

It would cost the Commission 0.5 FTE (ca. EUR 66,000) to handle one EU dimension infringement case within 9 months (based on the length of procedures in the EU merger control for two phased investigations).

Compared to the cost of the coordinated action initiated under the EU mandatory coordination procedure under options 3 and 4, this option would lead to significant savings (ca. EUR 160,000 (225,000-66,000)) per action per year 115 .

In EU competition policy the Commission adopts on average 12 decisions per year, covering antitrust and cartels 116 . If we assume that under this option the Commission would adopt an equivalent number of decisions this could save significant costs stemming from duplication and multiplication of efforts at the national level.

Reduce situations where CPC authorities reach diverging outcomes concerning the same malpractice

This option would provide the clearest and the most efficient legal framework to address widespread infringements. It would ensure best consistent enforcement of consumer law in the EU as it would create a "one-stop shop" for widespread infringements with EU dimension. Similarly to the EU competition policy, the Commission would lead the interpretation of consumer law and ensure that Member States apply it consistently.

In addition the option would increase legal certainty, transparency and access to justice for all stakeholders, in particular for traders accused of a widespread infringement, as well as for the consumers concerned.

General objective

Reduction of non-compliance rate and related consumer detriment

The estimated 12 decisions per year (on the basis of the number of cases handled per year in EU competition policy, see above) would concern infringements with significant financial consumer detriment, affecting consumers in many Member States. Thus the reduction in financial consumer detriment would be the highest from all the options considered. In addition, similar to the EU competition area, the Commission would have powers to carry out investigations to detect widespread infringements and take faster actions to prevent financial consumer detriment.

Direct powers of the Commission, uniformly applied law and financial/human resources allowing the Commission to act quickly and effectively EU-wide would deter traders from infringements in the most effective way.

Other impacts

Economic impacts

This option would best ensure consistent enforcement of consumer law in the EU. This would improve the functioning of the Internal Market, reduce economic transaction costs and increase consumers' trust and welfare. Thanks to the unified enforcement approach at the EU level, cross-border trade would increase and business conditions/ market entry conditions would be simplified, which would increase competition. This option would establish a level playing field within the Internal Market by more effectively tackling malpractices committed by traders operating either throughout the EU or from third countries. Stronger and fairer competition in the EU would encourage businesses to innovate and improve the quality of their products and services and/or reduce prices to stay competitive.

Impact on traders

The new Regulation would create a "one-stop-shop" with simple and transparent procedures for handling widespread infringements meeting the threshold, ensuring due process and rights of defence similarly to the Regulations 1/2003 and 139/2004 in the EU competition policy field. Administrative burden on businesses would decrease as it would no longer be necessary to face parallel procedures in several Member States for the same infringement. An infringement would be resolved in a single procedure with one set of remedies applicable throughout the EU. The impact of this option on businesses would be similar to the introduction of the EU-level merger control mechanism in 1989 for mergers with EU dimension: considerable reduction of administrative costs for businesses thanks to the removal of multijurisdictional procedures.

Environmental impacts

No significant impacts are expected.

Social impacts

Higher levels of economic activity, as described above, are expected to have a positive effect on the levels of employment in the EU.

Impacts on Fundamental Rights (EU Charter of Fundamental Rights)

In addition to the assessment provided under options 3 and 4:

Option 5 would require procedural rules to respect due process rights of traders (hearings, access to files, professional secrecy), similar to Council Regulation 1/2003 on the implementation of the rules on competition or to the Council Regulation 139/2004 on the control of concentrations between undertakings and the related implementing rules.

Compliance costs (for the Commission, Member States)

Commission:

In the EU competition area (antitrust, cartels and general services of DG Competition) the Commission employs ca. 225 full time officials. The Commission adopts in this field on average 12 decisions per year and conducts other activities such as sector inquiries, leniency requests and complaint handling. Consumer protection infringements would typically be less complex than major competition cases handled by the Commission. On this basis it is assumed that for a similar number of decisions in consumer protection 2/3 of the human resources currently used in DG Competition would be needed (ca. 150 FTEs per year). The consumer directorate currently employs ca. 100 FTEs. This would mean an estimated net increase by 50 FTEs (EUR. 6.6 mln) per year compared to the baseline. Further, the operating cost of EU courts would increase because they would be in charge of the review of the Commission decisions.

The Commission would also incur one-off training costs concerning the new powers, procedures, case-handling and decision-making of ca. EUR 270,000 (assuming 150 full-time officials would be trained for 3 days at the hourly wage rate of EUR 75).

In addition, IT systems would have to be replaced at an estimated cost of EUR 0.8mln through extending the existing IT systems from DG Competition.

The cost of option 5 + option 3 would be ca. EUR 6.9 mln.

The cost of option 5 + option 4 would be at least ca. EUR 10 mln per year.

Member States:

The same compliance costs as per option 3 or option 4.

Impacts on legal systems

In addition to the assessment provided under options 3 and 4:

All Member States would be affected in the same manner due to the application of one threshold for widespread infringements and direct powers of the Commission to address them. Some national procedural adjustments would be needed in particular, as regards, for instance, possible referrals of cases between the Member States and the Commission and implementation of the non bis in idem principle. Stronger impacts could be felt in countries with many enforcement authorities as various procedural rules would have to be adjusted (e.g. DE and CZ) and in countries with enforcement through civil courts (e.g. UK, LU, DK etc.).

Feasibility

Compared to the other options, feasibility of this option is the lowest, because:

At this point of time, the Commission could only enforce EU consumer acquis that is directly applicable in the Member States, i.e. contained in regulations. Horizontal consumer legislation, e.g. the Unfair Contract Terms Directive, the Unfair Commercial Practices Directive and the Directive on Consumer Rights, consists of directives that must be transposed into national law and hence are not directly applicable. At present the Commission could therefore only effectively enforce passenger rights legislation. Should, however, the new instruments, e.g. stemming from the REFIT of consumer acquis or from the on-going initiatives of the Digital Agenda, become directly applicable (i.e. take the form of regulations) it would be hypothetically possible to extend the Commission enforcement powers to these new directly applicable instruments.

Stakeholder support

In the public consultation more than half (52%) of the CPC authorities stated that the Commission should not carry out case investigations (including the power to do on-site investigations or request information from traders)" 117 . Since this option encompasses a Union action in the enforcement of consumer protection laws (which has so far been the task of the Member States), political reluctance from Member States regarding this option is expected to be substantial. Even more so given that the possible legal basis for this action could be Article 352 TFEU requiring decision by unanimity in the Council.

Consumer and trade organisations would be more supportive of a centralised enforcement to tackle widespread infringements. Multinational traders in particular would appreciate stronger EU-level enforcement (be it through better co-ordination of enforcement actions or through EU-level action).

Impacts

Baseline Option 1

Option 2:

Implementing/soft law measures

Option 3: Revision of the CPC Regulation

Option 4: PO3 +additional powers to address deceitful practices and auditing system

Option 5 direct enforcement powers for the Commission

+ PO3

+ PO4

Economic

0

Minor positive

Positive

Highly positive

Highly positive

Highly positive

Fundamental Rights (FR)

0

Positive impact on consumer protection, no negative impact on other FRs

Highly positive impact on consumer protection, no negative impact on other FRs

Positive impact on consumer protection but negative impact on other FRs

Highly positive impact on consumer protection, no negative impact on other FRs

Positive impact on consumer protection but negative impact on other FRs

Compliance costs (MS, Commission)

0

Negligible

EU: ca. €40,000 per year;

MS: ca.€870 per authority (one-off familiarisation costs);

Low

EU: ca. € 300,000 per year

MS: ca. €3,000 per authority (one-off familiarisation costs); ca. € 23,600 (0.378 FTE) per one authority per coordinated action per year if the authority is leading the action; ca. €174,000 for all MSs per one coordinated action (mandatory procedure) per year

High

EU: ca. €3.5 mln per year

MS: as per PO3

Very high

EU: ca. €7 mln per year

MS: as per PO3

Highest

EU: ca. €10 mln per year

MS: as per PO4

Feasibility

0

High, but would be below stakeholders' expectations

High and supported well by stakeholders

Low and not supported by all stakeholders

Low and not supported by stakeholders

Low and not supported by stakeholders

Example in Box 2: A deceptive air carrier advertisement campaign that lasted 4 days but resulted in flight cancellations for months. The revised CPC Regulation would include short-lived intra-Community infringements in the scope of the CPC Regulation. The requested CPC authority would be able to take an action under Article 8 of the CPC Regulation even after the air carrier advertisement campaign had ended: e.g. sanction the trader concerned and prevent the infringement to be repeated in the future.

Example in Box 3: Cheap design furniture online never delivered, but impossible to catch the responsible trader. The option 3 foresees an additional package of minimum powers necessary for the CPC authorities to effectively cease and prohibit intra-Community infringements, in particular which occur in the digital environment. E.g., thanks to the additional power to follow the financial flows by obtaining the information from police, financial authorities banks and/or from domain registries would permit the authorities establishing the identity, location and operational structure of the trader and stopping such practices much faster than now (it took more than three years for the CPC authorities to discover who was behind the trade mentioned in the example in Box 3). Further, the CPC authorities would also be able to take interim measures and close down the websites concerned by preventing further detriment for consumers from this widespread infringement.

Example in Box 4: Difficult cooperation with domain registrars. Thanks to the additional powers to cooperate under the option 3, the authorities would have the power to request information from domain registrars to reveal the trader's identity and take an enforcement action (e.g. close down its website, take an interim measure to stop its infringing practice) against the trader concerned.

Example in Box 6: divergence in the requirements for "evidence" among countries. Option 3 foresees mutual recognition of evidence (outcome of investigation) regarding intra-Community infringements. The evidence gathered by the country X submitted in a specifically required format (e.g. established by the implementing legislation) would therefore be recognised by the country Y without any validation or similar legal process even if the national law of the country Y provides for different rules on the collection of such evidence. The evidence, which was lawfully obtained in the country X, would be admissible by a fact finder (competent authority/court) in all other Member States, unless its admission would adversely affect the fairness of the procedure or the rights of defence as enshrined in Articles 47 and 48 of the Charter of Fundamental Rights of the EU. This would ensure that no intra-Community infringement is left unaddressed and would reduce delays in handling of cases under the CPC mutual assistance mechanism.

Examples in Boxes 8-9: widespread infringements

The revised CPC Regulation would introduce a new EU-level coordination procedure for widespread infringements meeting the EU-dimension threshold. New elements would be:

- threshold defining what a widespread infringement with EU-dimension is;

- mandatory coordination by the Commission The proposed threshold is high enough to ensure that the Commission would only be involved in serious widespread infringements;

- mandatory cooperation by the Member States concerned by the infringement;

- single procedure, common enforcement position as a basis for the action, and this procedure would only result in undertakings from traders. Where traders offer no undertakings or fail to implement them, the CPC authorities would coordinate mutual assistance requests (they would chose who is best placed to enforce on behalf of the others);

- basic procedural steps including respect of rights of defence of traders.

This procedure would ensure consistent responses to common problems and legal certainty for traders wishing to implement a single commercial strategy for the entire European market but who have to face and cope with plural regulatory and enforcement systems. So in case of the Apple guarantee case (Box 8), such a procedure would be launched (as the threshold would be fulfilled) with the aim to achieve one common enforcement position at the EU level with the trader concerned. The enforcement outcome would be consistent across the EU and all consumers would benefit from an equivalent protection in concrete terms.

In case of examples in Box 9 (CPC coordinated actions in the in-app and car rental cases), the procedure would be streamlined, resulting in ca. EUR 180,000 savings emanating from the less time devoted to the action in each Member State thanks to more streamlined pooling of national resources and the increased coordination role of the Commission. In addition, such a large scope action would have a stronger deterrent effect as back by a strong legal basis.

Objectives

Core indicators

Baseline

Target in 5 years

Reduction in the non-compliance rate and in the related consumer detriment (ca. EUR 770mln)

Non-compliance rate

Screening of at least 2,500 websites in the 5 online consumer sectors against key consumer rules to gauge compliance with EU consumer law in the 7th year since the application of the CPC Regulation

The non-compliance rate in the 5 online sectors was 37% in 2014.

-10 points in non-compliance rate in these sectors

Improved CPC cooperation to address intra-Community infringements

Number of CPC mutual assistance requests, for which the established binding time limits were not respected

Currently there are no binding time limits for handling CPC mutual assistance requests. By the end of 2014, almost 40% of the information requests and 50% of the enforcement requests were not treated and closed within the benchmarks set in the Operating Guidelines. 26% of all open cases were created more than two years ago.

halving of these %

Effectiveness of the CPC cooperation in tackling widespread infringements

Number of CPC coordinated enforcement actions

Ca. 1-2 actions per year.

3-4 actions per year on average

Improved market surveillance

Number of alerts notified by stakeholders, including Commission "for information"

Currently this is 0, as the Regulation does not permit this.

At least 10 per year

Improve priorities setting, strategy and dedicated resources for enforcement cooperation at EU level

Elaboration every two years of national enforcement plans

Elaboration of benchmarking of resources, dedicated to CPC enforcement

Currently not existing –only biennial reports (Article 21 of the CPC Regulation).

Existence of national enforcement plans, benchmarking of resources dedicated to CPC enforcement

Reference AP N°

Short title

Foreseen adoption

2015/JUST/014

Review of the CPC Regulation

First half of 2016

Board's Recommendations

Implementation of the recommendations into the revised IA Report

1. Clarify the problem section by underlying when the inefficiencies of the CPC Regulation are due to a lack of clarity of the current legal framework or a lack of commitment of the Member States to comply with their obligations and linking clearly problems to solutions.

2. Reinforce the intervention logic by illustrating with concrete examples how the proposed amendments would solve the underlying problems.

3.Reinforce the argumentation why an increased role of the Commission in consumer law enforcement to address pan-European infringements is needed and explain more in detail the related legal and implementation issues for Member States and their views in this respect (if known).

4. Clarify the interaction of the CPC Regulation with sectorial instruments listed in its annex (as some of them already include remedies such as compensation mechanisms for passenger rights).

1. The problem section 1 was clarified in this respect. Additional examples were provided and the structure was revised to illustrate better that the current shortcomings of the CPC cooperation are mostly due to the limitations of the legal framework. The revised report summarises more clearly the initiatives undertaken since the CPC Regulation came into force to address its current limitations (Box 7) and explains better why they are not sufficient for the future. The problem section was restructured in a clearer manner (drivers-problems-consequences) so that the intervention logic is more coherent. The problem tree was also included in the report.

2. The problem section and objectives were clarified to ensure more coherence in the intervention logic. Examples were provided to illustrate how the proposed amendments would solve the underlying problems (section 7.4).

3. The revised report emphasises successes obtained notably through the coordinated actions on in-app purchases and car rental and the pivotal role the Commission played to complete these actions successfully (section 1.4.2.2). The report points more clearly to the future opportunities that could be generated with the proposed amendments (section 7.4). Member States' views on a single EU level procedure are provided in the assessment of the option 3 and Annex II.

4. All sectorial legislation in the current annex and proposed to be further included were screened to review their existing remedies and explain the interaction with the CPC system, this screening is to be found in Annex VII

Summary of all stakeholders' views in the public consultation

Overall, there was a clear call from stakeholders to increase efforts towards effective enforcement of consumer laws.

Stakeholders 126 support additional powers to cooperate for the national authorities to deal with infringements, with a particular focus on powers needed to address infringements in the digital environment: the power to carry out test purchases/mystery shopping for investigative purposes (66% fully agrees); the power to name infringing traders (60%); the power to request penalty payments from the traders to recover illicitly obtained gains (60%), and the power to require interim measures (51%).

A clear majority of stakeholders (88%) 127 consider useful to introduce common procedural standards/criteria in the CPC Regulation to overcome procedural differences between national legal systems when tackling cross-border infringements. A few respondents (in particular from DE and UK), however, expressed some reservations regarding the idea of introducing common procedural standards in the CPC Regulation, stating that national procedural law falls within national competence 128 .

According to 87% of stakeholders 129 , it is necessary to include new elements into the CPC Regulation that would make the process of claiming compensation by individual consumers more user-friendly.

A clear majority of stakeholders (91%) 130 call for an enhanced EU-level coordination mechanism to tackle widespread infringements. According to stakeholders 131 , the Commission should play a stronger coordination role in addressing these infringements; including a possibility to request Member States to impose sanctions on non-compliant undertakings (71%) and define evidence based priority sectors where consumer conditions are the poorest (72%). A large share of stakeholders also support the Commission's direct involvement in carrying out preparatory prima facie investigations (58% support the Commission's role), on-site investigations (54%), requesting a trader to cease an infringement (53%) or establishing an undertaking with the trader (49%).

Fully agree

Somewhat agree

Somewhat disagree

Fully disagree

No opinion

The power to carry out test purchases for investigative purposes

Consumer associations

Public authorities and governments

Other

ECC

74%

75%

55%

59%

16%

13%

31%

35%

3%

3%

7%

6%

0%

3%

0%

0%

6%

7%

7%

0%

An explicit power (under defined conditions) to name infringing traders

Consumer associations

Public authorities and governments

Other

ECC

77%

62%

49%

72%

13%

23%

41%

28%

0%

6%

7%

0%

0%

6%

0%

0%

10%

4%

2%

0%

The power to request penalty payments to recover illicitly obtained gains

Consumer associations

Public authorities and governments

Other

ECC

73%

49%

67%

61%

17%

21%

26%

39%

0%

11%

5%

0%

0%

8%

2%

0%

10%

10%

0%

0%

The power to require interim measures, awaiting the completion of full proceedings

Consumer associations

Public authorities and governments

Other

ECC

73%

49%

44%

78%

17%

35%

41%

17%

3%

6%

10%

0%

0%

7%

2%

0%

7%

4%

2%

6%

The power to apply more stringent sanctions due to the cross-border nature of the infringement

Consumer associations

Public authorities and governments

Other

ECC

57%

24%

51%

18%

13%

26%

32%

47%

13%

14%

10%

24%

7%

29%

2%

12%

10%

7%

5%

0%

The possibility to request the application of sanctions, regardless of whether the infringement has ceased or not

Consumer associations

Public authorities and governments

Other 

ECC

70%

30%

43%

28%

20%

35%

43%

50%

0%

10%

10%

11%

0%

18%

2%

6%

10%

7%

2%

6%

Action categorisation of alerts (e.g. with an obligation to act/for information only)

Possibility for the European Commission to post alerts

Possibility for other organisations (e.g. consumer and trade associations, self-regulatory bodies, European Consumer Centres) to post alerts

Possibility for alerts to be made public

Consumer associations

Top, highest priority

32%

45%

75%

68%

Medium priority

52%

52%

22%

32%

Low priority

16%

3%

3%

0%

ECC

Top, highest priority

78%

78%

83%

47%

Medium priority

22%

17%

11%

35%

Low priority

0%

6%

6%

18%

Other

Top, highest priority

38%

40%

62%

43%

Medium priority

55%

52%

33%

48%

Low priority

7%

7%

5%

10%

Public authorities

Top, highest priority

49%

32%

36%

46%

Medium priority

32%

50%

39%

18%

Low priority

19%

18%

25%

37%

Very effective

Highly effective

Not so effective

Not effective

No opinion

A mechanism of mutual recognition of enforcement decisions

Consumer associations

Public authorities and governments

Other

ECC

45%

40%

46%

44%

27%

37%

37%

44%

18%

7%

0%

6%

0%

6%

3%

0%

9%

9%

14%

6%

A single EU level procedure, where the Commission or any Member State can bring the evidence of an EU-level infringement

Consumer associations

Public authorities and governments

Other

ECC

59%

40%

54%

56%

13%

28%

32%

28%

9%

13%

8%

6%

3%

7%

0%

0%

16%

10%

5%

11%

An obligation for Member States to alert other enforcement authorities on an enforcement action when it is suspected that similar practices by the same company or its branches are done in other markets, so as to trigger a joint enforcement action

Consumer associations

Public authorities and governments

Other

ECC

59%

48%

47%

61%

29%

30%

42%

33%

9%

13%

8%

6%

0%

7%

0%

0%

3%

1%

3%

0%

Following sufficient evidence on a case of EU-level relevance, brought by the Commission, an obligation for the concerned Member States to conduct a joint enforcement action

Consumer associations

Public authorities and governments

Other

ECC

61%

34%

49%

44%

30%

36%

35%

39%

3%

12%

8%

11%

0%

10%

0%

0%

6%

7%

8%

6%

An obligation for Member States to notify cases corresponding to defined criteria for EU-level relevance so as to trigger a joint enforcement action

Consumer associations

Public authorities and governments

Other

ECC

61%

34%

49%

44%

30%

36%

35%

39%

3%

12%

8%

11%

0%

10%

0%

0%

6%

7%

8%

6%

Yes

No

No opinion

Request Member States to enforce and/or impose a sanction in case of non-compliance with the undertaking

Consumer associations

Public authorities and governments

Other

ECC

76%

53%

70%

61%

0%

34%

0%

17%

12%

3%

11%

17%

Establish an undertaking with the trader(s) and ensure follow-up monitoring

Consumer associations

Public authorities and governments

Other

ECC

47%

37%

48%

39%

15%

43%

23%

39%

15%

8%

11%

22%

Request trader(s) to cease an infringement  

Consumer associations

Public authorities and governments

Other

ECC

62%

38%

50%

50%

6%

45%

18%

28%

15%

5%

14%

22%

Determine the existence and nature of an infringement

Consumer associations

Public authorities and governments

Other

ECC

56%

37%

57%

44%

9%

42%

14%

39%

12%

9%

9%

17%

Carry out case investigations (including the power to do on-site investigations, request information from traders) on the basis of complaints

Consumer associations

Public authorities and governments

Other

ECC

65%

37%

50%

56%

6%

46%

18%

22%

12%

7%

14%

22%

Carry out preparatory prima facie investigations (e.g. based on website studies, complaint data)

Consumer associations

Public authorities and governments

Other

ECC

56%

58%

48%

61%

9%

25%

18%

22%

21%

7%

16%

17%

Define evidence based priority sectors where consumer conditions are the poorest

Consumer associations

Public authorities and governments

Other

ECC

65%

61%

59%

72%

3%
20%

7%

11%

12%

8%

14%

11%

The screening of more than 2,682 websites in the five sectors found that:

Contact information: Both business address and telephone number contact information was provided frequently across all sectors. In contrast, the number of instances where more than 20% of websites did not provide an e-mail address was much higher.

Relevant product information was available in most sectors and countries, the exception being the consumer credit sector, where in a number of Member States (11 in total) more than 20% of surveyed websites did not provide relevant information. In a further seven Member States 12%-20% of websites were found not to provide this information.

Researchers also looked for information on price and payment methods, and compared the initial advertised price with the final price displayed before it was necessary to enter payment details. For all of the four sectors where this comparison applied (i.e. all, except the consumer credit sector), there was a high rate of inconsistency between the initially stated price and final price the consumer was requested to pay. This inconsistency was observed in 33% of websites in the clothes and sports goods sector, in 26% of websites in the electronic goods sector, in 48% of websites in the package travel sector, and in 19% of websites in the recreation and culture sector.

Information concerning the right of withdrawal was also absent in a significant number of cases: In the sector of electronic goods, in six countries 142 more than 20% of surveyed websites did not provide clearly worded information on the right to withdraw, in the sector of clothes and sports goods, this was the case in 3 countries 143 .

Information on delivery was also found to be absent in over 20% of websites selling electronic goods and tickets for entertainment events (where the option to print the e-ticket was not available) in a significant number of Member States.

Sector

Websites rated as 'very poor' by qualified researchers in terms of informing consumers about their rights

Websites which did not provide a possibility to retain terms and conditions

Websites where the final price to pay was not the same as the initial price offer

CPC Network sweeps (1st phase results indicating the percentage of websites containing irregularities)

Proportion of websites where at least one piece of consumer information was missing (EU total)

Average is 37%

Clothing and sportswear

3%

10%

33%

N/A

35%

Electronic goods

5%

10%

26%

55% (2009)

54% (2014) 144

36%

Recreation and culture tickets

8%

17%

38%

59%

39%

Consumer credit

11%

17%

N/A

69%

32%

Package travel

8%

13%

48%

N/A

42%

Enforcement action

% of cases when the action was used

Unit cost, £

Unit cost EUR

2015 value, EUR

Average costs of court case involving criminal proceedings

95%

4,050

4,770

4,870

Average costs of case involving undertakings

5%

1,270

1,495

1,527

Average costs per one 'non-complex case' = EUR 4,700 159

On average, ca. 2,000 cases are dealt per year = EUR 9,4 mln

Box 9: consumer detriment prevented by the CPC in-app purchases action

Any new single CPC action against a widespread practice could reduce significantly the consumer detriment across the EU. For instance, on the basis of the U.S. Federal Trade Commission action on in-app purchases against Apple in March 2014 161 and against Google in September 2014 162 , it was estimated that the corresponding CPC action prevented consumer detriment within the EU of EUR 68 mln.

The estimation is calculated on the basis of the U.S. consumer detriment per capita, adjusted to the EU population and converted in EUR in line with the current exchange rate of the European Central Bank (ECB): The U.S. FTC estimated the consumer detriment in the Apple case of $ 32.5 mln. This means that the detriment per capita is $ 0.1 ($ 32.5 detriment divided by 320 million consumers). Adjusted to the EU population, Norway and Iceland, the detriment of the EU market would be $ 51 mln ($ 0.1 multiplied by 513 million consumers). Using the UCB exchange rate on 1 October 2015, 1.3758, the consumer detriment on the EU market would be EUR 46 mln. The same reasoning applies to the Google case where the FTC estimated the U.S. consumer detriment of $ 19 mln, resulting in EUR 22 mln for the EU consumers. Thus, the cumulated EU consumer detriment amounts to the sum of EUR 68 mln per both actions.

In our view, this figure should even be further upgraded in the EU context since the room for manoeuvre while negotiating to determine the amount of detriment on behalf of 513 million consumers is bigger than when you are representing 320 million consumers. Moreover, it has to be born in mind that the notion of consumer detriment includes the detriment of the other economic operators and the detriment of consumer trust.

The CPC Regulation's core is the mutual assistance mechanism consisting of:

Mutual assistance requests (information and enforcement requests, Articles 6 and 8 of the CPC Regulation) 165 ,

Alert mechanism (Article 7 of the CPC Regulation), and

Coordinated monitoring and enforcement activities: such as EU-wide screening of websites, known as "sweeps"; or presenting common enforcement requirements to the industry to cease unfair commercial practices in areas of common interest across the EU (Article 9 of the CPC Regulation).

Enforcement requests (Article 8): a national authority in one Member State can request its counterpart in another Member State to take enforcement measures to cease or prohibit the intra-Community infringement without delay. This tool permits the competent authorities to obtain evidence and information from another Member State and to stop infringements committed by traders from other Member States.

In 2006 the Commission adopted a decision regarding the mutual assistance mechanism of the CPC Regulation. It sets the information requirements, which include the minimum information to be included in requests for mutual assistance and in alerts, benchmarks for handling mutual assistance requests and the use of languages 166 .

In practice, when issuing a request for enforcement measures to be taken to cease an infringement, the applicant authority will provide the requested authority with the minimum required information and evidence, on the basis of which the requested authority will be able to possibly initiate an enforcement action under its national enforcement system: name of the trader; details of the infringing practices; legal qualification of the intra-Community infringement under the law; evidence of harm to the collective interests of consumers.

Both authorities agree the time-line for the action. The requested authority has to notify the Commission and other CPC authorities concerned of the enforcement measures taken in the case.

The preferred option 3 does not envisage changing the current provisions of the CPC Regulation regarding the designation of competent authorities under the CPC Regulation, as this would not be in line with the principle of subsidiarity. The only technical amendment would be to clarify that the single liaison office should be part of an authority in charge of horizontal consumer legislation (such as the Consumer Rights Directive or unfair Commercial Practices Directive).

Diversity of enforcement systems has affected the effectiveness and efficiency of the enforcement cooperation under the CPC Regulation. However, the review of the CPC Regulation is not aiming to harmonise enforcement systems as this would not be in line with the principles of subsidiarity and proportionality. The information presented in this section is useful for a reader it provides information (i) why organising coherent effective and efficient enforcement cooperation has been and will continue to be an exceptional challenge because of different enforcement systems and (ii) this information is relevant for the analysis of the proposed options in particular regarding the assessment of the impacts on the legal systems.

The diversity of institutional design among Member States across EU is based on country specific institutional and legal traditions.

About half of Member States rely primarily on public enforcement in the form of self-managed administrative proceedings (although this does not preclude the parallel possibility of civil or criminal proceedings), i.e. BG, CY, CZ, EE, FR, HU, IE, IT, LV, LT, MT, PL, PT, RO, SK, ES.

Member States relying primarily on civil proceedings for public enforcement (although this does not preclude the possibility of parallel administrative and criminal proceedings) are BE, DK, EL, FI, HR, LU, SE and the UK.

In BE, FR, and the UK criminal proceedings can be used to sanction violations of consumer legislation. In these Member States the enforcement of the law on unfair commercial practices has traditionally been done through criminal sanctions. In AT, FI, HU, DK and SK criminal proceedings can be initiated also in certain data protection cases and/or in cases related to deception respectively.

Member States relying primarily on private enforcement for domestic and some cross-border infringements are AT and DE, and to some extent CZ. In these jurisdictions it is up to the consumers (aided by voluntary or publicly funded consumer associations) to enforce their consumer rights in national courts. As mentioned above, this possibility is also foreseen in the CPC Regulation 179 .

Availability of the power

Power to conduct mystery shopping

Power to make test purchases

YES

BG, CZ, DK, ES, FI, FR, HU, IE, LV, NL, PL, RO, SK, SI, UK

BG, CY, CZ, DE, DK, EE, ES, FI, FR, HR, HU, LV, NL, PT, SK, SI, UK

NO

AT, BE, CY, DE, EE, EL, HR, IT, LT, LU, MT, PT, SE

AT, BE, EL, IE, IT, LT, LU, MT, PL, RO, SE

Naming of infringing

traders

Take down websites/domains

Freeze assets

Withdraw/ suspend trade activity (interim)

Order consumer compensation

YES

AT,BE, BG, CY, DK, EE, ES, FI, EL, HU, IE, IT, LT, LU, LV, MT, NL, PL, RO, SE, SK, SL, UK

CY, DK, EE, ES, FI, IT, LU, PL, PT, SE, UK

UK, RO

BG, CZ, DK, ES, FI, FR, EL, HR, HU, IT, LT, LV, MT, RO, SK, SI, UK

EE, ES, PT, RO, UK

NO

CZ, DE, FR, HR, PT

AT, BE, BG, CZ, DE, FR, EL, HR, HU, IE, LT, LV, MT, NL, RO, SK, SI

All MS except UK and RO

AT, BE, CY, DE, EE, IE, LU, NL, PL, PT, SE

AT, BE, BG, CY, CZ, DE, DK, IT, FI, FR, EL, HR, HU, IE, LT, LU, MT, NL, PL, SE, SK, SI

1) Present framework

2) Future framework widespread infringement below the threshold

3) Future framework widespread infringement meeting the threshold

Time devoted to the action in each Member State

0.2 FTE

0.15 FTE

0.1 FTE

Time devoted by the lead Member State

0.1 FTE

0.38 FTE for one Member State or for the Commission

None

Time devoted by the Commission

0.38 FTE

0.38 FTE

Saving

2) - 1)

Saving

3) - 1)

Total staff costs at EU level, EUR thousands

404.7

Max 311.7

224.9

-93

-178.9

1) Present framework

2) Future framework widespread infringement below the threshold

3) Future framework widespread infringement meeting the threshold

Time devoted to the action in each Member State

Scenario1 + 0.2 FTE

Scenario1 + 0.15 FTE

Scenario1 +

Time devoted by the lead Member State

none

none

0.38 FTE

Time devoted by the Commission

none

none

none

Saving

2) - 1)

Saving

3) - 1)

Total staff costs at EU level, EUR thousands

1063.0

572.1

248.4

-490.9

-815.0

I. CURRENT COST

Cost of cross-border enforcement under the current Regulation (assuming that Member States respect the current benchmarks for handling of mutual assistance requests, as laid down in the Operational Guidelines)

Supervision (coordination inside Member States)

Per year:

Large MS 1 full time official (DE, ES, FR, IT, PL, RO, UK) = 7 full time officials

Medium MS 0.5 full time officials (AT, BE, BG, CZ, DK, EL, HR, HU, NL, PT, SE) = 5.5 full time officials

Small MS 0.25 full time official (EE, CY, FI, IE, LT, LV, LU, MT, SI, SK)=2.5 full time official

Total all Member States: 15 full time officials = EUR 930,000

Average annual cost of full time official in Member States = EUR 62,000 (Eurostat 2012)

Mutual assistance system

Information requests (3 months): 110 requests per year: 4 requests per Member State per year = 0.25 full time official per Member State per year = EUR 15,500 per Member State

Total per year for all Member States: EUR 434,000

Enforcement requests (12 months): 140 requests per year = 5 requests per Member State

Assume cost per 5 requests 1 full time official per year = 62,000 EUR

Total cost 140 requests = 28 full time officials = EUR 1,736,000 per year

Total cost of CPC mutual assistance system:

Per Member State (average): EUR 77,500

Total: EUR 2,170,000

Average annual cost of full time official in Member States = EUR 62,000 (Eurostat 2012)

Benchmarks:

3 months for information request handling

9-12 months for enforcement request handling (assumed 12 moths)

Alerts

60 alerts per year per 28 Member State

0.05 full time official per year =1.4 full time official per year

Costs: total for all Member States per year: EUR 86,800

Sweeps (1 action per year)

2014 sweep (437 websites)

Investigation phase: 730 hours = EUR 30,295 = EUR 1,165 per Member State on average

Enforcement phase (assume the same amount as per investigation phase, conservative) = EUR 30,295

Total cost: EUR 60,590 = EUR 2,330 per Member State

Based on the 2014 sweep on guarantees, checked 437 websites, 26 Member States participated

Assumed the same time allowance for the enforcement phase as for the investigation phase.

II. FUTURE SITUATION (after CPC review/implementation of policy option 3)

Costs linked to the change of the CPC Regulation

Implementation costs

Familiarisation costs (1 year only)

EUR 2,000 per authority 1 year only

Familiarisation with the new powers and the new legal framework

Learning costs: decision on best course of action (1 year)

EUR 1,000 per case

Change in operational costs because of the changed CPC Regulation

Supervision (coordination inside Member States)

No change.

Mutual assistance system

Reduction in cost of handling of mutual assistance requests:

Information requests (currently: 110 requests on average per year):

Based on UK data we assume that each full time official will be able to handle 50% more requests: under the new system either 168 requests can be handled (58 requests more) with the existing 7 full time officials instead of the current 110 or only 4.5 full time officials will be needed handle 110 requests

Net saving: 2.5 full time officials = EUR 155,000 (efficiency gains)

Enforcement requests (currently: 140 requests on average per year):

Based on UK data we assume that each full time official will be able to handle 50% more requests = 7.5 requests instead of 5 requests. The existing 28 full time officials will be able to handle 210 requests (70 requests more than that they handle currently) or only 18 full time officials will be needed to handle 140 requests instead of 28 full time officials.

Net saving 10 full time officials = EUR 620,000 (efficiency gains)

New: additional powers, mutual recognition of evidence, binding time limits.

Based on UK calculation of reduction of costs of case handling following an introduction of new powers. UK concluded that the costs of case handling will decrease up to 75% per case because more cases will be closed faster.

The average cost of non-complex case = EUR 4,700, average costs of case with undertakings is EUR 1,500 (i.e. trader accepts responsibility for the infringement). It is assumed that there will be more cases that will be concluded with trader's undertakings (75% of cases will be concluded with undertakings).

Other gains: increased deterrence effect in the long term as the number of infringements and case handling time will decrease.

Alerts

Member States: no change

Commission: additional cost for alert monitoring + posting of alerts of 0.2 full time official = EUR 27,000 per year

Sweeps (1 action per year)

Investigation phase (detection of infringements):

No change.

Enforcement phase: based on the UK example we assume 50% efficiency gain:

Example: 2014 sweep (437 websites)

730 hours of enforcement phase => 50% saving

365 hours = EUR 15,147 => saving of EUR 583 per Member State

Net saving: EUR 15,147 per sweep.

As per mutual assistance requests.

MS

ISCO 1

Legislators, senior officials and managers

(Hourly Earnings adjusted to 2010 + Non-wage Labour Costs + 25% Overhead)

Eurostat 2012, in EUR

Annual Salary in EUR (220 working days*8h per day*hourly wage costs), in EUR

37.8% FTE (0.378)

Part time work of one official (37.8%) FTE in a coordinated enforcement project in EUR ('000)

20% FTE (0.2)

Part time work of one official (20%) FTE in a coordinated enforcement project in EUR ('000)

BE

63.1

111,056

41.98

22.21

BG

5.8

10,208

3.86

2.04

CZ

17.8

31,328

11.84

6.27

DK

58.1

102,256

38.65

20.45

DE

57.5

101,200

38.25

20.24

ET

12.3

21,648

8.18

4.33

EI

39.1

68,816

26.01

13.76

EL

33.7

59,312

22.42

11.86

ES

41.8

73,568

27.81

14.71

FR

48.5

85,360

32.27

17.07

IT

59.2

104,192

39.38

20.84

CY

45.6

80,256

30.34

16.05

LV

7.8

13,728

5.19

2.75

LT

8.5

14,960

5.65

2.9

LU

76.2

134,112

50.69

26.82

HU

11.6

20,416

7.72

4.08

MT

20.0

35,200

13.31

7.04

NL

41.3

72,688

27.48

14.54

AT

57.1

100,496

37.99

20.1

PL

18.3

32,208

12.17

6.44

PO

31.6

55,616

21.02

11.12

RO

10.7

18,832

7.12

3.77

SI

29.2

51,392

19.43

10.3

SK

17.4

30,624

22.92

6.12

FI

52.2

91,872

34.73

18.37

SE

51.6

90,816

34.33

18.16

UK

40.7

71,632

27.07

14.33

HR

29.2

51,392

19.43

10.3

EU

41.5

(average)

61,971

(average)

667.24 (total sum)

346.97 (total sum)

Sectorial legislation

Existence of a formal cooperation mechanism

Existence of a specific remedy mechanism for individuals

Comment/Possible overlap/interaction

Passenger rights

Air (Regulation 261/2004)

The Regulation provides for the appointment of national enforcement authorities (referred as 'NEBs'), and in most Member States the NEBs have been also designated as enforcement authorities under the CPC system. There is an informal network of the NEBs who share information and discuss enforcement issues.

Article 7 sets substantive rules for calculation of compensation. Articles 4, 5 and 6 set events in which compensation is due. Articles 8 and 9 provide other obligations of care and assistance for the carriers.

Currently, NEBs act mainly with regards to individual complaints concerning incidents under their jurisdiction (by airlines of any nationality). It would not have a legal mandate to address an incident that occurred in another State, even if it concerned its own consumers, and may not have a mandate under national law to assist with enforcement in another State. Most of these enforcement cooperation tools are therefore focused on domestic enforcement and do not take into account the specific needs of cross-border enforcement.

Thanks to the CPC mechanism, when the collective interest of consumers is at stake, NEBs and otherwise CPC competent authorities would formally cooperate within the CPC system on the basis of the residence of affected consumers.

Sea and inland waterways (Regulation 1177/2010)

Similar mechanisms as for air transport

Article 8 sets out remedies for disabled consumers who have been refused boarding (reimbursement, re-routing, alternative transport). Articles 15-19 establish rules for compensation, reimbursement, assistance, and information due to various events. Article 21 clarifies that the Regulation does not preclude passengers from seeking damages with respect to loss due to cancellation or delay.

idem

Bus and coach (Regulation 181/2011)

Similar mechanisms as for air transport

Articles 7 and 8 establish compensation for personal injury, death, or loss of luggage, and set remedies for assistance in case of accident. Article 10 sets out remedies for disabled consumers who have been refused boarding (reimbursement, re-routing, alternative transport). Articles 17 and 19-21 establish rules for compensation, reimbursement, assistance, and information due to various circumstances. Article 22 clarifies that this regulation does not preclude passengers from seeking damages with respect to loss due to cancellation or delay.

idem

Rail (Regulation 1371/2007 - new entry into the CPC Annex)

Similar mechanisms as for air transport

Articles 13 and 16-18 address compensation payments, reimbursements, and re-routing and assistance remedies. Article 25 addresses compensation for mobility equipment. Article 27 requires undertakings to have a complaint handling mechanism.

idem

Rights of disabled persons travelling by air (Regulation 1107/2006 - new entry into the CPC Annex)

Similar as for air transport: Article 14 establishes an enforcement body in each MS. Article 15 requires complaints received by one MS' enforcement body about an infringement in another MS to be forwarded to that other MS's enforcement body. An informal network of NEBs.

Article 4 requires that passengers refused boarding are offered an alternative, reimbursement, or re-routing. Article 12 establishes that compensation shall be made for lost or damaged mobility equipment.

idem

Travel services

Regulation 1008/2008 on common rules for air services (Chapter IV pricing provisions) (new entry into CPC Annex)

Article 26 requires that MS and the Commission cooperate in applying and monitoring of the Regulation, and allows the Commission to obtain all necessary information from MS.

No formal cooperation network.

None

The CPC cooperation would be the key mechanism for formal cross-border cooperation on specific malpractices in this area.

Council Directive 90/314/EEC on package travel, package holidays and package tours

None

Article 4 sets forth remedies including compensation, withdrawal without penalty, suitable alternative arrangements, equivalent transport back

The new 2015 directive on package travel (2015/230/EU) clarifies that the CPC Regulation applies to infringements of the package travel directive. Articles 10, 11, 13, and 14 set out more detailed remedies than 90/314/EC (price reduction, refund, compensation for damages, termination without fee). Article 21 establishes trader liability for booking system errors.

Directive 2008/122/EC on timeshare, long-term holiday product, resale and exchange contracts

None

Article 6 provides for the right of withdrawal.

The CPC cooperation is the mechanism for formal cooperation on specific malpractices in this area.

Financial services

Directive 2008/48/EC on credit agreements for consumers

An informal expert group.

Article 14 sets forth right of withdrawal from the contract without penalty and without giving any reason. Article 16 sets substantive rules for early repayment. Article 17 assigns obligations in event of assignment of third party to creditor's rights.

The CPC cooperation is the mechanism for formal cooperation on specific malpractices in this area.

Directive 2002/65/EC concerning the distance marketing of consumer financial services

No

Article 6 requires right of withdrawal from the contract without penalty and without giving any reason.

The CPC cooperation is the mechanism for formal cooperation on specific malpractices in this area.

Directive 2007/64 on Payment Services (new entry into CPC Annex)

Article 82 requires Member States to ensure that the complaints procedures and penalties provided for in Articles 80(1) and 81(1) respectively are administered by the

authorities empowered to ensure compliance with the provisions of national law adopted pursuant to the requirements laid down in the Directive. Some competent authorities designated for handling complaints under Article 80 of the Payment Services Directive are also CPC authorities, e.g. DK, EE, FR, LV, LT, RO, FI.

The Directive protects consumer rights in the event of unauthorised debits from an account under certain conditions. There are three types of refund rights:

● Unauthorised debits: If a consumer realises that an unauthorised debit has been made from his/her account, s/he has the right to an immediate refund provided that the payment service provider has been notified no later than 13 months after the debit date.

● Overcharging: If a consumer has authorised payment without stating the amount, e.g. through a direct debit or a card payment for hotel or car bookings, and the amount debited is not what s/he could reasonably have expected, the consumer is entitled to challenge it by contacting the payment service provider within eight weeks. The payment service provider then has to reimburse the consumer within ten days or justify its refusal.

● Incorrect processing: If a consumer authorised the transaction but the payment service provider made a mistake in processing the payment, e.g. failed to pay, debited the wrong amount, paid late or paid twice, the consumer is allowed to challenge the error within 13 months and obtain proper rectification.

Article 24 of the Directive provides for cooperation and information exchange obligations (not clear whether these obligations also apply to competent authorities designated for handling complaints under Article 80). However, the CPC cooperation could still however be complementary in certain cases to cover infringements of provisions provided in the Title III and IV of the Directive, e.g. in particular when coordinated enforcement action is needed to address a pan-European infringement in the area.

Directive 2014/17/EU on mortgage credit (new entry into CPC Annex)

Chapter 13 spells out obligatory cooperation between competent authorities, including exchange of information, cooperation in investigation or supervision activities, establishment of one contact point for purposes of this directive, and European Banking Authority's assistance in resolving disputes.

The Directive requires clearer and more understandable information on mortgage loans by means of an improved European Standardised Information Sheet, better assessments of consumers' ability to repay the loans and more reliable advice. The Directive contains safeguards before entering into the credit agreement: e.g. Article 14 ensures that the consumer has sufficient time before being bound by the credit agreement (via a reflection period or a right of withdrawal or both). In addition, the consumer has the right under Article 25 to repay the credit early and is entitled, subject to conditions, to a reduction in the total cost of the credit.

The Directive lays down an elaborate cooperation mechanism among authorities going beyond information exchange. The CPC cooperation could still however be complementary in certain cases, e.g. when coordinated enforcement action is needed to address a pan-European infringement in the area.

Directive 2014/92/EU on payment accounts (comparability of fees switching and access -new entry into the CPC Annex)

Similar to the provisions of the Directive on mortgage credit, Chapter V spells out obligatory cooperation between competent authorities, including exchange of information, cooperation in investigation or supervision activities.

For the purposes of cooperation, information exchange and dispute resolution between competent authorities, the competent authorities should be those acting under the auspices of European Banking Authority, as set out in Regulation 1093/2010, or other national authorities provided that they cooperate with the authorities acting under the auspices of EBA in order to carry out their duties under this Directive.

The Directive creates a right for all consumers to access basic payment account services irrespective of their financial situation. It is for the Member States to decide whether payment accounts with basic features are offered to consumers by all credit institutions or by a sufficient number of credit institutions. However Member States will have to guarantee easy access to basic accounts for all consumers in their country.

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Directive 2001/83/EC on the Community code relating to medicinal products for human use: Articles 86 to 100

None

None

The CPC provides the mechanism for formal cooperation on specific malpractices.