CALL FOR EVIDENCE

FOR AN IMPACT ASSESSMENT

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

 You should finalise this document at the earliest stages of the impact assessment process, so that best use can be made of feedback from stakeholders.

Title of the initiative

Consumer protection – strengthened enforcement cooperation

Lead DG (responsible unit)

JUST.E3

Likely type of initiative

Proposal for a Regulation of the European Parliament and of the Council

Indicative timetable

Q2-2023

Additional information

https://ec.europa.eu/info/live-work-travel-eu/consumer-rights-and-complaints/enforcement-consumer-protection/consumer-protection-cooperation-network_en 

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

A. Political context, problem definition and subsidiarity check

Political context

The fast-growing digitalisation of consumer markets, which took an unprecedented leap during the COVID-19 pandemic, together with constantly evolving business models, pose continuous challenges for maintaining fair online markets for consumers and a level playing field for businesses.

In its New Consumer Agenda for 2020-2025 of 13 November 2020, the Commission stated that the COVID-19 crisis ‘underlined the critical importance of a high level of consumer protection and close cooperation among authorities in the EU […while], it has also brought to light certain gaps in the EU’s consumer protection framework.’ The Commission therefore, in line with Action 7 of the Agenda, pledged to ‘analyse whether additional legislation or other action are needed in the medium-term in order to ensure equal fairness online and offline’. In February 2022, at the European Consumer Summit, more than 500 stakeholders from all Member States, including policy-makers, national enforcement authorities, academia, consumer and business organisations, youth representatives, and other EU institutions, ranked the joint capacity-building activities of enforcement authorities on e-commerce as the top priority for the coming years.

The recently agreed Digital Services Act (DSA) and Digital Markets Act (DMA) introduce ground-breaking new rules for digital markets. The rules under the DSA clarify the responsibility of online platforms, including with respect to illegal goods, services and other content online, and clarify their application to businesses that are established in third countries but sell in the EU. The DSA also vests the Commission with direct enforcement powers vis-à-vis very large online platforms. However, the large majority of consumer problems online, for example business-to-consumers ‘dark patterns’ and other manipulative practices that remain regulated by consumer law, will continue to be tackled under the cooperation system established by the Consumer Protection Cooperation (CPC) Regulation. In order to prevent potential gaps and an imbalance in the enforcement of EU laws in digital markets, it is important to increase the deterrence, cost-effectiveness and the rapidity of action under the CPC Regulation to ensure that national consumer protection authorities and the Commission can effectively respond to consumer threats online.

Article 40 of the CPC Regulation requires the Commission to evaluate and report on the application of the CPC Regulation by January 2023. This Call for Evidence intends to assess whether, in line with that Article, the report needs to be accompanied by a legislative proposal.

Problem the initiative aims to tackle

Consumers are increasingly exposed to unfair commercial practices, in particular online. Recent behavioural research on dark patterns shows that in one mystery shopping exercise, 97% of the most popular websites and applications used by EU consumers use unfair commercial practices, such as hidden information, preselection of options or difficult cancellation. As unfair practices can spread extremely fast online and quickly harm a large number of consumers across different Member States, this trend is particularly alarming.

The increasing digitalisation of consumer markets also makes it easier for businesses that do not always fully comply with the EU laws protecting consumers and for rogue traders to target EU consumers. As the CPC Regulation does not explicitly state its application to non-EU based businesses, there have been divergent interpretations among Member States regarding their authorities’ competence to act against non-EU based businesses on the basis of the CPC Regulation. This decreases the effectiveness of enforcement cooperation to tackle illegal conduct by such businesses on the EU market.

Recent CPC enforcement cases against multiple market players in the COVID-19 pandemic have shown how businesses quickly adapt to unfair business practices by their competitors. The resulting ‘race to the bottom’ can significantly detriment consumers across the affected business sectors and disadvantage compliant businesses. The Commission expects this to be particularly harmful on online markets, where many smaller businesses follow closely the practices of ‘big players’, such as large online platforms, and where adaptations can be done very quickly.

While the CPC Regulation equips Member States’ authorities with tools to tackle unfair practices online, the current system is mostly conceived to address unfair practices committed by individual traders and does not formally provide the possibility to address several traders for violating the same consumer rights in one CPC enforcement action. The CPC Network therefore needs to engage in several, parallel enforcement actions that can take a long time and tie up significant resources, thereby delaying the resolution of the problem and remedies owed to consumers.

Basis for EU action (legal basis and subsidiarity check)

Legal basis

Article 114 of the Treaty on the Functioning of the European Union.

Practical need for EU action

While the laws protecting consumers are to a large extent harmonised in the EU, since enforcement of consumer law is a national competence it is highly fragmented. Unfair business practices on ever-more digitalised retail markets, however, are cross-border by nature as they do not stop at jurisdictional borders. Hence, only EU action combined with a coordinated approach can ensure that the rules are effectively and consistently enforced across the EU’s Single Market, while respecting the enforcement traditions in the Member States.

B. Objectives and policy options

The objective of the initiative is to enable consumer law enforcers cooperating under the CPC Regulation to react more rapidly to fast-evolving market threats, in particular in the digital sphere, and to increase the deterrence and cost-effectiveness of cross-border enforcement cooperation. In particular the following policy areas are being researched:

·How to increase the speed and flexibility for CPC authorities to respond to emerging market threats, including streamlining their powers and clarifying cooperation procedures to more effectively address threats affecting entire business sectors or coming from outside of the EU, or considering extending the Regulation’s Annex to include additional EU laws protecting consumers;

·How to ensure that CPC authorities can use the power to impose fines under Directive 2019/2161 more effectively when addressing widespread and EU-wide infringements of consumer law;

·Which role the Commission could take in coordinating more effectively the work of CPC authorities and how it could further contribute to their investigations and enforcement actions, including imposing credible and deterrent fines against non-compliant businesses.

From the examination of possible solutions to respond to these questions, the Commission could propose targeted improvements to the existing cross-border cooperation framework under the CPC Regulation. In particular, the Commission could propose to explicitly include third country traders; to provide for sector-wide common investigation procedures and a strengthened role for the Commission when it comes to sanctioning traders not cooperating in a satisfactory manner with the CPC Network; or direct powers for the Commission to enforce the CPC Regulation in relation to infringements of specific provisions of consumer law committed by large market players.

C. Likely impacts

Providing streamlined coordinated procedures to investigate and to sanction widespread infringements of consumer law would shift enforcement activities against illegal practices concerning most or all Member States to the EU level. This would significantly decrease the administrative burden and litigation costs of CPC authorities where a trader fails to propose or comply with commitments, by replacing parallel national proceedings by only one action at EU level. The impact assessment will examine in more detail the impact/benefit of shifting the administrative burden/litigation risk to the EU level.

The improved procedures are also expected to increase the deterrence of the CPC system, as businesses would be more directly exposed to investigation and enforcement measures in case of non-compliance. In addition, they would not be able to use the fragmentation of national enforcement systems to their advantage to delay and circumvent enforcement procedures and outcomes such as fines. Furthermore, more rapidly preventing and addressing misleading commercial practices should allow for a healthier and fairer environment for businesses and minimise the duration and magnitude of the collective consumer harm. This should also significantly boost consumers’ trust in the EU’s (Digital) Single Market.

No significant environmental or social impact is expected.

The envisaged changes to the CPC Regulation will not alter its intervention logic, i.e. that the enforcement cooperation is used to investigate suspected infringements of the laws listed in the Regulation’s Annex. They will therefore not affect compliance costs incurred by businesses. The changes should also considerably decrease litigation costs for businesses suspected of illegal practices and offer them an effective one-stop-shop approach to the application of consumer law.

D. Better regulation instruments

Impact assessment

An impact assessment to examine in detail the problem described in this Call for Evidence and the possible solutions, as well as their possible impacts, will be carried out. The Commission expects to submit this impact assessment to the Regulatory Scrutiny Board in Q1/Q2 2023.

Consultation strategy

In order to prepare for the evaluation of the CPC Regulation as required under its Article 40, the Commission already consulted the public between 4 April and 27 June 2022 and carried out a targeted consultation of Member States’ CPC Single Liaison Offices, competent authorities, entities issuing external alerts, and traders that have been subject to CPC actions in the past.

Together with this Call for Evidence, the Commission has also published an Open Public Consultation (https://ec.europa.eu/eusurvey/runner/strengthening-protection-consumer-rights). The questionnaire will be available in all official EU languages, which can also be used for replies. The consultation will remain open for 12 weeks.

The consultation will be promoted via the communication channels put in place by the Commission for exchanges across the CPC Network and social media. After closing the public consultation, the Commission will publish a factual summary report on Have Your Say. In addition, a synopsis report covering all consultation activities will be annexed to the impact assessment.

Why we are consulting?

The consultation aims to collect the views of various interested organisations and businesses on how to increase the efficiency of retail markets in the EU, how to ensure a level playing field among all traders operating in this market, from top-level platforms to smaller players, and how to ensure that consumers enjoy the same level of fairness online and offline.

Target audience

Contributions are welcome from anyone with a direct interest in the enforcement of consumer rights in the EU, including consumers and businesses, as well as their respective representatives, Member States CPC Single Liaison Offices, competent authorities, entities issuing external alerts, etc.