Collective redress for consumers

Some weeks ago,the government announced it was working on draft law to introduce collective redress for consumers. This is a laudable if somewhat overdue measure.

The EU has for the past few years been discussing the introduction of collective redress, though to date no definitive legislative instrument has been approved. Some EU states such as Portugal and France have already introduced collective redress whereas others like Malta still have to do so.

BEUC, the European federation of consumer bodies, has undertaken a campaign advocating the need of introducing collective redress throughout the EU and as part of its campaign is using a very likeable mascot.

Until collective redress is introduced, the concept of the Single Market will be incomplete. Collective redress empowers people to act together to enforce their rights at home or across borders whether because collectively they have been impacted negatively because of a defective product, negligent financial advice or cancelled flights, just to mentioned a few cases. Without collective redress, many consumers throughout the EU continue to run the risk of remaining without compensation. In the sphere of EU antitrust alone, the amount of unrecovered damages is estimated to be of circa €20 billion.

In Malta, the Consumers’ Association has come across various instances where consumers did not proceed precisely because it was not feasible to act individually to attempt to recover the compensation due. A case that comes to mind involved various consumers who took a package holiday and who were lumped with sub-standard accommodation coupled with many advertised excursions that were not held. While a few consumers decided to fight this individually, many concluded that the time and cost involved was not worth the effort.

The basic concept underlying collective redress is to enable people to band together to undertake a common lawsuit where, primarily because of the cost and effort involved, they would not have proceeded. Some cases – such as those involving alleged defective goods or complex financial products – may require the aid of expert advice that invariably comes at a cost. Consumers acting on their own may not always afford engaging such experts. Conversely, a group acting in unison would be in a much better position to seek redress.

The introduction of collective redress poses various questions. Should collective redress be extended to other areas such as the environment? I believe this is a pertinent consideration and should be favourably considered. However, one of the most important considerations that should be factored once collective redress is introduced is to have in place the necessary administrative measures ensuring that collective redress can effectively be used. Time and again, in various spheres of the law – consumer protection not excluded – various positive measures have been introduced but in practice remain there only on paper. Any draft law on the subject should ensure that entities representing consumers, such as the Consumers’ Association, have the required means to act on behalf of groups of aggrieved consumers, in particular access to financial and human resources, which would enable such entities to undertake collective redress.

The next step in a local context is for the government to make public its recommendations on this subject. It is imperative that, in doing so, all pertinent issues are addressed. There may not be straightforward solutions for all issues but it is important they are raised and discussed and stakeholders afforded the opportunity to have their say.

The article reflects only the author’s opinion.

Dr Micallef is a member of the Consumers’ Association.