Speed Read
In March 2024, the European Parliament (the Parliament) moved forward with a proposal emanating from the European Commission (the Commission) that the current consumer Alternative Dispute Resolution (ADR) legislative framework be overhauled and modernised.
In recognition of the changes to the way in which consumers buy products over the last decade, the reform measures are aimed at adapting the ADR legislative framework to:
- digital markets
- facilitating the use of ADR in cross-border cases
- simplifying ADR procedures.
The proposed reforms involve two key elements:
- Amending and updating a number of aspects of the existing ADR Directive (2013/11/EU) (the ADR Directive) which sets out the current out-of-court dispute resolution framework for consumer disputes.
- Discontinuing the ‘European Online Dispute Resolution Platform’ through repeal of Regulation (EU) 524/2013 which established a framework for resolving consumer disputes online (ODR Regulation).
Notably, there has been some initial pushback to the proposed reforms at a European level. In May 2024, Business Europe, Eurochambres, and SME United issued a joint statement setting out their views that there was no need for a substantive increase in the material scope of the ADR Directive to include matters which should fall within the remit of national supervisory authorities. They also expressed the view that the voluntary nature of the ADR processes should be maintained.
It remains to be seen whether other stakeholders and EU Member States will follow suit in making similar calls or raising objections to the proposed reforms, the overall aim of which is to strengthen consumer access to independent, fast, and affordable redress.
What are the key reforms proposed?
1. Extension of scope beyond contract disputes: The ADR Directive currently only covers contract disputes arising from the sale of goods or services between EU consumers and traders. The proposed reforms to the ADR Directive would extend both the product, material, and geographical scope of the directive in the following ways:
- Product scope - to specifically include digital content and digital services as well as goods and services
- Material scope - to include infringements of a consumer’s rights in non-contractual and pre-contractual situations e.g., unfair commercial practices; omission of compulsory pre-contract information; remedies in the case of non-conformity of products etc. In addition, Member States may further extend the ADR procedures to other categories of disputes should it wish to do so
- Geographical scope – through the introduction of a new definition – ‘cross-border dispute’ – to include disputes between a consumer resident in a Member State, and a trader established in another Member State or established outside the Union (to the extent that the trader voluntarily agrees to participate)
These proposed reforms come on foot of the Commission’s Impact Assessment Report accompanying its original proposal, which was published in October 2023. This Report observed that the current ADR Directive framework did not correspond with the new patterns of consumer expenditure which have undergone drastic change in recent years with a significant increase in the level of business conducted online.
In the Commission’s view, the result is a higher risk of unfair trading practices (which extends beyond scenarios in which consumers enter concluded contracts); greater challenges associated with cross-border consumer-trader disputes (particularly where non-EU traders are involved); and more complex disputes. By way of example, the Commission pointed to the increase in e-commerce, including cross-border transactions, which has been accompanied by the development of private online dispute resolution solutions provided by digital platforms which are not necessarily established in the EU – and thus not subject to the ADR Directive.
2. Collective ADR: to increase time and cost savings in the ADR processes, an amendment to the ADR Directive has been proposed which would permit ADR entities to ‘bundle’ cases with similar elements together. Notably, more than half of the respondents to the Commission’s consultation were supportive of this proposal on the basis that case handling would ultimately be made easier.
The proposed amendment envisages that the ADR entity would be authorised to bundle similar claims into one procedure upon informing the consumer of the proposed approach and providing them with an opportunity to refuse the case being bundled. The proposal also provides that Member States would create an obligation that traders established in their territory would respond to the ADR entity confirming whether it would agree to participate in the proposed procedure no later than 20 working days after receipt of the request.
3. Assistance for consumers and traders with ADR processes from ‘ADR contact points’: in recognition of the low uptake of ADR in cross-border cases, it is proposed to introduce an ADR contact point in each Member State who will assist consumers and traders to access ADR entities.
The primary role of the ADR contact point would be to facilitate communications between the parties and the ADR entity e.g., assisting with submission of the complaint and any relevant documentation; providing the parties with general information on EU consumer rights; providing explanations on procedural rules etc.
4. Repeal of the ODR Regulation and replacement of ODR platform with digital interactive tool: it is proposed that the ODR platform would be discontinued on the basis that it is underutilised by EU consumers. Indeed, reports emerging from the Commission have shown that use of the platform has now fallen to only approximately 200 complaints per year across the EU. Failure by traders to provide an electronic link to the ODR platform on their websites, which is mandatory pre-contractual information which traders must provide under the ODR Regulation, has however been an area of regulatory focus in Ireland with the CCPC issuing seven compliance notices to traders in 2023.
Under the proposal, the ODR platform would be replaced by a digital interactive tool that will direct consumers to consumer redress solutions. These proposed new tools would be designed to improve signposting for consumers on the ADR redress mechanisms available to them and will provide interactive solutions for consumers on how to seek the best ADR entities for their specific disputes. Information is also to be provided about other redress mechanisms and links to the ADR contact points.
Conclusion
If ultimately enacted, the ADR proposal will materially revamp the current Directive to keep pace with a rapidly evolving and digitized consumer market. It would see the complete phasing out of the ODR platform, as well as addressing certain pressing issues concerning the Directive’s scope and cross-border disputes. The timelines around passage of this proposed legislation should become clearer in the coming months. The new Parliament must formally decide to move forward with this legislation and this decision is expected in the autumn. The negotiating mandate of the Council of the EU is also awaited at this time.
For more information please contact Orla Clayton, Knowledge Consultant, Katie O’Connor, Partner, Mairead O’Brien, Senior Associate or Denise Daly Byrne, Senior Associate or your usual ALG Disputes & Investigations team contact.
