BRUSSELS (Reuters) - The European Union plans more powers for consumers to sue firms such as Volkswagen (VOWG_p.DE) after the Dieselgate scandal showed the limits of consumer protection authorities to curb corporate cheating.
Wednesday’s proposal by the EU executive would allow some groups to launch collective action and consumer protection authorities higher sanctions for rule breakers.
Amid frustration in Brussels with rule-flouting by the powerful tech and auto industries, fines will increase to up to four percent of annual turnover for companies deemed to have trampled on the rights of a large group of consumers.
“Consumer authorities will finally get teeth to punish the cheaters,” Europe’s Justice Commissioner Vera Jourova said. “It cannot be cheap to cheat.”
Along with a separate plan to improve transparency over how science shapes policy, officials couched the moves as the EU becoming more responsive to citizens’ worries such as the potential cancer risk of products such as glyphosate, used in Monsanto’s Roundup.
EU regulators say that, after VW was caught using software to cheat emissions test by U.S. authorities, they lacked the tools to ensure EU car owners received the same kind of compensation offered to U.S. clients.
Jourova said only two national consumer protection authorities imposed fines on VW, amounting to 5.5 million euros. “This is nothing in comparison to what Volkswagen paid in the United States,” she said.
The European Consumer Organisation (BEUC) said the move was long overdue but cautioned that judges and national authorities would still hold sway over what may be a laboriously lengthy process.
Business groups said the plan, which still need approval from national governments and the European Parliament, could lead to a proliferation of lawsuits, saying EU citizens already enjoy some of the world’s strongest consumer protection rules.
Defending the draft rules, Jourova said they would not allow U.S.-style, profit-seeking class action suits. Law firms would not be allowed to sue firms - only citizens’ rights groups - a legal recourse only now available in a handful of member states.
In a bid to deliver Commission President Jean-Claude Juncker’s promise of a “new deal for consumers”, the plan also tackles concerns online rights and food brands being sold with inferior ingredients in different parts of Europe.
Adding pressure on firms like Facebook (FB.O) and Google’s Gmail (GOOGL.O), it would extend EU consumer law to “free” digital services for which consumers provide personal data, such as cloud storage services, social media and email accounts.
Consumers would also get more information on contracts and the right to cancel them within 14 days.
In a separate plan, the Commission wants to make more of the evidence used to decide policy on food safety publicly availably and allow the European Food Safety Authority (EFSA) to conduct its own studies.
Reporting by Alissa de Carbonnel @AdeCar; Additional reporting by Julia Fioretti; Editing by Robert-Jan Bartunek and David Evans