Scent of a EU citizen

The European Commission published today a final opinion of the Scientific Committee on Consumer Safety (SCCS) regarding fragrance allergens in cosmetic products. Earlier this year we have discussed the preliminary opinion of the SCCS (Scenting... new regulations), which aimed at identifying potentially allergenic fragrance ingredients. Aside the already known 26 ingredients (that have been identified in 1999), additional 30 individual chemicals and 26 natural extracts were added to the list. The opinion suggests the tolerable concentration limits for some of these ingredients that would be unlikely to cause allergies with consumers. Based on the SCCS opinion, the Commission will now consider whether any regulatory measures need to be taken.

Clinical trials on the (exam) table

The European Commission presented this month a proposal for a new regulation on clinical trials. Clinical trials means that the new medicines are tested on humans. On the one hand, it gives patients access to most recent, most innovative treatments and helps business develop new medicines and improve the already authorised ones. On the other hand, it can bring about quite a risk, which means that it needs to be strictly regulated. The new European Regulation is supposed to replace the 'Clinical Trials Directive' of 2001 and simplify and speed up the authorisation and reporting procedures, while at the same time keep up the high standards for patients' safety and the reliability of data. The Directive of 2001 was differently transposed by various Member States which led to unfavourable regulatory framework and a decline by 25% in clinical trials between 2007 and 2011. (Fostering EU's attractiveness in clinical research: Commission proposes to revamp rules on trials with medicines)

Q&A

EU helps to keep it real

"Got a real bargain when I bought this Louis Vuitton wallet for 10 euro". Well, who doesn't like a bargain? Some bargains are too good to be true, though, and it's unlikely that you would get an original product for price that is not anywhere close to the shop price. With certain products a bargain is also not what consumers should be looking for. Spending more money on a product usually guarantees its better quality, its authenticity, which is crucial for the health and safety of consumers when products such as medicines, food etc. are concerned. In order to protect consumers, as well as to protect intellectual property rights, the EU Customs department diligently examines products entering the EU market in order to comply with the EU's 2020 Strategy. In 2011, they detained almost 115 million products suspected of violating IPR (in 2010 that number was just 103 million) valued at 1,3 billion euro. (Report on EU customs enforcement of IPR) Out of these products 24% were medicines, 21% packaging material, 18% cigarettes, products for daily use that could potentially be dangerous to consumers - 28,6%. The main offender is still China (73% of all infringing articles come from there). Fake foodstuff comes usually from Turkey, alcoholic drinks - Panama, soft drinks - Thailand, mobile phones - Hong Kong. (EU customs detain over 100 million fake goods at EU borders)

Cross-border succession in the EU

A few months ago we have posted about a new Regulation in matters of succession (An elderly uncle living in another Member State?...). This regulation becomes European law tomorrow - upon its publication in the Official Journal. New provisions aim at simplifying the procedure of inheritance of properties located in different Member States by determining that it is the country of habitual residence of the deceased whose laws will apply to establishing the jurisdiction and the law applicable in cross-border cases. It also provides for a European Certificate of Succession, allowing heirs to prove their claims to the inheritance throughout the EU. Member States have three years to implement them into their national laws. (EU rules to ease cross-border successions are now law)

New EC Video Campaigns

Granny goes roaming:



... and 100.000 lives saved:

Protecting open internet

Yesterday the European Commission opened a public consultation on preservation of the open internet, which refers to the concept of net neutrality. The idea of open internet is that consumers should have a free choice among various internet offers, which means that these offers should be transparent and easily comparable, that consumers could switch between operators and that their online privacy would be protected. The consultation is opened until 15 October 2012 and consumers as well as public and private parties are invited to participate in it.

"Today there is a lack of effective consumer choice when it comes to internet offers. I will use this consultation to help prepare recommendations that will generate more real choices and end the net neutrality waiting game in Europe. Input from this consultation will help turn BEREC's findings into practical recommendations." said Neelie Kroes (Commission opens public consultation on preservation of the open internet (net neutrality)).

Safe food

Continuing with news on the food policy of the EU, last week the European Commission published a report about the efficiency of the Rapid Alert System for Food and Feed (FAQ on RASFF). This EU's tool helps to avert or mitigate many food safety risks by quickly spreading any information about risks found in food or feed (e.g. discovered during the safety checks at EU borders), contributing to the increase in EU citizens' health.

"European consumers enjoy the highest food safety standards in the world. The EU's Rapid Alert System for Food and Feed is a key tool as it allows risks to be identified and removed from the European market. RASFF reinforces the confidence of our consumers in our food and feed safety system. In 2011, we dealt with a number of important crises such as the effects of the Fukushima nuclear incident, the dioxin and the E. coli crisis. The EU managed to tackle them and the lessons we all learnt will no doubt guide us to do even better in the future." said John Dalli, Commissioner in charge of Health and Consumer Policy (Food: Latest Report shows EU Controls ensure our food is safe)

Annual report of 2010 may be read here , 2011 - here.

EU dietary guidelines

The European Food Safety Authority (EFSA) opened a public consultation last week on the draft Scientific Opinion on Dietary Reference Values (DRV) for energy. Basically, they are proposing new average energy requirements for adults, infants, children and pregnant and lactating women, taking into account the fact that a balanced diet should provide adequate amounts of energy and nutrients for health. The DRV set out the average intake of nutrients, adequate intake as well as lower threshold intake values. These values may then be used as reference in, e.g., food labelling. They also guide consumers in their choice what to eat. The last EU opinion comes from 1993 so it is indeed time to review it. (Dietary reference values and dietary guidelines)

If you are interested in finding out more about the proposal - see here. If you'd like to participate in the consultation, it is open until 28 September 2012, and you should visit its website.

Bon Voyage!

In this holiday period the European Commission has many travel-related issues on its agenda.

Yesterday, a public consultation was launched that aims at finding out what is the situation for victims of cross-border traffic accidents in the EU. It is estimated that at least 2% of all road accidents in the EU involve visitors from other EU countries. These can be tourists, cross-border workers or cross-border commuters. If a EU citizen is a victim of a car accident, he is likely to want to claim some compensation for his damages. Unfortunately, the EU law in this area is not harmonised, which means that there are different national rules for claiming such compensation. Especially problematic is the difference in time limits for making a claim which can range from 1 to 10 years (see Annex: Have a safe trip: Commission consults on how to help victims of road accidents abroad). These cut-off periods may contribute to making it difficult for the victims to claim compensation. The consultation will be open until 19 November and it is supposed to shed some light as to what future actions should the European Commission take. For example, it could harmonise limitation and prescription periods in the EU or it could just try to improve information given to victims of cross-border road accidents.

Additionally, the European Commission announced yesterday its approval for the Single European Sky Performance Scheme. The scheme contains national performance plans that are supposed to save billions of Euros for air passengers as well as airlines in years 2012-2014 by improving air navigation services. This would result in less delays, cheaper flights and reduction of environmental impact of air traffic. Currently, it is estimated that passengers ultimately pay between 6% and 10% of the airline's operating costs. The goal is to reduce user charges by ca. 2.4 billion Euros. (Commission approves national performance plans to reduce costs and...)

Protecting consumers' choice in choosing air fares - CJEU case ebookers.com Deutschland (C-112/11)

19 July 2012: CJEU's judgement in the case ebookers.com Deutschland (C-112/11)

Regulation No 1008/2008 on common rules for the operation of air services protects passengers from unfair treatment by the airlines. For example, its recital 16 puts an obligation on the airlines to clearly indicate the final price (inclusive of all taxes, charges, fees etc.) to be paid by customers for air services, so that they are able to compare effectively the prices for air services of different airlines. The regulation defines what kind of charges should be included in the final price, as well as what to understand under air fares and air rates. It also requires all optional price supplements to be communicated in a clear, transparent and unambiguous way at the start of any booking process to the customer. The customer needs to clearly indicate his choice to pay any optional charges, which means that the 'opt-in' system has to be used to acquire customer's consent. The airlines are not allowed to check in boxes for optional price supplements as a default choice of passengers. (Art. 23 Regulation). This provision aims at protecting customers from overlooking a certain payment that has been chosen for them, which they may forget to reject. Moreover, it may prevent customers from seeing the default chosen options as the 'right ones', which they should go with.

In the case at hand the German consumer protection (BVV) organisation brought a case against ebookers.com, a company which organises air travel online. In the process of making a reservation on their website, the customer sees on the right hand side of the page his current travel costs. The 'total price of travel' that is indicated encompasses also 'travel cancellation insurance', which is calculated automatically and added to the travel price even though it is an optional payment. The passenger then pays the total price of travel in a single sum to ebookers.com, which company then transfers the costs of the cancellation insurance to an insurance company. If the customer does not want to take on the cancellation insurance, he needs to opt-out from this charge (and an information about how to do this may be found only at the bottom of the internet page). The BVV rightly noticed that this method could be seen as infringing provisions of the Regulation. The legal question that arose was whether the reference in Article 23 of the Regulation to 'optional price supplements' should be understood as covering costs, connected with the air travel, arising from services supplied by third parties (e.g. travel cancellation insurance) which are charged to the customer by the company selling the travel as part of the total price.

The CJEU decided that such an interpretation of this provision is necessary in order to assure transparency with regard to the prices for air services. (Par. 13)

"Those optional price supplements therefore relate to services which, supplementing the air service itself, are neither compulsory nor necessary for the carriage of passengers or cargo, with the result that the customer chooses either to accept or refuse them. It is precisely because a customer is in a position to make that choice that such price supplements must be communicated in a clear, transparent and unambiguous way at the start of any booking process, and that their acceptance by the customer must be on an opt-in basis, as laid down in the last sentence of Article 23(1) of Regulation No 1008/2008." (Par. 14)

In that respect, as also noticed by Advocate General Mazák, it should not make a difference for the scope of the passengers' protection whether the optional additional service is offered by an air carrier or by another, third party. (Par. 17) Therefore, as long as the optional additional service that is being offered during the booking process to customers is linked to the flight itself, it does not matter who is offering its performance. It falls under the definition of 'optional price supplements'. (Par. 18) The customers should, therefore, have a real choice as to whether they want to pay such a supplement and not find themselves bound by it as a default option.

Fate of the European ADR and ODR schemes to be decided after summer

Last winter the European Commission presented proposals of new laws that would improve consumers' rights in settling disputes out of courts. (A step away from out-of-court dispute resolution for European consumers) This post is just a quick update to let the readers know that these laws have still not been finalised but the works on them continue. A week ago the European Parliament's internal market committee adopted amendments to two draft laws on alternative and online dispute resolution schemes (ADR and ODR). MEPs proposed, e.g., an introduction of a quality label for ADR entities, with which they could show that they comply with the minimum quality standards set in the directive. MEPs introduced also certain provisions in order to strengthen impartiality of the ADR arbitrators or mediators. The next step is in the legislation procedure is to start negotiations with the Council on a possible first-reading of the two proposals. Whether the texts are ready for that will be decided after the summer break. (Easy, cheap and rapid redress for consumers)

Better safe than sorry - on new road safety rules

Did you know that more than 5 people die on Europe's roads every day in accidents caused by a technical failure of a vehicle? Did you know that technical defects are responsible for 6% of all car accidents and 8% of all motorcycle accidents? In order to prevent such tragic outcomes, the EU decided to toughen its rules on vehicle checks. One could say, it's the highest time to introduce new rules, since the current minimum standards for vehicle checks date back to 1977 and don't foresee for inspections of such important mechanisms as, e.g., ABS. That's not what we want to hear when we are heading out for our holidays in our cars and would like to think that the chances of the car that comes towards us from another direction swerving suddenly into our lane are none to slim.

The new proposal of the European Commission introduces compulsory EU wide testing for scooters and motorbikes. It will also demand more frequent periodic checks of road-worthiness for old vehicles, as well as for cars and vans with exceptionally high mileage. The latter ones would have to fulfil the same requirements as taxis or ambulances. Not only the objects of the tests are to change, but also its substance. The EC intends to set minimum standards for deficiencies, equipment and inspectors, as well as make electronic safety components subject to mandatory testing. Finally, the proposal includes provisions that are to limit mileage fraud, with registered mileage readings.

"If you're driving a car which is not fit to be on the road, you're a danger to yourself and to everyone else in your car – your family, your friends, your business colleagues. What's more, you’re a danger to all the other road users around you. It's not complicated; we don't want these potentially lethal cars on our roads." said Vice President of Transport, Siim Kallas (Tougher vehicle testing rules to save lives)

The whole new legislative package is presented in the FAQ format.

If you'd like to read more about EU road safety plan 2011-2020 - see the guidelines and visit the road safety page.

Less than full harmonisation of consumer credits in the EU - CJEU case SC Volksbank România (C-602/10)

12 July 2012: CJEU's case SC Volksbank România (C-602/10)

The Directive on Consumer Credit (2008/48/EC) is still a 'baby' among European consumer protection measures. It had to be transposed by Member States only by 11 June 2010, so it does not surprise that the first cases regarding interpretation of its provisions are reaching the CJEU now. What could give rise to a certain amount of concern is the fact that the judgment seems to undermine the full harmonisation character of this Directive.

A Romanian bank, Volksbank România, demanded from its customers to pay the bank a 'risk charge' equal to 0.2% of the balance of the loan and payable monthly throughout its term. This charge was specified in the standard contract terms of the bank. Romanian consumer protection authorities (CJPC) questioned the validity of this charge and imposed fines on Volksbank for using them. Pursuant to Romanian law which transposed the Directive, the creditor is only allowed to levy certain, specified in the law charges on consumers and a 'risk charge' is not one of them. Volksbank claimed in front of national courts that the national transposition measures are contrary to the Directive.

A few important questions were considered by the CJEU in the light of the full harmonisation character that the Directive introduced (see its article 22(1)).

1. May a Member State broaden the material scope of application of the Directive to matters excluded from its scope, for example, in order to cover consumer credit agreements secured by immovable properties?
2. May a Member State broaden the temporal scope of application of the Directive to consumer credit agreements concluded before this law entered into force?
3. May a Member State prohibit creditors to impose certain charges on consumers even if the Directive does not specify them?
4. May a Member State allow consumers to have direct recourse to a consumer protection authority, which may then impose penalties on creditors for infringement of national measures without having to use beforehand the out-of-court resolution procedures?

Answer 1

In general, the Directive excludes its application to credit agreements which are secured by a mortgage or by other security on immovable property (art. 2(2)(a) of the Directive). The CJEU explains the full harmonisation character of the Directive as precluding Member States to introduce less or more consumer protection measures than the ones that are provided for in the Directive. (Par. 38) However, recital 10 of the Directive allows Member States to apply provisions of the Directive to other areas which are not covered by its scope. (Par. 40) Since the consumer credit agreements which are secured on immovable property do not fall in the scope of the Directive, the Member States are free to broaden the scope of its application to these agreements. (Par. 42-43)

Answer 2

Article 30(1) of the Directive states that the Directive shall not apply to credit agreements existing on the date when the national implementing measures enter into force. The CJEU concludes, therefore, that consumer credit agreements that were concluded before this new law entered into force, fall outside the scope of application of the Directive. This means that Member States are free to broaden the scope of its application to these agreements. (Par. 53-54)

Answer 3

The CJEU finds that the Directive contains information duty for the creditors pursuant to which they are obliged to inform consumers about bank charges that will form part of the total cost of the credit. However, the Directive does not specify types of charges that the creditor may levy, which means that an exhaustive list of bank charges that can be levied by creditors upon consumers cannot be seen as contrary to the Directive. (Par. 64-65)

Answer 4

Article 24(1) of the Directive requires Member States to ensure that adequate and effective out-of-court dispute resolution procedures are put in place for the settlement of consumer disputes concerning credit agreements. The CJEU does not consider this provision as placing an obligation on Member States to establish these procedures as mandatory, as long as the consumer protection granted by this Directive remains effective. (Par. 94-95) Moreover, consumers should have the widest possible access to the bodies specially set up to defend their interests on account of the risk that consumes will be unaware of their rights or encounter difficulties in exercising them. (Par. 98) The fact that consumers may have direct recourse to consumer protection authorities does not automatically render out-of-court dispute resolution procedures ineffective and therefore a Member State is allowed to provide for such an option. (Par. 99-100)

HIT and HIT LARIX v Bundesminister für Finanzen: ECJ allows Austria's restrictions on foreign advertising for Casinos

12 July 2012: CJEU's case HIT and HIT LARIX (C-176/11)

In a judgment delivered by the ECJ today, the court made clear that the restrictive rules on foreign advertising for casinos in Austria do not breach the freedom to provide services. In Austria, foreign casinos can only advertise their services if the rules governing the casinos in that country offer at least similar protection (e.g. on legal gambling age, observing gamblers' conduct, etc.) as offered in Austria itself. In order for foreign casinos (in this case from neigbouring state Slovenia) to advertise in Austria, they must obtain prior authorisation by the Austrian state. According to the ECJ, the Austrian rules do limit the freedom of to provide services, but that this limitation is justified by the objective of protecting the population against the risks connected with games of chance. Lacking harmonised rules in the field, Member States are still able to set their own rules as long as they are proportionate. In the case of Austria, this does not pose problems. The ECJ does warn, however, that Member States cannot require foreign casinos to be subject to identical rules. Click here for the full judgment in the case (C-176/11).

CO2 emission targets and our (empty) pockets

Not many of those who own and/or drive a car are daily concerned with the CO2 they are releasing in the air when going to work, to the IKEA or on a weekend trip. Many more, on the other hand, are deeply affected by the fuel consumption that these activities are going to entail. 

A recent position paper issued by BEUC tries to link this two aspects in light of the EU plans to lower the emission targets for passenger vehicles in the coming years (the final deadline would be 2020). In short, the paper calculates that if producers are "forced" to comply to the new standards by means of technical improvements alone consumers are going to be better off in the short-middle run. How? BEUC researchers expect that the implementation of technical improvements may cause a raise in the vehicles' price of around 1000 euros; on the other hand, with the price for fuel likely increasing over the coming years, consumers will be able to recover the initial costs through reduced consumption in fairly short times- maximum three years according to BEUC, and less if the second-hand market is considered as a way to "split" the cost among subsequent owners.

Much emphasis is put on the fact that, as anticipated, the emission reduction should be only achieved through technical improvements: other implementation devices, such as efforts to teach drivers eco-driving would shift the burden on consumers and jeopardize the measure's effectiveness.

For more in-depth information, a longer version of the paper is also available (guest access available by simple click).

Cities getting smart

68% of Europeans lives in cities, consuming 70% of the EU's energy. This means that urban development policies are quite important for sustaining the EU and its citizens in status quo of consumption in the coming years (with more and more energy being spent on ICT, transport etc.). Here is where the concept of "Smart Cities and Communities" is supposed to help out - by introducing innovative technologies that improve the efficiency of the urban environment.

Last week the European Commission launched a Smart Cities and Communities European Innovation Partnership (SCC), in which research resources are pooled from energy, transport and ICT and concentrated on a small number of demonstration projects which will be implemented in partnership with cities. This means that in 2013 the budget for innovation will be increased from € 81 Million to € 365 Million, and instead of just being spent on transport and energy, ICT projects would be implemented as well.

"Innovation drives Europe's competitiveness and is the best means of addressing energy efficiency. Thanks to this partnership, high efficiency heating and cooling systems, smart metering, real-time energy management, or zero-energy buildings neighbourhoods solutions will spread among more and more European cities." said Günther Oettinger, Energy Commissioner (Commission launches innovation partnership for Smart Cities and Communities)

What kind of projects could be co-financed by the EU?

• smart buildings and neighbourhood projects - integrating local renewable energy sources; using highly efficient heating and cooling systems (e.g., biomass, solar thermal, etc.); aiming towards zero-energy buildings;
• smart supply and demand service projects - providing information to consumers on energy consumption/production, multimodal transport and mobility services; developing smart metering;
• urban mobility projects - introducing more electric public transport vehicles; using ICT to manage energy flows or using hydrogen as energy carrier - energy flow would be controlled by ICT using forecasts for demand patterns based on weather forecasts, event planning etc.;
• smart and sustainable digital infrastructures - reducing carbon footprint on the internet; intelligent heating, cooling and lighting solutions.

More on Smart Cities may be found here. Urban Mobility - here.

Summer fun

The European Commission posted today also some handy tips as to how to spend a worry-free summer. Read it, if you are going to be travelling this summer and you are not sure what rights you have as a traveller or what to do in case of an emergency. Read it, if you are thinking about getting a timeshare in a property you rented for holiday. Read it, if you still don't know how to limit your telephone bills while you are abroad. Read it, if you want to know how to transport your pet. Finally, read it, if you are concerned as to what food to eat abroad. And then... remember to have some summer fun!

Cybercrime - new EU statistics

Cybercrime is internet users worst nigthmare. Due to the worries that if they give their personal information online, someone will record them and misuse them later, many EU internet users do not conclude any transactions online, which does not help to integrate the internal market. Recent findings of an Eurobarometer show that internet users (survey covered 27000 people in all EU Member States - EU citizens concerned by security of personal information and online payments):

• 89% - avoid disclosing personal information online,
• 74% - think that the risk of becoming a victim of cybercrime has increased in the past year,
• 59% - does not feel well informed about risks of cybercrime,
• 40% - is concerned about someone misusing their personal data,
• 38% - is concerned about security of online payments,
• 12% - experienced online fraud,
• 8% - had their identity stolen,

at the same time:

• 53% - have not changed any of their online passwords during the past year!!

Other findings:

• 53% - buy goods or services online,
• 52% - use social networking services,
• 48% - bank online,
• 29% - is not confident about their ability to purchase online or bank online,
• 20% - sell goods or services online,

Pursuant to the proposal of the European Commission of March this year, the European Cybercrime Centre is to be set up as of January 2013 (An EU Cybercrime Centre to fight online criminals and protect e-consumers and A European response to cybercrime). It will aim at protecting internet users from organised crime groups, targeting e-banking etc. It will also try to better protect social network profiles from identity theft, child sexual abuse and other cyber-attacks. Additionally, as of September 2010 works continue on a proposal for a Directive to deal with new cyber-crimes.

Consumers may remain passive while obtaining information about right of withdrawal - CJEU case C-49/11 (Content Services)

5 July 2012: the CJEU's case C-49/11 (Content Services)

The CJEU decided today that Article 5 of the Distance Selling Directive (97/7/EC) does not allow for service providers and sellers to convey information about, inter alia, a right of withdrawal to consumers only through a hyperlink placed on a website of the undertaking. Such a method does not fulfil the requirement of 'giving' the information to consumers, neither it can be said that consumers 'receive' the information, if an everyday meaning of these words is taken into account, that is the fact that consumers should not have to take any action in order to be provided with the information. (Par. 33-37) Moreover, a general website may not be seen as a 'durable medium' - for which there is another requirement in this provision. (Par. 43, 46, 49-50)

We have previously discussed the opinion of the AG Mengozzi in this case in details (Websites may be a click away from a durable medium), and since the CJEU followed his opinion we refer you, dear readers, to our previous post.

Basic bank account, one (small) step forward

Earlier this week, the European Parliament adopted a resolution urging the commission to legislate on universal access to a basic payment account for the 10% of EU citizens who still do not have one. In particular, the baisc account should be

- less expensive than any other options offered by the bank;

- open to anyone with no income requirements and no obligation to purchase additional products.

As we already said, it doesn't seem that "less expensive than other options" here means free: a feature which casts some doubts on the foreseeable impact of the (should-it-come) measure.

Goodbye ACTA!

Yesterday, as it was expected, the European Parliament rejected the ACTA. We have been posting about critical approach of all the commissions who have examined it, so the final verdict was basically just a formality. What may be interesting to notice is that by rejecting the Anti-Counterfeiting Trade Agreement (ACTA), the European Parliament for the first time ever exercised its Lisbon Treaty power to reject an international trade agreement. With only 39 of the MEPs voting for adoption of the ACTA, it had no chance to become law in the EU (165 MEPs abstained in protest of the Parliament deciding to take a vote before the verdict of the CJEU on the constitutionality of the ACTA).

It should be stressed that the possibility of adoption of the ACTA had mobilised many European citizens to actually get involved in the legislation process by starting a heavy lobbying of the MEPs. I wonder whether that means that times are a-changing and that we could expect in the future more citizen involvement in the works of the European institutions. (European Parliament rejects ACTA)

Passenger rights at hand

A friend of mine once brought her copy of the Civil Code to a store in order to get a pair of trousers replaced (and was successful). For European travellers in possession of a smartphone, as of today, it is possible to consult and invoke their rights in a similar, but digital way: As part of its 'your passenger rights at hand' campaign, the European Commission has launched a smartphone application that gives passengers the possibility to check their rights at any time. For more information and download options, please refer to the Commission's passenger rights website and the press release on the new app.

Investing consumers should be treated like/with (cross out inapplicable word) KIDs

Yesterday the European Commission presented a new legislative package that is supposed to restore consumers' faith in the financial services. It is an ambitious undertaking, no doubt, taking into account the consumer experience of the last few years with one financial crisis following another and big financial companies failing to provide much needed security and reliability. Many consumers found themselves in financial troubles due to wrong information or financial advice they had received, which often led them to invest in unsuitable for them financial products. To prevent this from happening again, an action at a European level was deemed to be necessary.

"In the aftermath of the biggest financial crisis in recent memory, the financial sector must place consumers at its heart. Retail products must be safer, information standards must become clearer, and those selling products must always be subject to the highest standards. That is why we have adopted a package solely dedicated to consumers, so that they can choose financial products based on clear and sound information and professional advice which puts the consumer's interests first." said Internal Market and Services Commissioner Michel Barnier (Commission proposes legislation to improve consumer protection in financial services)

And so, the European Commission presented three new documents: a proposal for a regulation on key information documents for packaged retail investment products (PRIPS), a revision of the Insurance Mediation Directive (IMD), and a proposal to boost protection for those who buy investment funds which is governed by the Directive on Undertakings for Collective Investment in Transferable Securities (UCITS). The first two of these documents are especially relevant for consumer protection so let's take a closer look at them.

PRIPS

Anyone who ever tried to make an investment knows that financial products are, ehm, complex (this really is too mildly put). In order for consumers to understand what they may expect from a given financial product and what risks they are taking on themselves the information provided to them has to be more transparent and comprehensive. This proposal aims at improving quality of such information by introducing a new, innovative standard for product information. It is intended to be short, plain-speaking and consumer-friendly. Every investment product (investment funds, insurance-based investments, retail structured products, private pensions, etc.) will need to have such a document attached to it. I just love the new name for it: KID - Key Information Document. Let's be honest, most of us have a childlike approach to financial matters - lots of faith in things ending up right even if we climb that highest (financial) tree branch without any security. Each KID will convey information on the product's main features, risks and costs associated with the investment in the product. The intention is to make it clear to consumers whether they can lose money on that product and to show them its complexity. Consumers will easily be able to compare KIDs of different investment products since they will follow the same structure, content, presentation. More information on this proposal may be found here.

IMD

Another matter that often leaves consumers flabbergasted is the risks associated with taking an insurance cover. Most often taking an insurance is seen as purchasing more security, without realising that it may also endanger consumers' interests. Anyone who studied law knows that insurance law is not a thing to trifle with, but consumers often remain blissfully unaware of its complexity. The EC aims at revising the IMD which regulates selling practices for all insurance products. Currently, the Directive applies only in cases when insurance was bought through an intermediary, but the revision aims at giving the same level of protection to consumers regardless of the character of the person they had purchased the insurance from. Moreover, sellers of insurance will need to inform consumers of their professional character, links to the insurance company as well as reveal their remuneration for selling an insurance cover. Most importantly, a professional, honest advice will have to be given to consumers interested in purchase of insurance products. Currently, more than 70% of insurance products are sold without appropriate advice. More information on this document may be found here.

How do consumers choose their financial products?

Leaving on a jet plane

Tomorrow, 4th of July, European Consumer Centres (ECC-net) will be offering advice to passengers at 28 airports across Europe. The purpose of the event is to inform European citizens of their air passenger rights, a topic that is among the ones most dealt with by ECC-net when helping consumers. According to recent data, in 2011 a fifth of the complaints that European Consumer Centres dealt with (5 600 of 28 000) concerned air travel:

'The main causes for complaint were cancelled flights (about 30% of the cases), delays (24%), lost or damaged luggage (15%), but also denied boarding, non-transparent prices and surcharges, technical problems in the booking process or unfair commercial practices.'

The ECC-net helped travellers reach amicable solutions with airlines in almost 50% of the cases.

More information is available in the European Commission's press release on tomorrow's event and on the ECC-net's website.

In the meantime, as air passenger rights are concerned, we await the CJEU's judgment in cases C-581/10 and C-629/10 (Nelson and Others, TUI Travel and Others) (a summary of AG Bot's opinion in these cases appeared on this blog earlier).

Consumers may report suspected adverse drug effects

The European Medicines Agency (EMA) published yesterday information about the new pharmacovigilance legislation that came into force, after having been adopted in December 2010 (Directive 2010/84/EU and Regulation No. 1235/2010). The goal is to better protect public health in Member States by strengthening the EU system for medicines safety. On the one hand, it will influence consumers just by limiting the number of unnecessary risks that they are exposed to when taking medicines. This will be achieved by increasing control mechanisms over medicines and making them more transparent. The second effect on consumers is more direct, namely as of now patients are supposed to be more involved in the regulatory process. This includes patients being able to directly report suspected adverse drug effects.

"The new pharmacovigilance legislation will help us to make the system more robust for public health and more transparent. It gives regulators a range of new or improved tools to ensure that patients are not exposed to unnecessary risks when taking medicines. It also increases the efficiency of medicines regulation for the benefit of all stakeholders." said Guido Rasi, EMA's Executive Director (New pharmacovigilance legislation comes into operation)