Energy price spike: Commission announces toolbox including consumer alleviation measures

Europe – like most of the world – sits in the middle of an energy crunch. Natural gas prices have gone up in the three digits (!) since 2020 and consumers are feeling the brunt: to give but an example, in the Netherlands several smaller companies have either informed their consumers that their monthly payments will have to go up considerably starting next January, or even have tried to terminate their fixed-term, fixed-price contracts in advance – to the point that the Consumer authority warned them that they do, in fact, need to comply with their contractual obligations (or go to court, one may add).

The spike in gas (and oil) prices has been mainly caused by the global production chains picking up again as the pandemic seems to have gone past its peak moment. For consumers, however, the origins of the phenomenon are less salient than its consequences on their ability to heat their homes this coming winter. Furthermore, energy anxiety in advanced and high-impact countries risk undermining the energy transition goals that have been set up in the past few years: suffice it to say that China has announced that its plans not to open new coal power plants will have to be reconsidered. 

Against this background, the Commission has announced this week a “toolbox” meant to guide Member States in the effort to soften the impact of this new crisis on consumers, and in particular vulnerable households who suffer or are exposed to energy poverty. While some elements in the toolbox are related to general energy policy and hence not so interesting to report on here, a few are worth mentioning, in particular:

•     Provide emergency income support for energy-poor consumers, for example through vouchers or partial bill payments, which can be supported with EU ETS revenues;
•       Authorise temporary deferrals of bill payments;
•       Put in place safeguards to avoid disconnections from the grid;
•       Provide temporary, targeted reductions in taxation rates for vulnerable households; 

The first measure seems to be inspired by actions recently taken in France, but also seems to mirror practice in the (formerly MS) UK. It goes without saying that this could be difficult for some MS to bear, especially after years of crisis in which the pandemic has already put a strain on public finances.  

Deferrals may be a more attractive option for public actors, but they may exacerbate problems for providers, some of which have – to take the UK’s example – already declared bankruptcy since last month.  

Safeguards against disconnections should be already part of the policy kit in this area. According to both the 2019 Electricity Directive and the Natural Gas Directive, Member States have the option to ban disconnections “at critical times” to protect vulnerable consumers. What these critical times are, however, is not defined, and neither is the notion of vulnerable consumers – which may or may not, according to the directive, refer to energy poverty.

The Commission’s communication emphasizes that in the long term, energy transition is the best insurance against price fluctuations on the fossil markets. This process, according to the Commission, should thus not be jeopardized by the current crisis. 

The toolbox has been positively received by BEUC; Member States, however, may or may not be receptive to the Commission’s push to put immediate relief centerstage, being divided on many points including the extent of the current threat for prices on their own as well as social cohesion. 

New study on consumer protection in the digital age: should the burden of proof in the UCPD be reversed?

Earlier this month a very interesting report by Natali Helberger, Orla Lynskey, Hans-W. Micklitz, Peter Rott, Marijn Sax and Joanna Strycharz was published by BEUC. The study entitled "EU consumer protection 2.0: Structural asymmetries in digital consumer markets" addresses a number of topical issues concerning consumer protection in the digital age and consists of the following parts:

1. Surveillance, consent and the vulnerable consumer. Regaining citizen agency in the information economy
2. Personalised pricing and personalised commercial practices
3. A universal service framework for powerful online platforms

The first and most extensive part has a foundational nature and considers the key premises of consumer protection in view of structural asymmetries observed in digital consumer markets. Attention is paid, among others, to the concepts of digital vulnerability and consent. Following existing research, the authors remark that consumer vulnerability should not be reduced to internal characteristics, but can also be caused by external conditions, and that data-driven practices that promote exploitation of vulnerabilities can be linked to the lack of privacy. At the same time, privacy controls placed at consumers' disposal are often not effective and can lead to a false sense of security. The most ground-breaking conclusions and recommendations, however, follow from the subsequent analysis of what is described as "digital asymmetry". According to the authors, instead of focusing on the information aspect of the UCPD and the different consumer images, more weight should be attached to the structural power relations, including the power embedded in digital choice architectures controlled by online platforms. On this basis, a case is made for reversing the burden of proof in the UCPD so that effectivelly "unfairness of data exploitation strategies is presumed" (p. 77).

The second part of the study part looks more specifically at personalised pricing and advertising and the third part explores how obligations traditionally associated with services of general interest (SGI) could be applied to the platforms considered to hold a gatekeeper position.

We encourage our readers to consult this thought-provoking study, the full text of which can be found here.

The New Consumer Protection Agenda 2020-25

Last month, on November 13 2020 the EU Commission adopted its new Consumer Protection Agenda 2020-25 that will provide the strategic framework of consumer protection policy  for the next five years. The Agenda identified 5 key priority areas:

1) Green transition: empower consumers to behave 'green' to purchase sustainable and circular products.

2) Digital transformation: increase online consumer protection; this aim will entail the revision of several well established directives: General Product Safety Directive, Consumer Credit Directive and Distance Marketing of Financial Services Directive.

3) Effective enforcement and redress: places emphasis on the CPC Regulation. 

4) Consumer vulnerability: means addressing the needs of different groups, including debt advice and safety of products designed for children.

5) Consumer protection in the global context: aims to promote overall high level of protection, including the safety of products sold online. 

The strategy seems to have addressed the most pressing consumer protection issues of our everyday lives. Not surprisingly it is significantly influenced by the COVID pandemic and the ways in which it reshaped our lives.

FCA report on debt management firms: A long way to go to address consumer vulnerabiltiy

On 15^th March 2019, the UK regulator for financial services, the Financial Conduct Authority (FCA) published a report on consumers and debt management firms. The report focused on the impact of advice provided by debt management firms to vulnerable consumers. This report comes shortly after the publication of the Access To Cash review report on the declining use of cash in Britain and its impact on vulnerable consumers (you can read the blog post on that report here.  

This publication is a follow-up on the 2015 review of the sector conducted by the FCA. The FCA is a newly established authority and these reviews have the dual aim of assisting the FCA in gaining a better understanding of the sector as well as an nudge to traders to increase their standards (though the report does not set any goals). For the report a sample of 12 firms was selected including both commercial debt management firms and not-for-profit debt advice bodies.

The results of the 2015 review were grim, exposing an unacceptably low standard of services, especially by commercial fee paying firms and a high risk of detriment for vulnerable consumers. Has the situation improved since then?

The 2019 report shows that there has been an improvement, and commercial firms tend to be more customer-focused now, compared to a few years ago. However, there is still a long way to go for improving standards in the area. The two main areas identified for improvement are:

1) Debt advice given to customers seeking help together or who are already on a joint debt management plan.

Firms often treat consumers as a unit and fail to provide them with options that apply only to one of them, meaning they may lose out on a more favourable solution.

2) The identification and treatment of vulnerable customers. 

While most firms have good intentions, they do not have the proper procedures in place, quality assurance and staff training for identifying and assisting vulnerable consumers in an appropriate manner. Consumers’ vulnerability or vulnerabilities may go unnoticed or unrecorded. Worse yet, it may be identified only to later be buried under a pile of documents or processes and not accessible to the next person handling the case. 

Identifying consumer vulnerability has a severe impact on the advice that should be provided to these consumers and how they will respond to it. Firms need to take the circumstances of each consumer into account, also in the advice provided.

Furthermore, the report point out that there is no one-size-fits-all when addressing vulnerability and firms should be flexible and be able to adapt to the needs of vulnerable consumers where necessary. Some firms have done that successfully by creating specialist units that receive further training and had greater autonomy within the company on how the communicate with customers. Such specialist units could be key in addressing the needs of vulnerable consumers.

The report is a welcome development to bring attention to the needs of vulnerable consumers of financial services and the FCA is showing its commitment to pursue this agenda further by taking action against firms as well as publishing a new guidance on vulnerable consumers.

From today's news: cashless societies and vulnerable consumers

The Guardian reports today on an interesting document, the Access to cash review, which has investigated to what extent the UK market infrastructure - and UK citizens - are ready for developments in the cash markets that are likely to take place in the coming 15 years. 

As the use of cash declines, maintaining its availability becomes increasingly burdensome for market actors - banks in particular.

With ATMs and bank offices closing by the day, the availability of cash may become an issue in not so long time - are consumers ready to go cashless? According to the review, 17% of consumers could not dispense of cash, and around 4% still conduct all of their market transactions in cash. 

The report thus calls for:

• Government and regulators to step in urgently to ensure cash remains viable
• A “Guarantee to Cash Access” for all, including those in remote and rural areas
• Those providing essential services to be required to allow consumers to pay by cash
• A more efficient, effective and resilient wholesale cash infrastructure to ensure that cash remains viable as its use declines.  

The saliency of the issue for vulnerable consumers hardly needs explanation - as it is mainly older consumers, those living in rural areas and people in the informal economy who rely on cash in their daily lives. It seems all but unlikely that similar issues will also need to be discussed outside of the UK. 

Consumer vulnerability study published by the Commission

Yesterday the Commission published a study examining the incidence of consumer vulnerability across the EU28 and Iceland and Norway. It identifies the main reasons behind this vulnerability and what can be done about it. A special focus is on the challenges consumers face in the online environment, as well as in the finance and energy sectors. Many consumers show some signs of vulnerability, putting them at a higher risk of suffering negative outcomes in the market and making them more susceptible to certain marketing practices.

The key finding is that the incidence of vulnerability is the highest when consumers face complex advertising or when they have problems comparing deals because of market-related or personal factors, giving them difficulties getting informed, comparing, accessing and choosing between offers. Presenting offers in a simpler and clearer way significantly improves consumers' ability to select the best deals and to exercise their right to choose other alternatives.

If you are interested, take a look at the Commission's factsheet and final report here. 

Refugees among the most vulnerable consumers in Europe

German consumer associations have started reacting to the special demands of refugees that act as arguably particularly unexperienced consumers with extensive cultural and language barriers: for helpful information regarding German law see: link.

(Re)imagining consumer law

What images of the consumer can be discerned in European Union law? And how do these affect the regulation of consumer interests in the EU? These questions formed the starting points for the conference on the 'Image(s) of the "Consumer" in EU law' that was organised in Oxford at the end of March. The papers presented at the conference mapped the various conceptions of the consumer in different fields of European law, including rules on competition, trade marks, consumer credit, financial contracts and free movement of goods and services. Furthermore, speakers addressed the normative questions raised by the images of the consumer that emerged in the descriptions of current law. What I took away from the conference were at least two matters for further thought. 

In the first place,  different conceptions of the consumer (e.g. the average 'rational' consumer, the vulnerable consumer) were related to specific functions of EU law. The idea of a consumer acting in an economically rational manner, for instance, has inspired certain types of regulatory interventions, most famously the introduction of information duties ('a well-informed consumer will make a rational choice'). The image of a weaker consumer, on the other hand, justifies more extensive policing of contract terms ('the consumer needs protection, because there is a real risk that she may be unaware of her rights or encounter difficulty in enforcing them'). Such differentiated approaches have different effects on consumer contracts and, therefore, a further analysis of their impact is called for. Think, for example, of the Court of Justice of the EU's interpretation of the Air Passenger Rights Regulation, which effectively provides an incentive for airlines to pass on costs of higher consumer protection (compensation in case of cancelled or delayed flights) to consumers themselves.

In the second place, the topic of 'ethical consumerism' was taken up by several speakers. What approach does and should EU law adopt in regard to consumption choices having so-called 'negative externalities'? Examples include negative effects of consumption on the environment or on labour conditions for those producing consumer goods for European markets. The question was posed to what extent the market for consumer goods may be seen as a forum for the articulation of political and ethical values, in which consumers would vote through their purchases. From that point of view, could ethical consumerism be included in EU regulatory measures? Furthermore, could the European law on sales be understood to include consumer expectations regarding not only the features of a product but also the process through which the good has been made?

The contributions to the conference are planned to be collected in a joint publication. 

What will the future bring? The new consumer programme 2014 - 2020

With some delay, the EU announced its priorities in consumer law for the period from 1st January 2014 to 31st December 2020.  The consumer programme takes the form of a Regulation based on Art 169 TFEU and explains how the Union will complement, support and monitor the Member States' policies. This is mainly achieved through financing actions taken either by national authorities or thirds, such as consumer organisations, e.g..

The consumer programme details four main objectives (Art 3): product safety (I), consumer information and education, and support of consumer organisations (II), rights and redress (III) and enforcement (IV). The short Regulation (only 19 articles) as well as its Annexes elaborate these objectives and the types of actions to be taken. Although not directly granting rights to consumers, the Regulation is an important indicator of the EU's current view on and future priorities in consumer law.  

Consumer programme adopted

Today, the European Parliament has approved the Consumer Programme 2014-2020, with a budget of 189 mln euros. 

The focus of the new programme is on project which "empower vulnerable consumers, strengthen European consumer organisations and promote the development of price comparison websites."

The resolution was approved with a large majority, which seems to indicate a consensus among the various political parties. However, more nuanced positions may raise in the coming months as the programme takes shape.