New pan-EU contract regime will enhance consumer protection, EU Commissioner says

EU Justice Commissioner Viviane Reding said an optional Common Sales Law will provide better choice to consumers over the kind of remedies they can select if a cross-border trader issues them with faulty goods. The Commission is expected to issue formal proposals for a new optional pan-EU contract law on 12 October.

"This new regime will soon become a 'mark of quality' for consumers to rely upon," Reding said in a speech.  

"They need the confidence to venture across borders when they shop. They need to know that the optional instrument is a guarantee for high level of consumer protection," she said.

"The optional Common Sales Law provides the consumers with a free choice between several remedies if faulty goods are delivered to him. He can choose whether he wants the good repaired, replaced, a price reduction or the termination of the contract. Under the majority of national laws the consumer does not have this choice," Reding said.

Reding said the new optional law, which traders will be able to choose instead of using existing individual national contract laws of member states, would be published in all official EU languages and consist of "a set of concise and user-friendly rules".

Reding said that traders that choose to use the new regime would benefit by being able to reach "an important number of potential consumers at low cost".

"Those traders that feel comforted by the status quo are left free to carry on trading under their own national law," Reding said.

"On the other hand, those traders who see the advantage in the common set of rules for their cross-border transactions may opt for that regime. In short, the optional EU rules will provide an alternative which makes cross-border transactions easier and cheaper. It's a win-win situation for business and consumers," she said.

Reding said that the EU loses out on "at least" €26 billion annually in "intra-EU trade" as a result of the current "contract law patchwork" that exists in the area. Only 25% of EU traders sell cross-border because businesses deem the cost of doing so prohibitive, she said.

"Businesses wishing to carry out cross-border transactions may have to adapt to up to 26 different national contract laws translate them, seek legal advice," Reding said.

"This costs time and money: an average of €10,000 for each additional export market. Adapting the websites will cost a further €3,000, on average. To make things worse, the costs grow proportionately to the number of European countries a company trades with, and logically these costs have the greatest impact on micro and small companies, as these costs make up a greater share of their turnover." Reding said.

"Money and time are precious commodities these days. A lot of traders (especially those which are small or medium size) do not have the necessary resources to go through the process of adapting to new markets. So they simply abdicate from expanding into a new market," she said.

Reding also said that consumers are currently dissuaded from buying cross-border in the EU by "confusion" over their legal rights. Even when consumers do decide to shop abroad they are "far too often" met with notices from traders stating that they do not deliver to their country, Reding said.

"When this happens, consumers feel frustrated and, consequently, are discouraged from shopping cross-border," she said.

Last month a spokesman for Viviane Reding told Out-Law.com that the new contract law proposals would not cover insurance and financial services contracts.