Explanatory Memorandum to COM(2011)794 - Online dispute resolution for consumer disputes

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dossier COM(2011)794 - Online dispute resolution for consumer disputes.
source COM(2011)794 EN
date 29-11-2011
1. Context of the Proposal

The present proposal, together with the proposal for a Directive on alternative dispute resolution for consumer disputes ("Directive on consumer ADR"), is to be seen in the context of efforts to improve the functioning of the retail Internal Market, in particular by enhancing consumer redress linked to cross-border e-commerce transactions.

At present, the offer of ADR schemes to resolve consumer disputes related to e-commerce transactions is scattered and incomplete. In addition, while half the existing ADR schemes offer consumers the possibility of submitting their complaint online, very few offer consumers the possibility of conducting the entire procedure online (via online dispute resolution – ODR). Handling the entire process online would produce time savings and ease communication between the parties.

With the development of e-commerce, the scope and size of markets in which businesses and consumers operate have grown significantly and extend beyond national borders. Consumers as well as traders, however, perceive it as risky to engage in cross-border e-commerce transactions because they fear that relevant disputes might not easily be resolved due to the virtual character of the transaction.

The lack of effective redress for complaints resulting from cross-border online transactions has adverse consequences both for consumers and businesses. Consumers lose out by not being able to shop online across borders; they thus miss the opportunity of comparing the costs of products in the wider EU market and of buying them where they are less expensive. Businesses, in particular small and medium-sized enterprises, are deterred from acquiring the administrative capacity needed to deal with disputes with consumers residing in another Member State. This hinders the development of the digital Internal Market.

The Europe 2020 flagship initiative 'Digital Agenda for Europe' announced an EU strategy to improve ADR systems, indicating that the Commission will 'propose an EU-wide online redress tool for e-commerce' to boost consumer and business confidence in the digital market. The 2011 Single Market Act included amongst its key priorities the establishment of 'simple, fast and affordable out-of-court settlement procedures for consumers and protect relations between businesses and their customers. This action will also include an electronic commerce dimension'.

In view of the problems identified, the proposed Regulation aims at establishing an EU-wide ODR system that will facilitate the resolution of disputes related to the cross-border online sale of goods or provision of services between a trader and a consumer.

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2. Results of Consultations with the interested Parties and Impact Assessment 2.1. Collection of expertise and consultation of interested parties


Several studies conducted by the Commission on consumer ADR addressed issues linked to online dispute resolution tools. These include the 2009 “Study on the use of Alternative Dispute resolution in the European Union” carrying out an in-depth analysis of existing ADR schemes and their functioning in all Member States, the study on consumer redress in the EU, the 'Assessment of the compliance costs including administrative costs/burdens on businesses linked to the use of Alternative Dispute Resolution (ADR)' (2011) and the study on 'Cross-border ADR in the European Union' (2011).

The public consultation on the use of ADR launched in January 2011 also addressed issues related to ODR and how best to ensure consumer redress in cross-border e-commerce transactions. A large measure of support emerged on the need to improve ODR tools, in particular for e-commerce transactions, where there is an increasing number of complaints especially for low-value cases. In particular, it was underlined the need to tackle the language issue and to provide adequate information to the parties on the process and its outcome. A vast majority of respondents drew attention to the need to build on positive experiences that exist in specific sectors.

The debate held at the summit on 'Alternative Dispute Resolution for Internal Market and consumers' organised jointly by the Commission services and the European Parliament in March 2011, showed general support for the development of ODR tools for consumer disputes through EU action in order to provide clarity on the conditions and to ensure high quality ADR schemes for e-commerce in all sectors. The workshop on 'ADR: how to make it work better?', organised within the European Consumer Summit of April 2011, dealt with issues linked to online dispute resolution.

Finally, the European Data Protection Supervisor (EDPS) was also consulted.

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2.2. Impact assessment


The Commission has carried out a detailed impact assessment (IA), analysing a range of policy options for both 'ADR coverage, information and quality' and 'ODR for cross-border e-commerce transactions'.

The IA concluded that only a combination of two instruments on ADR and ODR can ensure access to impartial, transparent and effective means to resolve consumer disputes linked to cross-border e-commerce transactions out-of-court. In particular, a Regulation will establish an EU-wide ODR system, which can effectively deal with disputes related to cross-border e-commerce transactions on the basis of the full coverage of quality ADR schemes to be achieved in accordance with the Directive on consumer ADR.

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3. Legal Elements of the Proposal 3.1. The functioning of the EU-wide online dispute resolution system 3.1.1. Establishment of the European online dispute resolution System


The present proposal aims at establishing a European online dispute resolution platform ("ODR platform"). This ODR platform takes the form of an interactive website which offers a single point of entry to consumers and traders who seek to resolve out-of-court a dispute which has arisen from a cross-border e-commerce transaction. The platform can be accessed in all official languages of the EU and its use is free of charge. ADR schemes established in the Member States which have been notified to the Commission in accordance with the 'Directive on consumer ADR' will be registered electronically with the ODR platform.

Consumers and traders will be able to submit their complaints through an electronic complaint form which will be available on the platform’s website in all official languages of the EU. The platform will check if a complaint can be processed and seek the agreement of the parties to transmit it to the ADR scheme which is competent to deal with the dispute. The competent ADR scheme will seek the resolution of the dispute in accordance with its own rules of procedure within 30 days from the date of receipt of the complaint. The ADR scheme will have to notify to the platform some data in relation to the development of the dispute (date when the complaint was notified to the parties; date when the dispute was resolved; outcome of the dispute).

Under the proposal, a network of online dispute resolution facilitators ("ODR facilitators' network") will be established which will consist of one contact point for online dispute resolution in each Member State. The ODR facilitators' network will provide support to the resolution of disputes submitted via the ODR platform.

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3.1.2. Information on the EU-wide ODR system


The present proposal requires traders established within the EU that engage in cross-border e-commerce to inform consumers about the ODR platform. This information shall be made easily, directly, prominently and permanently accessible on the traders' websites as well as when the consumer submit a complaint to the trader.

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3.1.3. Monitoring


An annual activity report will be drawn up on the operation of the platform. The compliance by ADR schemes with the obligations set out in this Regulation will be monitored by the competent authorities to be established in the Member States in accordance with the Directive on consumer ADR. Every three years the Commission will report to the European Parliament and the Council on the application of the Regulation.

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3.1.4. Data Protection rules


The data entered in the ODR platform by the parties and the ADR schemes will be stored in a database and will be subject to the relevant legislation on data protection.

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3.2. Subsidiarity principle


The proposal is based on Article 114 of the Treaty on the Functioning of the European Union.

The development of an EU-wide ODR system for cross-border online disputes, built on existing ADR schemes in the Member States and respecting their respective rules of procedure, will strengthen confidence in the retail digital Internal Market and will open up new opportunities for businesses.

Despite the currently low level of cross-border e-commerce transactions, there is a rapidly expanding digital retail market within the Member States. Thus, ensuring simple, low-cost and effective means of out-of-court redress is needed to strengthen consumers’ and traders’ confidence in online transactions across borders.

Action at EU level is necessary to establish an EU-wide ODR platform which is an essential tool for promoting e-commerce. It is also imperative to provide European consumers with the same level of protection and promote competitive practices amongst businesses, thus increasing the exchange of products and services online and across borders.

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3.3. Proportionality


The proposal complies with the proportionality principle for the following reasons:

The proposal intends to put in place the most effective means of achieving the pursued objective at the lowest comparative costs. Instead of creating a completely new structure at EU level, the intended regulatory approach is based on existing national ADR schemes which comply with the requirements set out in relevant Union legislation.

The proposed Regulation will thus ensure full coverage in quality ADR services for cross-border online disputes while the implementation costs will be limited to what the proposal adds to the existing ADR structures at national level.

The proposed rules have been subject to a proportionality test and intensive consultation to ensure appropriate and proportionate regulation.

Contents

1.

Budgetary Implication



This action is part of the Consumer programme 2014-2020.[7] The budgetary impact will be addressed by redeployment for the years 2012 and 2013. The financial appropriations for implementing this proposal from 2012 to 2020 will amount to EUR 4,586 million in current prices. The human resources required will be met by staff from the Directorate General who are already assigned to the management of the action and have been redeployed within the Directorate General, together if necessary with any additional allocation which may be granted to the managing Directorate General under the annual allocation procedure and in the light of budgetary constraints. A financial statement is attached to the proposal.