European consumers want better deals and businesses want to sell products in more countries. That is the simple rationale for an optional European contract-law initiative (“Why the optional instrument is the wrong way for consumers”, 16-22 June).
Online shoppers should not get messages such as “This product is not available in your country”. Businesses should not delay rolling out a product because of high legal bills. As we face the challenges of economic recovery and creating jobs, we need to think about what is possible for making consumers’ lives easier. One way to make a difference is to tackle barriers in the single market – the EU’s crown jewel and source of economic growth.
The reality today is that businesses and consumers wishing to carry out cross-border transactions must deal with 27 different national contract laws. Currently, 75% of European traders do not sell across a border. And those who do trade across borders limit their exports to only a few countries. How successful is a single market of 500 million people when only 7% of European consumers buy online from another member state? Research confirms that the differences between contract laws are one of the major obstacles to trading across borders.
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Viviane Reding, the European commissioner for justice, fundamental rights and citizenship, has been a champion of consumer rights for years. Just think about her battle to lower mobile phone roaming bills. She has reflected and taken into account the views of consumers, businesses and experts from across Europe about how to improve contract law. In a vote on 7 June, the European Parliament called for an optional European contract-law instrument, which could be chosen voluntarily. The commissioner is also considering this option.
The exact details of such a possible optional instrument on European contract law are still being developed, but the following fundamentals should be clear:
? Added value for businesses and consumers: To be successful, the optional instrument would be a set of contract-law rules that could be used voluntarily in cross-border transactions across the EU. This would reduce the transaction costs for cross-border trade and help businesses expand into more countries.
? More opportunities for SMEs and consumers: Many companies decide that it is simply not worth the expense and trouble to sell in small and medium-sized EU countries. The Federation of Small Business in the UK reported that it costs firms around €9,000 in legal and translation costs for every member state they trade with. For example, a micro-company in the UK with six employees and an average annual turnover of €150,000 has a successful product and wants to sell across Europe. It could face transaction costs of around €275,000 for hiring contract-law experts to take into account the laws of the other 26 countries. This should be changed by any European contract-law initiative.
? Lower prices and increased product choice: An optional instrument would mean that a business would have to pay just once for a lawyer to expand across Europe. More trade would lead to more imports, more competition in the domestic market and, therefore, more choices and lower prices for consumers. This will particularly benefit consumers in small and medium-sized EU countries, who are currently disadvantaged through limited choice.
? A higher level of consumer protection: An expert group established by the Commission published a feasibility study on a future initiative on European contract law on 3 May. According to a wide range of contract-law experts, the group’s text contains a higher level of consumer protection compared to the current situation in many countries. For example, consumers can choose a remedy in case they buy a defective product – even several months after the time of purchase. This means that consumers can terminate the contract, ask for a replacement or repair or a price reduction. Under these conditions, consumers would be better off than in the UK. Following a reasonable time after a purchase, UK consumers can terminate the contract or ask for a price reduction only when repair or replacement is not possible. The Commission has not taken a position on the expert group’s text and needs to reflect on the level of protection.
? Freedom to contract: Nobody would be forced to use the instrument. The bottom line is choice. Only those who choose the instrument would be able to contract under it. Those who do not want to use it will be able to continue to contract under national laws. This would be an intelligent way of promoting the single market. It would also be a very pro-competitive way: the initiative would only be a success if businesses and consumers found it attractive for their transactions.
? Informing consumers: Businesses would have to inform consumers about the most important features of the optional instrument in layman’s terms. The Commission is developing a standardised information sheet that would be available in all official EU languages.
Consumers want more choices and better prices. That is exactly what the Commission will deliver.
Matthew Newman, spokesman for Viviane Reding, European Commission, Brussels