Cross-border consumer complaints too rare to change law for, says OFT

The OFT has told the Ministry of Justice (MoJ) that no EU-wide action is needed to protect consumers, and that the European Commission's plan to harmonise consumer protection laws would harm UK consumers.

It said that consumer protection body Consumer Direct receives 850,000 complaints in a year but in 2009 only 41 of them were about international sales. It said that harmonising EU law on consumer contracts would be a major exercise that would have little benefit.

"The average total number of complaints received by CD during a year is 850,000. The majority of recorded cross border complaints relate to services used when consumers are on holiday (holiday clubs, car hire, air travel,timeshare, accommodation etc)," it said in a response to a MoJ consultation (8-page / 166KB PDF) on the planned changes.

The OFT said that it is also the body that acts in the UK as part of the European Consumer Protection Co-operation Regulation, an EU network of consumer protection bodies. Even through that, it said, activity related to cross-border disputes was low.

"In 2009 the OFT received 39 requests for assistance from consumer enforcement bodies in other member states and requested assistance from other member states on 33 occasions," it said.

The OFT said that a common frame of reference (CFR) should not be developed into an EU-wide law by being the basis of a directive or regulation.

"The draft CFR is an impressive and wide-ranging academic work and is a particularly valuable reference document when read alongside the underlying analysis of the laws that exist in different member states," said the OFT's response. "However, we do not believe that it is appropriate that it should form an official tool box for the legislator. It would be too rigid and could have unintended consequences for drafting future legislation – for example, in respect of definitions and remedies."

The OFT rejected the options described by the MoJ that would have resulted in a new EU-wide law.

"Our interpretation of what is proposed by [those options] is for a replacement of national contract laws through various stages of compulsion. The impact of these options on the UK and other [countries] have not yet been assessed," it said. "We are concerned that significant decisions may be made on the future of contract law even before the final Draft CFR has been published and fully considered or any reliable and informative cost benefit analysis performed."

"We are not convinced that these proposals will offer benefits proportionate to the significant time and costs needed to bring them about beyond those that may be achieved from the review of the [current EU law], the proposed CRD [Consumer Rights Directive], and the other existing European Legislation."

The European Commission believes that the fact that the EU's 27 member states all have different consumer contract laws is a major barrier to the widespread adoption of e-commerce. It has proposed a number of ways to solve the perceived problem, including creating a '28th regime' of contract law that consumers could use.

The Commission's proposed Consumer Rights Directive has been opposed, though, on the grounds that it will dilute some countries' consumer protection laws if it fully harmonises consumer protection law.

The OFT expressed concerns about that process in the response to the MoJ.

"We note that the Commission refers on several occasions for the need to ensure that any European Contract Law must offer a high level of consumer protection. This was also stated in relation to the proposed CRD," it said. "However, during the discussion of that directive we have been concerned that longstanding UK key consumer protection provisions, such as the consumer’s right to reject faulty goods and the length of liability periods, have been under threat from the maximum harmonisation approach, and we have therefore welcomed recent indications of greater flexibility on key areas within the CRD."

The MoJ conducted the consultation to use responses as a basis for its negotiations with the Commission on the proposed measures.