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Best Practices of Consumer Redress
 

Background

The functions of Consumer Protection Law include regulating behaviour and correcting misconduct by service providers and providing redress for consumers when something goes wrong. However, the second function is somewhat overlooked by both international and national consumer policy and law. The consumer does not care how splendid the law is, the main point is who can help when problems arise and how to get a satisfactory result in the simplest way.

A recent example of consumer frustration comes from the Consumers International member survey carried out in 2012/131. CI members were asked: "Have any of the following enforcement actions been used in your country by the authorities in response to consumer protection violations?" Among the measures listed, out of 62 countries responding, fines were imposed in 92% of cases, but compensation orders were granted in only 53%. The European Commission has estimated aggregate losses to consumers and to the economy: "In 2010 one in five European consumers experienced problems when buying goods and services in the single market"2 and "The cost of unresolved consumer disputes is estimated at 0.4% of the EU's GDP. This includes the money lost by European consumers due to problems when shopping from other EU countries, which is estimated between €500 million and €1 billion."3

In the USA, it seems that Class Action is a very powerful tool to obtain redress for consumers by very punitive compensation. In contrast, US-style Class Action has been described as a "toxic cocktail" by the EC which has placed emphasis rather on Consumer ADR (Alternative Dispute Resolution). Two new pieces of legislation, on Consumer ADR and Consumer ODR (Online Dispute resolution) have recently been adopted by EU on 21 May. Meanwhile, China is undertaking a reform of Consumer Protection Law with consumer redress as one of the most significant topics. Chinese legislators and consumer specialists anchor their hopes on introducing Class Action into Chinese consumer law to move away from the dilemmas caused by the present deficient consumer redress mechanisms. But whether Class Action will function well in every legal system is not known. The EU has already indicated its view that Class Action does not provide an effective way to redress consumer grievances in most cases, and that ADR does provide a more promising approach.

In the area of financial services, the Financial Ombudsman Service in UK turns out to have been a very successful Consumer ADR mechanism, judging from the volume of adjudications. In E-commerce area, payment medium seems very effective to ensure the consumer redress. 'Chargeback' for payment card holders originated from the USA as a legal right for consumers and was applied in the EU as a contractual right for consumers, and now functions as a very effective tool for consumer redress both in USA and EU. In China, Escrow is widely accepted by E-commerce consumers to guarantee their transactions, but is only a lex mercatoria not backed by legislation. It functions much better than statutory routes for consumer redress in China, but has been well developed in jurisdictions with a common law system for more than 500 years.

One area of increasing importance is cross-border redress as the volume of cross-border transactions rises following the development of e-commerce, migration and tourism. Difficulties in resolving potential cross-border problems has been found to inhibit cross-border transactions for some years now5. Networks such as the ECC-Net have been set up to coordinate responses by consumer protection agencies in different countries and to advise consumers affected. Such networks have limited judicial powers but merit investigation nonetheless.

Developing countries (such as China), very much need to learn from the valuable experiences of other jurisdictions, while assessing their own successes and failures as basis from which to judge good practice. Best Practice research with a global perspective is therefore highly suitable and in demand.

Objectives

The objective of this research is to compare and analyse some of the best practices of effective consumer redress in different jurisdictions, and draw a clear picture of the circumstances under which the individual practices function well. This will help developing countries to reach an objective approach to the orientation of their consumer redress policy. Moreover, the research will come up with suggestions regarding the possibility and the practical approach to building up an ADR (ODR) Platform of Cross-Border Consumer Redress globally.

Project Plan

Phase 1:  Investigate and select a few relevant and effective consumer redress tools as best practice models. Examples to be drawn from US, EC and China

Phase 2:  Survey and analyse how and why the models function well.

Phase 3:  Compare the results and try to synthesise an approach for a cross-border consumer redress platform.

Phase 4:  Draft a report containing the conclusions and recommendations.

Current Phase of Implementation

The project is currently in Phase 1.

Contact Information

Dr Ying Yu
Research Fellow
Wolfson College, University of Oxford
 
Dr. Graham Mott
Economic Affairs Officer
Competition and Consumer Policies Branch (CCPB)
UNCTAD

 


1Consumers International, The state of consumer protection around the world, April 2013, Q B6.
5Brussels 27 November 2008, Green Paper on Consumer Collective Redress - Questions and Answers, page 2.

 

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