EU Online Dispute Resolution for Consumer Disputes

February 15, 2012

EXPLANATORY MEMORANDUM

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)1. 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”2 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 Act3 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.

For the complete EU Proposal, see the attachment below.