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EU Consumer Chief Rules Out US-Style Class Action Cases

The European Union's consumer chief dispelled industry fears on Saturday that she intends to
introduce U.S.-style class action lawsuits across the bloc next year as part of her strategy to strengthen consumer rights.

EU Consumer Protection Commissioner Meglena Kuneva announced in March that she hopes to introduce a new system of "collective redress" aimed at giving European consumers more power to bring claims against providers of faulty goods or services.

But she vehemently dismissed claims that she proposes to copy the United States' legal system, where class action laws have allowed lawyers to create a thriving litigation industry seeking colossal damages against companies.

"To those who have come all the way to Lisbon to hear the words "class action," let me be clear from the start. There will not be any. Not in Europe, not under my watch," Kuneva told a
meeting of business leaders, consumer groups and leading law firms in the Portuguese capital.

European employers group BusinessEurope -- an organization that represents 20 million small, medium-size and large companies -- opposes the U.S. model.

The U.S. system allows individuals to aggregate claims into one lawsuit, giving consumers the incentive to pursue compensation - often for small sums - when it would be too costly or time-consuming to take action on their own.

But class actions have been criticised in the United States as enabling enterprising law firms to win big fees while often generating little return for the individuals concerned.

Group Action

Instead Kuneva said she intends to introduce what she describes as "group action," whereby a group of people with the same complaint about the same company across the 27-member bloc
come together, but are represented by their national consumers' body or a new EU consumers regulatory body.

"Options exist, which range from a market-led approach to the establishment of an EU consumer collective redress scheme or out-of-court redress scheme," Kuneva said.

"It should be possible to finance the actions in a way that allows either the consumers themselves to proceed with a collective action or to be effectively represented by a third
party."

"The proceeds should be distributed in an appropriate manner amongst plaintiffs and their representatives and the introduction of unmeritorious claims should be discouraged," she
added.

Fifteen EU countries have no provisions for joint consumer action and in those countries where they do exist, joint action can only take place within their own borders.

According to an EU survey earlier this year, just 26 percent of consumers buy goods and services from businesses established in other EU states and only 6 percent make cross-border
purchases via the Internet due to what retailers describe as "perceived insecurity of transactions."

Kuneva said bolstering EU consumer confidence will encourage the bloc's 500 million citizens to spend more money across national borders and help push up EU retail spending, which represents about 58 percent of gross domestic product, towards the U.S. rate of over 70 percent.

"I do not believe reputable companies have a problem with this proposition. Healthy markets need effective remedies," Kuneva said.