Brussels - Consumers from across Europe will in future be able to join forces and file class-action lawsuits to demand compensation from firms that break the law, under a proposal presented Wednesday by the European Commission. Calls for the European Union to introduce collective lawsuits - a tool used extensively in US litigation - grew after the Dieselgate scandal, in which Volkswagen customers were outraged to learn that the German car giant had cheated on environmental emissions tests.

To level the odds

Some EU member states already allow consumers to jointly sue a company for compensation, but there is no effective EU-wide tool. "In a globalized world where the big companies have a huge advantage over individual consumers, we need to level the odds," said EU Justice Commissioner Vera Jourova. The commission is proposing two instruments. One would be for situations in which a limited group of consumers suffered comparable harm. The second would be for low-value cases in which many consumers suffered a small loss which would be hard to compensate. In the first kind of case, consumers would be able to collectively sue and receive direct compensation. In the latter, any payout would go to a public cause benefiting consumers. In complex cases where it is hard to ascertain who has suffered losses and how much, the commission is proposing that the issue could be settled in principle, leaving the onus on consumers to follow up with individual claims.

EU-wide fines of up to 4 per cent

Consumers will only be able to seek compensation for losses suffered - such as a payout, replacement or repair of a product - and only after a court has ruled that a company has breached the law. However, the commission is separately proposing EU-wide fines of up to 4 per cent of a company's annual turnover in each member state for firms found guilty of widespread infringements. "Consumer authorities will finally get teeth to punish the cheaters," Jourova said, adding: "It cannot be cheap to cheat."

The proposal "only goes halfway"

Business organizations warned Brussels against opening the door to a US-style lawsuit culture. "EU citizens already enjoy the most efficient and strongest consumer protection in the world," said Markus Beyrer of the BusinessEurope industry association. "EU collective redress would only enrich law firms," he added. However, the European Consumer Organisation, BEUC, said the proposal "only goes halfway" towards helping consumers to obtain redress, as they would still have to take individual action in many cases. The commission argues that it is taking a balanced approach by only allowing recognized consumer groups or independent public bodies to file class-action lawsuits, thus avoiding the risk of abusive litigation. The proposals - part of a package of consumer laws - will require the approval of EU governments and lawmakers to come into effect. The so-called New Deal for Consumers also includes stronger online safeguards, for example obliging online marketplaces such as Amazon and Ebay to clearly indicate whether sellers are professional traders or private individuals, as this affects consumer rights.