News November 2015: Alternative Resolution - consumer disputes

Alternative Resolution in consumer disputes: what are the professionals required to do before January 1, 2016                                                                                                                                                                                                                                                                                                  

The ordonnance n° 2015-1033 dated August 20, 2016 (« the Ordonnance ») transposed in French law the EU Directive 2013/11/UE dated May 21, 2013 of the European Parliament and Council on alternative dispute resolution for consumer disputes (« Directive on consumer ADR ») and introduces in the French consumer code (« FCO ») a new « TITLE V: Mediation in consumer disputes» (articles L. 151-1 to L. 157-1).

It shall be noted that, in parallel of Directive on consumer ADR, a new Regulation of the European Parliament and Council has been adopted the same day (the « Regulation »[1]) intended to apply, more specifically, to the alternative resolution of disputes based on contractual obligations resulting from online contracts of sale/services between consumers located in the European Union and a professional located in another Member State. This Regulation aims at setting up a European platform dedicated to the online dispute resolution (“ODR platform »).

It shall also be noted that Decree n°2015-1382 dated October 30, 2015, implementing the Ordonnance, has entered into force on November 1st, 2015, which means that professionals have only until January 1st, 2016 to comply with the Ordonnance requirements. On January 9, 2016, the Regulation comes into force.  

In a nutshell, pursuant to article L.152-1 of FCO[2], the Ordonnance implements an effective « right to mediation » to the benefit of any French or European consumer involved in a dispute regarding the contract performance with a professional established in France.

• To which professionals and disputes this « right to mediation » applies?  

• all professionals[3] from all economic sectors are concerned, at the exclusion of professionals operating in (a) general interest services sector; (b) healthcare services provided for by healthcare professionals and (c) public providers of university education.

• the disputes concerned are, either domestic or cross-border disputes (ie. dispute arising between a professional established in France and consumer located in another member State of the European Union), of a contractual nature (based on sale or services contract) and which have been initiated by the consumer (alternative resolution set forth in the Ordonnance does not apply to legal actions introduced by the professional against the consumer).

It shall also be noted that the Ordonnance does not exactly transpose the Directive since it only applies to disputes relating to the « contract performance » (article L .151-1 of FCO) whereas the Directive targets, under its article 4, any dispute “arising from the sale contract”. Does it mean that disputes involving contract conclusion (eg. disputes arising from non-compliance with pre-contractual information obligation) should not fall within the scope of “French-style” alternative resolution procedure? We do not think so, such a restriction is, in our opinion, neither consistent with the spirit of the European text nor desirable in practice.

• In order to be admissible to the mediation, the dispute (i) must have first given rise to a written claim by the consumer to the professional which must be unanswered; such claim must not be manifestly unfounded or clearly abusive, (ii) must have been brought before the mediator within the year following the unanswered written claim and (iii) must not have been already submitted to another mediator or court (article L.152-2 FCO).

• Which obligations are required from professionals between now and January 1st, 2016?

• Setting-up an alternative resolution process with adequate warranties

In order to make effective the « right to mediation », the professional may:

• either set up his own alternative resolution procedure (internal mediation or “mediation d’entreprise”)

• or, guide the consumer towards an existing institutional or sectorial mediator ; in any case, the professional shall always entitle the consumer to have access to the sectorial mediation if any (article L.152-1 of FCO). If a public mediator has jurisdiction over the alternative resolution at stake, any other conventional mediator is, in principle, excluded (article L.152-5 of FCO).

Besides, the mediation procedure implemented by the professional must fulfill the following conditions:

• freedom: the professional must systematically propose to the consumer the amicable resolution of the dispute through a mediation but shall not contractually force the consumer to go through mediation (thus, the provision in general conditions by which a mediation is mandatory before litigation is prohibited – ie. article L.152-4 of FCO). Furthermore, the parties must, at all times, remain free to withdraw from the mediation process and may also accept or refuse the solution proposed by the mediator, within a timeline that will be scheduled by the latter (in case of refusal, consumers may only go to litigation since the same dispute may not be submitted to another mediator).  

• accessibility: mediation must be easily accessible through electronic or mail means (article R. 152-1 a) of FCO).

• free of charge : the mediation procedure must remain fully free of charge for the consumer, regardless of the financial issue at stake ; however the consumer will have to incur the lawyer or expert’s fees hired by him (article R.152-1 c) et d) of FCO).

• speed: the mediation process must terminate within 90 days as from the date of receipt by the mediator of the complete file.

• efficiency: the mediation procedure must reach a practical solution, without an assistance by a lawyer or a counsel being required or needed.

• confidentiality: the exchanges between the parties during the procedure must remain strictly confidential.

• qualities required from the mediator: in order to meet his assignment requirements[4], the mediator must comply with conditions regarded to be essential for his impartiality and independence, in particular in case of an internal mediatior (« médiateur d’entreprise ») who receives financial compensation from the professional or a sectorial mediation (paid by a professional organism or federation). In case of an internal mediator, he must (i) be appointed by a collegial body with an equal number of representatives of agreed consumer associations and of professionals (ii) not work for three years following his mandate (of three years) for the professional or the federation to which such professional is linked, (iii) not have any functional reporting relationship with the professional during his assignment as a mediator and (iv) get, as the sectorial mediator, a “budget that must be separate and sufficient to enable the mediator to achieve his assignment» (article L.153-2).

It shall be noted that the mediation, whatever the chosen form, will be under the control of the new commission of assessment and control of the consumer mediation (“CECMC”) (articles L. 155-1 et. seq. FCO ) which role is notably to keep updated the mediators list and which is directly linked to the Ministry of Economy.  

• The consumer information

In order to allow an effective access to mediation and to warrant the transparency and legibility of the procedure, the Ordonnance provides some information requirements to consumers,  and notably :

• the obligation for all professionals to inform upfront the consumers of the « contact details of the competent mediators that the consumer mustrefer to » (article L. 156-1 of FCO), and also to give such information, after a written claim raised by the consumer to which the professional does not intend to satisfy.

This information obligation requires an updating or redesign of the professional websites and commercial documentation (general conditions of sale, invoices, order forms and all other supporting appropriate device…) which must clearly indicate all useful information.

• the obligation for online professionals to inform consumers of their implementation of an ODR platform, as per article 14 of Regulation n° 524/2013 du 21 mai 2013 (article L.156-2). Such professionals have now the possibility to implement ODR platform Youstice, directly on their website.

It shall be noted that those information requirements and the penalties attached thereto appear to be lying, as per the Ordonnance, on the only professionals (to the exclusion of professional organisms or federations which must comply with those information requirements under the Directive). It seems nonetheless reasonable to believe that, for caution and transparency purposes, if several professionals delegate to a professional syndicate/federation the organization and implementation of a mediation procedure on their behalf, such information obligations should be complied with by both syndicate and professionals.

Any failure to this obligation may be punished by an administrative penalty of 3.000 euros maximum for individuals and 15,000 euros for legal entities (article L.156- 3).  

It is not excluded that, in some cases, the failure to this information obligation – including the non-compliance with the mandatory implementation of an effective mediation procedure – may be regarded as an unfair/ deceptive commercial practice punishable by criminal fines of a more significant amount than the administrative penalty.

As a matter of fact, why should not it be possible to sustain that, under article L.121-1 II of FCO, the failure to inform the consumer of his « right to mediation » – which is to be regarded as a « substantial » information since it deals with « the treatment terms of consumer claims » – is to be regarded as a deceptive practice? [5]

This question is worth to be raised considering the latest extensive interpretation of the unfair commercial practice[6] and also the most significant penalties that could be incurred in such a case: 300,000 euros and a two-year prison penalty for individuals and up to 1,500,000 euros for legal entities (article L.121-6 of FCO).

 

In parallel, the mediators have to set up a dedicated website allowing permanent information on the mediation process, the online seizure etc…. (article R.154-1 et R.154-2 of FCO).

One must hope that these new constraints may offer, at the very least, an opportunity for professionals and their customers to establish or reinstate a « virtuous circle of trust » that would contribute eventually to promote the image and reputation of professionals, through satisfied customers who will be eager to disclose their satisfaction, as it is usually the case with the dissatisfaction, on social medias.  

Sarah Temple-Boyer

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[1] Regulation (EU) n°524/2013 of the European Parliament and the Council of 21 May 2013 on online dispute resolution for consumer disputes

[2] Article L.152-1 of FCO: « Any consumer is entitled to seize, on a free basis, a consumer mediator in order to resolve amicably an existing dispute with a professional. To this effect, the professional warrants to the consumer an effective access to a consumer mediation process”.

[3] Pursuant to article L.151-1 of FCO, « professional » means « any individual or legal entity, either public or private, operating – including through a person acting in its name and on its behalf –within the scope of its commercial, industrial, craft or liberal activity » whereas, on the opposite, « consumer » means « any individual acting for the purposes which do not fall within the scope of its commercial, industrial, craft or liberal activity ».

[4] Article L.153-1 of FCO: « the mediator must accomplish his assignment with diligence and skills, in independence and impartiality, within a transparent, efficient and fair framework”.

[5] Article L.121-1 II of FCO provides that : « a commercial practice is also deceptive when, considering the natural restrictions of the communication device which is used and the surrounding circumstances, it fails to give, conceals or provides in an unintelligible, ambiguous or delayed manner a substantial information or when it does not indicated the real commercial intention (…)”  

In any commercial disclosure relating to a purchase invite intended to the consumer and indicating the price and product or service features, are to be regarded as substantial the following information : (…)

4° The payment terms, delivery terms, performance or treatment of consumers claims modalities, as soon as they are different from those usually applied in the same professional sector ».

[6] CJUE C-388/13 of April 16, 2015 Nemzeti Fogyasztóvédelmi Hatóság: CJEU has an extensive conception of unfair commercial practice which includes a false information disclosed by the after-sale service to one and only consumer.