The Future of Consumer Law The perspective from a small island state

1. The Future of Consumer LawThe perspective from a small island state Paul Edgar Micallef 25th April 2006

2. Consumer law in Malta – some considerations • Limitations because of size & geographical position • Not enough discussion to adopt structures suited to specific needs of Malta • Shortcomings: • Overall regulatory framework • Enforcement tools • Lack of specialised tribunals • Aspects of substantive law – e.g. after-sales services

3. The influences on Maltese Consumer law • Maltese Legal tradition – a mixture of continental civil law & anglo-saxon law • Since 1990’s bulk of consumer law has been EU related • Some measures implemented not EU inspired e.g. Consumer Claims Tribunal, pyramid schemes, rights for consumer associations • Consumer Affairs Act as amended in 2000 – has the high point been reached? • Impetus for change post-2000 tied with EU related measures

4. The impact of the EU • Overall positive impact of EU on Maltese consumer law • Instances where Maltese law went beyond EU minimum measures: • Unfair terms • Sale of goods • Timeshare • A step backwards - limitation on Member States to introduce pro-consumer measures beyond those stated in directives • May mean that consumer lobby in Malta has to fight a rearguard battle

5. Consumer law in Maltathe story so far • Prior to the 1980’s consumer law had no identity of its own • Consumer related issues dealt with under various laws notably: • Civil Code – torts/quasi-torts, obligations & rights of buyers & sellers, letting & hiring • Weights & Measures Ordinance, • Food, Drugs & Drinking Water Act • The 1980’s – the first consumer laws: • Consumer Protection Act – 1981 • Trade Descriptions Act –1986 • Door-to-Doors Salesman Act – 1987

6. The story continues… • White Paper in 1991 • An executive Consumer Protection Council • Enactment of laws on unfair terms, product safety, advertising etc • Small Claims Court • A consumer code • Consumer Affairs Act in 1994 • An executive director • An advisory Consumer Affairs Council • Rights for recognised consumer associations • Consumer Claims Tribunal

7. And continues … • The Amendments in 2000 • Declaration of principles • Unfair practices (unfair terms, advertising & schemes) • Product liability • Sale of goods to consumers • Compliance orders • Doorstep Contracts Act • Amendments to Malta Travel & Tourism Services Act

8. Other consumer laws enacted • Under the Consumer Affairs Act • Distance Selling Regulations • Consumer Affairs Act (Price Indications) Regulations • Consumer Credit Regulations • Product Safety Act • Package Travel, Package Holidays and Package Tours Regulations • Protection of Buyers in Contracts for Time Sharing of Immovable Property Regulations • Timeshare Promotion (Licensing of OPC Representatives) Regulations • Distance Selling (Retail Financial Services) Regulations

9. Regulatory framework: shortcomings • Director of Consumer Affairs (DCA) with a general remit & specialised regulators for different sectors • Shortcomings • Overlap between Director & sectoral regulators – not always clear which is the competent authority • Reliance of sectoral regulators on Director to enforce consumer law, in those instances where regulators lack powers to intervene • Lack of pro-active regulatory action to protect consumers

10. Addressing these shortcomings • Criteria: each issue to be investigated by that authority best informed & resourced, whilst having necessary tools at law • 1st Option: MoU’s between DCA & each regulator PLUS each regulator is designated as a ‘qualifying body’ under Consumer Affairs Act • 2nd Option: empower regulators to have concurrent powers with DCA under Consumer Affairs Act (compliance orders, public warning statements, undertakings etc.)

11. Enforcement of consumer law • Enforcement tools under Consumer Affairs Act scarcely used – why? • DCA inadequately resourced & lacks flexibility to act autonomously - focus is on education & advising on complaints • Enforcement tools include: • Public warning statements • Undertakings to comply with obligations • Issue of compliance orders • Non-compliance is punishable as a criminal offence – means prosecution before ordinary courts with onus to prove case ‘beyond reasonable doubt’

12. Changes to the enforcement regime • Issuance of undertakings should be extended to all laws enforced by DCA • Introduction of administrative fines regime in cases of non-compliance • Criminal sanctions retained for serious cases (e.g. safety issues, excessive fraudulent cases, threatening DCA when exercising duties) • Any such changes must be complemented with political commitment to strengthen human & financial enforcement resources of DCA

13. A new regulatory framework? • Approach is to copy regulatory structures adopted in larger jurisdictions • Draft Bill in 1998 called for an ‘Authority for Fair Trading and Consumer Affairs’, included proposal to appoint ‘regulators’ to deal with specific issues/sectors • Focus regulation of consumer & competition issues in one authority acting autonomously? • Advantages: a single reference point, no overlap plus available human and financial resources concentrated in one body • Difficulties: dismantling of existing structures, wide-ranging amendments to various laws

14. Taking matters forward the not-too-distant future • DCA & Consumer Affairs Council merged in one umbrella organisation • A Consumer & Competition Authority with executive directors reporting to it • Board of the Authority answerable to Parliament & appointed by President • Cardinal principles underlying new body: • Visible autonomy from all stakeholders including Government • Clarity of jurisdiction, minimising conflict of jurisdiction with other regulators • Effective enforcement tools

15. The Consumer Claims Tribunal a partial success? • Decides consumer vs trader disputes where monetary value is under Lm 1500. Disputes decided according to equity & substantive merits & justice • Informal procedure & low costs • Limited right of appeal & decisions can be enforced as if given by an ordinary court • Backlog of cases – currently only one arbiter • Enforcing tribunal decisions – proving to be a deterrent to consumers • Possible solution: simplify court paper work, minimise dependence on lawyers, provide support from court staff & ensure that court expenses are proportionate to amounts being recovered

16. A specialised tribunal ? • Ordinary courts deal with following litigation: • Breach of consumer law which constitutes a criminal offence • Contestation of a decision by DCA (e.g. issue of a compliance order) • Disputes between consumers & traders where value exceeds Lm1500 • Should there be a specialised tribunal? If so how should it be composed? What cases should it determine? Should it also deal with competition issues? Should its remit extend to decisions taken by utility regulators? • A new tribunal? Ideally avoid creating a new forum with over 100 tribunals already in place

17. A changed ‘Commission of Fair Trading’ ? • Commission is composed of a magistrate, economist & accountant • Propose extending its remit to litigation under consumer law, including decisions by DCA & disputes over Lm1500 which relate to consumer law • Its composition to be revised – UK Competition Appeal Tribunal could serve as a model – members of the Commission to be chosen from a panel of experts according to the issues in dispute • In the longer term such a changed Commission could assume role of the Appeals Boards under Cap. 418 and Cap. 423

18. Rights of Consumer Associations has enough been done? • ‘Registered’ consumer associations enjoy substantial rights – e.g. protection when making public statements, right to request issue of compliance orders etc • Lack of financial & human resources – means that associations are not in a position to exercise these rights • Some proposed changes: • Reduction or exemption from court fees incurred • Creation of a fund consisting of fines collected from those who act in breach of consumer laws

19. After Sales Services • Is a major source of complaint • Existing provision requires traders in the case of goods that require maintenance or possible replacement – to provide such services/parts for a ’reasonable time’. Trader can release himself if he advises consumer in writing beforehand of unavailability • No norms establishing minimum period guaranteeing quality of work when repairs are done • No specific period stating for how long parts must be available • No norms requiring a written estimate before repairs are undertaken

20. Implementing the Unfair Commercial Practices Directive – the immediate future • Implementation of directive means that Consumer Affairs Act needs to be amended • Is an opportunity for Government to review consumer law – particularly to improve on existing enforcement tools • Regrettable that Member States have no faculty of departing from measures in directive if they wish to include more favourable measures • Short to medium term: consultative document outlining proposals including implementation of directive, after sales issues, revision of sanctions & overlap of roles between DCA & regulators • Should also attempt to address issues in the long term – a market court & a comprehensive regulator?