Consumer group action: how to take collective action against a professional?

Bank charges unduly deducted from thousands of accounts, a smartphone model with a hidden design flaw affecting an entire series, an unlawful clause systematically inserted into an internet service provider's subscription contracts... There are many examples of disputes in which a large number of consumers suffer similar damage at the hands of the same professional. However, taking legal action alone can be costly, time-consuming and discouraging, especially if the individual loss is small. It was to overcome this obstacle that group action was introduced in France, initially specifically in the area of consumer law by the so-called "Hamon" law of 17 March 2014.

This article focuses on the consumer group action, the pioneer in this field. We will look at who can bring such an action, against which professionals, for what types of breaches and losses, and the broad outlines of its specific operation. Understanding these aspects is essential if you feel that you and other consumers have been harmed by the practices of a professional.

Who is concerned by this action?

Group action in consumer matters is governed by precise rules concerning the players who can take part in it, whether they are claimants, victims or those responsible.

Applicants: a monopoly of associations

As we saw in our previous article on the foundations of group action, the French legislator has chosen not to open up this action to just anyone. Article L. 623-1 of the French Consumer Code is very clear on the subject of consumer group actions: only fifteen nationally-approved consumer protection associationsThe list includes well-known generalist associations such as UFC-Que Choisir and CLCV. This list includes well-known generalist associations (such as UFC-Que Choisir or CLCV) and others that have their origins in family or trade union movements, or are more specialised (housing, transport, etc.).

Why this monopoly? The idea was to avoid an anarchic proliferation of procedures and to ensure that actions were taken by structures deemed to be serious, competent and representative of consumer interests. However, this very limited number of potential players is also one of the weaknesses of the system, as not all of them have the means or the will to use this complex and costly tool.

There is one exception for the French overseas territories: in certain local authorities (Guadeloupe, French Guiana, Martinique, Mayotte, La Réunion, Saint-Barthélemy, Saint-Martin, Saint-Pierre-et-Miquelon, Wallis and Futuna), consumer associations that are simply representative at local level may also initiate proceedings, which allows better account to be taken of the problems specific to these territories (article L. 652-1 of the French Consumer Code).

Victims: individual consumers only

As far as victims are concerned, the consumer group action only benefits consumersas defined by the French Consumer Code. The introductory article of this code specifies that these are "any natural person acting for purposes which are outside their trade, business, craft, profession or farming"..

This definition calls for several important comments:

• Only private persons are concerned. A company, an association or any other legal entity cannot benefit from this group action, even if it has suffered damage from a professional.
• The natural person must act outside his professional activity. A craftsman who buys a tool for his work is not a consumer within the meaning of this text for this purchase. However, if he buys a television set for his personal use, he is acting as a consumer. European case law states that if a good or service is purchased for mixed use (personal and professional), the person will only be considered a consumer if the professional use is marginal.
• The status of "non-professional" (for example, a works council or an association acting outside its main activity) is not covered by the consumer group action, even though certain rules of consumer law (such as those on unfair terms) may be applicable to it.

The person or persons responsible: professionals

The action must be brought against one or more professionals. The same introductory article of the Consumer Code defines a professional as "any natural or legal person, public or private, who acts for purposes falling within the scope of its commercial, industrial, craft, liberal or agricultural activity, including when acting in the name of or on behalf of another professional"..  

This covers a wide range of economic players: companies, traders, craftsmen, the self-employed, but also potentially public bodies acting in a commercial context. It is worth noting that article L. 623-1 explicitly states that the action may be brought against "one or more of the same professionals. This opens up the possibility of taking action against several companies jointly, for example in the case of an illegal price cartel where several players have contributed to the same damage suffered by consumers.

Key condition: a "similar or identical" situation

Lastly, for group action to be possible, the consumers concerned must have been placed in a position of trust. "in a similar or identical situation by the professional's failure. This means that the problem giving rise to the dispute must be common to the whole group (same defective product, same unlawful contractual term, same misleading commercial practice, etc.). It is this commonality that justifies collective handling of the case. The losses suffered need not be exactly the same for each person, but the origin of the loss must be the same.

What breaches can justify a consumer group action?

Group action cannot be launched for just any inconvenience. It must be based on a breach of the professional(s) to their obligations. What does this mean?

Le operative event According to article L. 623-1, "a breach by one or more of the same professionals of their legal or contractual obligations"..

Nature of the obligations breached

The breach may relate to two types of obligation:

• Legal obligations : These are all the rules imposed by law (in the broadest sense: laws, regulations, European law, etc.) on professionals in their dealings with consumers. This of course includes the many obligations set out in the Consumer Code (pre-contractual information, canvassing, credit, guarantee of conformity, unfair terms, product safety, etc.), but is not the only one. Following restrictive case law that had excluded disputes relating to residential leases from the scope of the action (as governed by a law outside the Consumer Code), the ELAN Act of 2018 clarified that the breach may relate to legal obligations "whether or not covered by this Code. Thus, a breach of a rule of the Civil Code (for example, on fraud or breach of contract) or of another specific law may potentially form the basis of a consumer group action, provided that it occurs in the context of a professional/consumer relationship targeted by the action.
• Contractual obligations : These are the commitments made by the professional in the contract concluded with the consumer. A breach of a specific clause in the contract (poor performance, failure to provide a promised service, etc.) may therefore also justify group action if the breach affects a large number of consumers with the same type of contract in a similar or identical way.

Scope of the breach

The breach must occur in a specific context, again in accordance with Article L. 623-1 :

• On the sale of goods : This covers the purchase of all types of goods (movable, immovable, tangible, intangible).
• When providing services : This concept, which originated in Europe, is still being interpreted in an uncertain way by the French courts. While the Court of Cassation seemed to exclude it for residential lease contracts (considering that it is an obligation to "give enjoyment" and not to "do"), the ELAN law specifically added property rental to circumvent this case law. The exact scope of the "provision of services" for other contracts (furniture leases, financial contracts, etc.) remains to be clarified.
• When renting a property: Specific addition of the ELAN law to include rental disputes (failures by the landlord to meet his legal or contractual obligations).
• Where the damage results from anti-competitive practices : Group action can also be used to obtain compensation for additional costs or other harm suffered by consumers as a result of unlawful agreements (Article L. 420-1 of the French Commercial Code and Article 101 TFEU) or abuses of a dominant position (Article L. 420-2 of the French Commercial Code and Article 102 TFEU). Special rules apply to this specific type of action, in particular the need to rely on a prior decision by a competition authority (see below).

What losses can be compensated?

This is an essential and often restrictive point of consumer group action. Article L. 623-2 of the French Consumer Code sets out a dual limitation important :

1. The action "can only cover compensation for property damage"..
2. These economic losses must result from "damage to property suffered by consumers"..

Let's unpack these limits:

• Material damage only: The damage is the initial injury. Here, the action only covers damage to the consumer's property. Bodily injury (injury, health problems) is therefore excluded, even if it is caused by a product sold by a professional (these cases are potentially covered by the "health" group action). Pure" moral prejudice is also excluded, i.e. psychological disturbance or damage to honour not directly linked to material loss (except in very exceptional cases where moral prejudice results directly from damage to property, such as the loss of a pet with emotional value).
• Property damage only: The loss is the consequence of the damage. Here, only the negative economic consequences for the consumer's assets are compensable. This typically includes :
  • Repayment of sums wrongly paid.
  • The cost of repairing or replacing a defective item.
  • The direct financial loss caused by the breach (for example, the extra cost paid as a result of a price agreement).
  • Expenses incurred to remedy the breach.
  This excludes extra-patrimonial (or moral) damage such as loss of enjoyment (inability to engage in an activity), cosmetic damage, suffering or anxiety. Even if these losses were linked to material damage (for example, the anxiety caused by the discovery of a serious defect in one's car), they could not be compensated via the consumer group action. To obtain compensation for these non-material losses, consumers would have to bring a separate individual action.

This restriction to property damage resulting from material loss is a key feature of the consumer group action, clearly distinguishing it from other group actions (health, discrimination, etc.) which may cover personal injury or non-material loss.

What is the specific procedure for a consumer group action?

While the procedure follows the main stages common to all group actions (judgment on liability, participation of victims, settlement), the consumer action has a number of notable specificities:

• No prior formal notice required: Unlike most other group actions (discrimination, environment, personal data), the consumer association is not required to send a formal notice to the professional before taking the case to court. It can bring the action directly.
• Judgment on liability : As with other actions, the court in the professional's place of residence will first rule on the professional's liability. This decision is based on the "individual cases" presented by the association in its writ of summons. The judgement precisely defines the group of consumers concerned (using criteria for linking them together) and determines the losses (financial losses resulting from material damage) likely to be compensated, as well as the amount of these losses or the factors used to assess them.
• Publication of the decision : If liability is recognised, the court will order publicity measures to inform the consumers concerned. These measures (posters, press, internet, mail, etc.) are defined by the judge but implemented at the expense of the professional. Important point: this publicity only takes place once the decision on liability is no longer subject to ordinary appeal (appel) or appeal to the Supreme Court. This can therefore take some time.
• Consumer opt-in : Informed consumers seeking redress should be an active member of the group within a period set by the judge (between 2 and 6 months after the end of the publicity measures). Membership is obtained in accordance with the procedures laid down by the judge (often by letter or form sent to the association or sometimes directly to the professional). Membership constitutes a mandate for the association to act with a view to obtaining compensation. If the consumer does not join within the deadline, he or she will no longer be entitled to compensation. as part of this group action (but retains the right to act individually if the limitation period has not expired).
• Settlement of damages : Once the adhesions have been collected, the repair phase begins.
  • Ideally, the trader will pay compensation directly to consumers who have signed up, on the basis of the judgment. Payment can be made via a special account opened by the association with the Caisse des Dépôts et Consignations (CDC).
  • If the trader refuses to compensate certain consumers (for example, by disputing whether they belong to the group or the amount claimed), the association (acting as agent) or the consumer himself (depending on the case) must refer the matter back to the original court so that it can resolve these difficulties and order compensation.
• Simplified share : The Code provides for a "simplified" procedure if the identity and number of consumers are known and if the loss is the same for all of them (or can be calculated according to a simple rule). In this case, the court may directly order the professional to compensate the identified consumers individually, after informing them and giving them the opportunity to accept. However, the exact terms and conditions and the way in which they tie in with the traditional procedure remain complex.
• Mediation : Mediation is always possible between the association and the professional to reach an amicable agreement on compensation. This agreement must then be approved by the judge to be enforceable.

Consumer group action is complex but can be a powerful tool. If you believe that a professional has committed a breach that has harmed you and many other consumers, contact our firm to assess the possibilities for action.

Sources

• Consumer Code (Articles L623-1 to L623-32, R623-1 to R623-33)
• French Commercial Code (Articles L420-1, L420-2)
• Treaty on the Functioning of the European Union (Articles 101, 102)
• Law no. 2018-1021 of 23 November 2018 on the evolution of housing, development and the digital economy (ELAN)
• Paris Court of Appeal, Pôle 4 - Chamber 3, 9 November 2017, RG no. 16/05321
• Court of Cassation, 1st Civil Chamber, 19 June 2019, no. 18-10.424