The UK government recently published a report announcing a wide range of far-reaching changes to the UK competition and consumer protection regulatory regimes, following a consultation last year.
The key reforms are examined on our Competition Notes blog, here. Below, we highlight a less prominent aspect of the report, regarding the role of ADR services in consumer markets.
Under the banner of “supporting consumers to enforce their rights independently”, the report addresses the following issues.
- Consumer awareness: The report recognises that the landscape of consumer ADR services is decentralised, complex and difficult to understand, with multiple schemes in some sectors and none in others. Although noting that consultation responses advocated the creation of a single entry and signposting point, the report does not announce any specific proposals in this regard. Rather, it will continue to work with relevant stakeholders “to help promote ADR and ensure ease of access”.
- Business response times: The report notes that in regulated markets, most regulators have typically set an informal upper limit of eight weeks for businesses to resolve complaints before consumers are entitled to take a dispute to ADR. The consultation process indicated support for reducing the standard response time to four weeks, although some concerns were expressed that in some sectors this could prevent traders from properly investigating claims and place additional burdens on business. The government has decided against imposing a standardised four week response time but will continue to to explore the case for reducing the current informal upper limit while ensuring appropriate safeguards for complex cases.
- Quality and oversight of ADR services: In the consultation, the government signalled its intention to improve the quality and consistency of consumer ADR services, to increase business and consumer confidence in ADR. In a significant announcement, the report confirms that it intends to:
- require “all businesses that offer dispute resolution services in consumer markets” to be approved under the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015; and
- strengthen the existing accreditation framework to ensure a common set of standards are applied and that providers can be held accountable.
‘Consumer ADR’ is usually understood as referring to the services provided by dispute resolution bodies set up specifically to deal with consumer/trader disputes, such as Ombudsmen and trade association schemes. It is currently not clear to what extent the new approval requirement could extend to individual mediators/neutrals or small independent ADR bodies which do not operate within any particular consumer sector but are available to deal with disputes that could be categorised as consumer disputes.
- Improving business take-up of ADR in non-regulated markets: The consultation recognised that, while in the regulated consumer sectors it is generally mandatory for traders to participate in ADR schemes, in sectors where participation is voluntary there is little engagement by business particularly amongst SMEs. Although the report notes strong support for it in the consultation responses, the government appears to be not proceeding with a proposal that business participation in ADR should be made mandatory in the motor vehicles and home improvements sectors. The report’s conclusion with respect to improving business take-up is limited to supporting the Ministry of Justice’s ongoing wider policy review of the role of ADR in civil disputes generally.
The recently published final report of Lord Justice Briggs in his Civil Courts Structure Review includes some interesting conclusions as to the role currently played by ADR in the civil justice system in England and Wales and a number of recommendations aimed at expanding that role.
Key recommendations are for:
the proposed new Online Court to include an expanded range of conciliation options (beyond the short telephone mediation originally recommended); and
the re-establishment of a court-based out of hours private mediation service in County Court hearing centres.
The UK Government has announced its plans for implementing the ADR Directive and the ODR Regulation, both of which are aimed at promoting the use of ADR schemes in disputes involving consumer complaints throughout the EU.
While the Government is not at this stage pressing forward with a suggested proposal to restructure the entire UK landscape for consumer ADR, the plans include:
- the creation of a new ‘residual’ ADR scheme to fill the current gaps in the existing consumer ADR landscape;
- the appointment of the Trading Standards Institute (TSI) as the UK’s competent authority to monitor ADR providers in the non-regulated sectors;
- an 8 week extension to the standard 6 year limitation period for bringing court proceedings (in disputes covered by the Directive) in cases where ADR is ongoing at the expiry of the 6 year period; and
- new statutory obligations on businesses to provide information to consumers regarding the availability of ADR schemes.
Businesses engaged in selling to consumers in the EU will need to familiarise themselves with the new consumer information obligations and ensure that they take steps to comply, including by amending contractual terms and website information where necessary. Continue reading
On 12 March 2013, the European Parliament adopted two key legislative measures regarding ADR in respect of consumer disputes. The first Resolution deals with the proposed Directive on alternative dispute resolution (ADR) and the second Resolution deals with the proposed Regulation on online dispute resolution (ODR). The EU Parliament adopted the amendments proposed in 2012 by the EU council (see our previous post on these proposals).
Both of these aim to increase the use of ADR schemes in the EU by giving consumers a quicker, cheaper and more informal way to settle disputes with traders. It applies to any purchase made domestically or across EU borders. The consumer ADR Directive will be supported by an ODR mechanism through the setting up of a free, interactive website accessible electronically in all languages of the EU.
The ADR Directive and ODR Regulation still need to be formally adopted by the Council. They will enter into force on the 20th day after they have been published in the Official Journal. The ADR Directive requires domestic implementation and should apply in all Member States within 24 months of its entry into force. The ODR platform will be available shortly thereafter.
The Government yesterday published its plans for reforming the UK regime for competition law private actions, following a detailed consultation exercise carried out last year. The wide-ranging reforms controversially include the creation of an opt-out collective action for competition law claims on behalf of both businesses and consumers, despite concerns that this may lead to some of the excesses of US-style class action antitrust litigation. Under an opt-out regime, a claim can be brought on behalf of a defined group without all the individual claimants needing to be identified, and all parties who fall within the defined group will be bound by the result of the case (including a settlement) unless they actively opt out. A central element of the reforms concern the promotion of non-mandatory ADR, including introducing an opt-out collective settlement regime in the Competition Appeal Tribunal (CAT) and giving the new Competition and Markets Authority (CMA) the power to certify voluntary redress schemes.
It remains to be seen whether the Government's desired balance of increasing redress for competition law breaches, in particular for consumers and SMEs, without creating disproportionate risks of unmeritorious claims or a 'litigation culture' can be successfully achieved. It is clear, however, that despite attempts to also encourage ADR, the reforms will lead to a significant rise in private competition law litigation in the UK, increasing both burdens on business and potential opportunities for bringing claims. We review here the rationale for the reforms and the range of ADR proposals. Continue reading
The European Commission has recently published the results of a pan-European consultation canvassing views on ADR usage at the business level. This will inform the European Commission’s desire to promote and facilitate ADR between businesses. Much of the European Commission’s recent work on ADR has focussed on business to consumer relations (see our post on the proposals on consumer ADR and consumer online dispute resolution (ODR) that were adopted by the European Commission on 25 November 2011 and are currently under negotiation in the European Council and the European Parliament). The business to business survey results favour ADR and highlight the need for increased awareness and online facilities. So it seems likely that the EU will prioritise the consumer/ODR package and follow-up with a business to business instrument if necessary afterwards. Continue reading
There are some 142,000 small businesses in South Australia and an office dedicated to supporting dispute resolution and avoidance in this area was created in March 2012. The independent body, headed by a small business Commissioner appointed by the Governor, is able to assist small businesses in the event that they are in dispute with a government department or agency or another business. The Commissioner can exercise certain powers to compel the provision of information and the parties may be asked to attend a meeting or invited to attempt mediation. Continue reading
In a month-long consultation released on 28 June 2012, the NSW Government proposed that its small business commissioner be empowered to require a party to produce evidence and attend mediation. However, this does not mean a dispute will be forced into settlement, as parties will retain the right to litigate through the courts.
The consultation also proposes that the commissioner have power to commence litigation on behalf of small businesses against large business/government. In order to become law, the proposals will need to be supported via the consultation process.
The mediation proposals have been modelled on the Retail Leases Act which operates in NSW and has been successful in resolving disputes (a success rate of over 80% at mediation has been recorded).
On 19 June 2012 the Financial Dispute Resolution Centre opened to assist financial institutions and their clients to resolve monetary disputes involving claims not exceeding HKD 500,000 (USD 65,000). It is hoped that under the FDRC’s dispute resolution mechanism, an early meeting/mediation between the parties will resolve the dispute. The government’s decision in December 2010 to set up the FDRC upon the completion of a public consultation marked a turning point for the resolution of disputes in the financial sector. The FDRC’s goal is to resolve monetary disputes through “mediation first, arbitration next”.
On 21 June 2012 the Department for Business Innovation and Skills (BIS) announced that Consensio, a member of the Civil Mediation Council (CMC), will conduct training in mediation for employees from a group of 24 small to medium sized enterprises (SMEs) in Cambridge and Manchester. BIS has determined that both Manchester and Cambridge have a suitable concentration of SMEs and comparable levels of economic activity against their pre-defined control regions, to support the pilot networks. Continue reading