State agencies to be given right to sue for compensation for consumers

Euro coins.
Euro coins. Source: Siim Lõvi/ERR

Draft legislation aims to give several state agencies the right to collect consumer claims and bundle them together for a class action.

The eye of Estonia's Consumer Protection and Technical Regularity Authority (TTJA) was caught by eight companies last year that racked up 50 complaints between them. Three companies were the targets of complaints from more than 100 people.

"Usually, these complaints are resolved in extrajudicial proceedings in the consumer disputes committee," Kristina Tammaru, head of the agency's consumer and business advice department, said.

"But there are traders who fail to comply with the committee's decisions," Tammaru said, adding that such companies end up on a public blacklist. "That is the end of proceedings at TTJA. Consumers have the right to turn to court independently regarding particular contracts with service providers."

This may change should Estonia decide to adopt a European directive allowing agencies to bring class actions in the name of consumers.

"In cases where dozens or even hundreds of consumers have a claim against a single company or trader, this initiative would allow them to bring a class action with state representation to demand damages or an alternative outcome," said Martti Kangur, head of legal for TTJA. He added that it would also be possible to demand changes to unfair contract conditions or even lower prices.

Stella Johanson, adviser at the private law department of the Ministry of Justice, said that both the directive and the law in Estonia could go even further.

"The aim of the directive is for consumer organizations to protect consumers' rights in court," she said.

While there is an organization called the Consumer Protection Association in Estonia, it reported at income of €71 last year and spent all of it. The organization's balance was €0 at year's end. The last consumer protection organization to receive state support was the Estonian Homeowners Association the focus of which is on helping property owners.

But litigation can be expensive, especially if you lose. "The directive prohibits ordering consumers to pay for procedural expenses," Johanson said.

Both Tammaru and Kangur said that the authority stands ready to take advantage of the possibility. The bill does not describe how agencies are supposed to decide whether to spearhead such class actions, meaning it is up to every individual agency to decide, Johanson remarked.

Should an agency decide to launch a representative class action, it will communicate relevant intent, allowing people to join the suit, Tammaru explained, adding that a class action would have to be preceded by thorough analysis.

"Should the class action see hundreds of participants, it is a lot of work preparing all of these claims for court. Another aspect is how expensive the process might end up, including procedural costs, and how likely it is to end up producing the desired result."

Avalanches of complaints tend to hit struggling online shops.

Martti Kangur said that those contemplating a class action should consider whether the company they are going up against is capable of paying damages.

"We have had situations where the firms in question have been on the verge of bankruptcy. There is nothing to be done in those cases, even if you do win in court," Kangur said.

But class actions could prove effective in the tourism sector. "In cases where flights are canceled and the carrier refuses to pay compensation, a plane full of people might be motivated to join," Tammaru said.


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Editor: Marcus Turovski

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