Group actions: the politics of small steps
Should companies be afraid of class actions? As group actions gradually develop, it is important to take the measure of dissatisfaction and to put one's resources in battle order to deal with the incipient fires.
Referred to as the "arlesienne of consumer law", the group action, introduced in France via the Hamon law of 2014, could pose a greater threat to businesses in the near future. This is due to the forthcoming arrival of trans-European actions and a bill to strengthen its scope, tabled in the National Assembly by former magistrate Laurence Vichnievsky and MP Philippe Gosselin. The latter provides for a maximum penalty equivalent to 5% of the company's annual turnover before tax. "If this bill were to be adopted as it stands, it would be a real game changer," warns Erwan Poisson, a partner in the litigation department of the Allen & Overy law firm. Class action is a form of collective redress for customers following the purchase of a good or service. Dissatisfied customers are represented by a "qualified entity" (some fifteen consumer associations have obtained this status).
For the time being, "the number of actions brought in France is clearly lower than the promoters of the texts had hoped. Moreover, objectively, these are not actions that associations win easily: they have lost a number of them and many are characterised by their length," says Jean-Charles Jaïs, a partner at Linklaters, a law firm specialising in litigation. However, "associations are inclined to speed up in different areas", the expert adds.
To date, the Directorate-General for Competition, Consumer Affairs and Fraud Control has identified 13 consumer-related group actions. Four of them are in the banking sector, four in the real estate sector (one settlement), three in the telephony sector (again, a settlement was reached), one action (also resolved) was against a campsite, and one action, which is ongoing, is against BMW concerning a hidden defect in certain touring motorbikes. New actions have recently emerged, such as the UFC-Que Choisir association against Canal+ regarding a suspected forced sale. No company has yet been definitively held liable.
Cautious progress, in consultation with businesses
Initially, "due to the overly restrictive nature of the 2014 text, several actions appeared unacceptable", explains François Carlier, general delegate of the CLCV, a major French consumer association. These include the proceedings brought by the CLCV against Axa Agipi, for failure to comply with the guarantee rate for a life insurance investment, set at 4.5%. The first version of the text was limited to disputes under the Consumer Code, excluding consumer problems related to the Insurance Code or the Housing Code. The text has since been revised to include these disputes. "In France, the policy of small steps prevails concerning the evolution of measures and compensation for consumers," says Erwan Poisson.
In terms of timeframe, the consumer association, the customers and the company involved are engaged in a long process. Indeed, although there is no minimum number of injured parties, the first phase, aimed at establishing the company's liability, usually lasts six years. Only then does the compensation phase begin. On the customer service side, these dissatisfied consumers should be dealt with individually in order to re-establish a dialogue and reach a friendly resolution.
A still fumbling implementation
Faced with these individual disputes that can be controlled in terms of brand image, should companies be afraid of group action, which is a testimony to a product or service that has disappointed, to insufficient customer relationship management to ease the crisis and to a societal background of intolerance towards certain commercial practices? Not so sure. One of the weaknesses of this procedure concerns its lack of appropriation by magistrates and the need for acculturation. To achieve this, the use of specialised tribunals, which was mentioned for a while, does not seem to be a priority. The risk is that the procedure will become over-specialised, and thus be interpreted in a fixed way," explains Patricia Foucher, head of the legal department of the National Consumer Institute. It is more important to keep it alive in order to obtain divergent decisions, obtain the position of the Court of Cassation and make the regulations evolve."
Erwan Poisson (Allen&Overy), whose job involves defending companies targeted by consumer associations, is not worried: "Many legal professionals are wondering about the causes of the failure of group action. In my opinion, the pre-eminence of criminal proceedings will continue in France, because of the difficulty consumer associations have in accessing evidence, unlike the American discovery procedure." BNP Paribas obtained a ruling in its favour at first instance and on appeal, the case is now before the Court of Cassation.
The negative media fallout from certain cases is more to be feared, due to the possibility of a consumer boycott or a lasting feeling of distrust of the brand. For example, the association UFC-Que choisir (which did not wish to respond to our requests) has threatened group action against 20 airlines and in July 2020 launched a concerted action at European level with ten other associations that are members of the European Bureau of Consumers' Unions via the external alert mechanism. At issue is the right to reimbursement for cancelled flights. The case was widely reported in the media and via social networks, thwarting the efforts of several airlines, including Air France, to get their customers to accept the substitution of a refund for a credit note.
Similarly, the association's action against LCL popularises the notion of loan insurance substitution among the general public and introduces more friction into the sales process. "The applicable texts stipulate that once all appeals have expired, publicity measures must be taken by consumer associations on television, radio, in the written press, etc. in order to invite concerned consumers to come forward," says Erwan Poisson. An episode that it is crucial to anticipate on the part of customer services, in order to set up a freephone number to answer consumers who want to check whether they are affected.
Who is financing? What fears for the future?
Whereas when the group action was created, Pierre Moscovici, then Minister for the Economy and Finance, welcomed a "balanced" and "ambitious" measure, he highlighted its protective dimension against possible predatory activities: "This text will not create [...] bounty hunters chasing companies". However, the financing of qualified entities is a concern. "The danger is that a player's competitor could, under cover of a foundation, attack the company via a group action in order to destabilise it," says a source close to the matter on condition of anonymity.
Furthermore, the funding of associations is an issue, as they cannot set up compulsory membership. This explains why so few actions are brought. "This is a real issue for the future of group actions: who will finance them?" asks Patricia Foucher (INC). Consumer associations cannot be paid by companies because of their independence criteria. The fear of seeing Anglo-Saxon firms with pension fund systems arrive, speculating on group actions and injecting funds in the hope of a return on investment, is perceptible.
To reduce costs, the CLCV, France's second largest consumer association, with 30,000 members, is banking on a "follow up" action (group action following a criminal action, only for the compensation phase) against the car manufacturer Volkswagen, in the context of "Dieselgate". "We are asking for compensation for the 900,000 owners of these vehicles", says François Carlier (CLCV). The association has so far gathered about ten complainants. The same strategy is being used against BNP Paribas for its "Helvet Immo" mortgage product.
However, only half of the 440 criminal plaintiffs have chosen to join the group action. "In the long run, the high costs of this type of procedure will have a selective effect," confirms the general delegate. The possibility of an association alliance between different EU Member States should strengthen their financial surface. Will the development of these actions, originally presented as a means of contributing to the improvement of consumers' purchasing power, be preventive in nature, pushing dishonest companies to "place the customer at the heart of their strategy, with the introduction of accessible and efficient after-sales services, commercial gestures and a dispute resolution policy geared towards amicable agreements and the increasingly frequent auditing of their standard contracts to avoid unfair terms", in the words of François Molins, the public prosecutor at the Court of Cassation(1)? Companies, customers and consumer associations have every interest in favouring mediation, to avoid the shortcomings of the American class action.