EUROPEAN COMMISSION

Brussels, 17.10.2023

SWD(2023) 335 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT REPORT

Accompanying the document

Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

amending Directive 2013/11/EU on alternative dispute resolution for consumer disputes, as well as Directives (EU) 2015/2302, (EU) 2019/2161 and (EU) 2020/1828

{COM(2023) 649 final} - {SEC(2023) 347 final} - {SWD(2023) 334 final} - {SWD(2023) 337 final}

Table of content

Glossary    

1.    Context    

1.1.    General Introduction    

1.2.    Purpose and Scope of the Evaluation    

2.    What was the expected Outcome of the Intervention?    

2.1.    Background to the ADR Directive    

2.2.    ADR Directive Intervention Logic    

2.3.    Baseline and Points of Comparison    

2.4.    State of Play on the Implementation of the ADR Directive across the EU    

3.    How has the situation evolved over the evaluation period?    

4.    Evaluation Findings    

4.1.    Effectiveness    

4.2.    Efficiency    

4.3.    Coherence    

4.4.    Relevance    

4.5.    EU added value    

5.    What are the Conclusions and Lessons learned?    

5.1.    Six main lessons from the evaluation of the ADR legislation    

5.2.    Conclusion    

Annex I: Procedural information    

Annex II: Methods and analytical models    

Annex III: Questions Matrix for the ADR Data Collection Study    

Annex IV.A: Amendments to the national legal frameworks implementing the ADR Directive    

Annex IV.B: Statistics on ADR Disputes (2018-2021)    

Annex IV.C: National Monitoring Schemes    

Annex IV.D: List of ADR grant awardees    

ANNEX V: Overview of Costs and Benefits    

Glossary 

ANNEX 7 EVALUATION

1.Context

Consumer expenditure in the EU generates more than half of the EU GDP. Overall, consumer transactions take place smoothly in the EU thanks to the extensive body of consumer protection laws. Consumer requests are mostly resolved by a talk with traders thanks to sound after-sales mechanisms.

However, there is a significant share of EU consumers who are not complaining because they do not trust their problems will be solved in an efficient and/or rapid manner. Data from the 2022 Consumer Conditions Survey indeed shows that 25% of consumers encountered a problem when buying goods or services from a trader in their own country in the last 12 months, for which they felt there was legitimate reason to complain but almost half (12% of all consumers) took no further action. Among those, 49% felt it would take too long, 42% considered the sums involved were too small and 36% felt it was unlikely to get a satisfactory solution (see graph below).

REASONS WHY CONSUMERS ENCOUNTERING PROBLEMS DID NOT COMPLAIN (%)

In this respect, the EU out-of-court dispute resolution legal framework established in 2013 aims at helping EU consumers and traders resolve domestic and cross-border disputes in a fair, transparent, affordable and fast way. The rationale for an EU intervention in the domain was to encourage and empower consumers to take action to resolve disputes when they do not manage to reach an amicable solution with traders. Respecting quality criteria in out-of-court dispute resolution was indeed considered key to ensure equal access to consumer redress across the EU and a higher level of trust in such schemes. Although ADR is not meant to replace court litigation, it is an effective redress mechanism to resolve low-value disputes, as resorting to court is more costly and often much more time-consuming.

1.1.General Introduction

The Alternative Dispute Resolution (ADR) Directive 1 was adopted in 2013 with a minimum harmonisation approach, to cater for the different ADR cultures and national frameworks that existed across the different EU Member States. It reflects the no one-size-fits-all method adopted by the EU for enforcement matters which are mainly the responsibility of Member States. The objective was to propose a set of harmonised quality requirements to ensure that ADR schemes are fair, independent and impartial whatever the model, including where ADR schemes are financed by industry/trade associations. Member States are required to ensure that all EU consumers can benefit from out-of-court dispute resolution across all economic retail sectors for free or at an affordable fee.

The parallel adoption of the Online Dispute Resolution (ODR) Regulation 2 enabled the Commission to design and manage the ODR Platform which is a single multi-lingual point of entry to put consumers seeking to resolve disputes out-of-court in contact with the trader. The Commission lists the quality ADR entities notified by the ADR Competent Authorities on the Platform to ensure clear information and easier access to consumers.

The 2019 Commission ADR/ODR Application Report 3 concluded that all Member States registered progress in their ADR landscape thanks to the ADR Directive although the overall uptake of ADR, especially to resolve cross-border disputes, remained low. The main issues flagged were:

·consumers may not be sufficiently aware and informed of the applicability of consumer protection rules and of the existence of cross-border means of redress;

·traders are not always keen to engage in ADR;

·other practical challenges e.g. costs, language barriers, no clarity on the applicable law to be used in a cross-border context, lack of easily accessible online procedures.

1.2.Purpose and Scope of the Evaluation

This evaluation of the ADR Directive is being carried out in line with the Better Regulation Guidelines and Toolbox. It assesses the 5 main evaluation criteria (efficiency, effectiveness, relevance, coherence, EU added value), highlighting how ADR has been applied on the ground, as well as at the challenges and shortcomings in the implementation of ADR at national and cross-border levels across all the EEA countries. It is based on the outcome of consultations and studies carried out over the last 2 years 4 , providing extensive quantitative and qualitative data from 2018-2021, as well as lessons learnt from the ADR Directive implementation. The 2019 Commission ADR/ODR application report focused on the period between the entry into application of the ADR Directive in 2015 until 2018.

Article 26 of the ADR Directive obliges the Commission to report every 4 years to the European Parliament, the Council and the European Economic and Social Committee on the application of this Directive on the development and use of ADR entities and the impact of the ADR Directive on consumers and traders, in particular on the awareness of consumers and the level of adoption by traders. That report shall be accompanied, where appropriate, by legislative proposals for amendment of the ADR Directive. This evaluation is to complement the application report and is necessary to support the Commission’s proposal to review the ADR Directive. This is why, in 2022, the Commission launched on the “Have your Say” website two public consultations: i.e. backward-looking approach 5 and forward-looking approach and a Call for Evidence 6 to highlight possible policy options should the need arise to revise the ADR Directive.

An external data collection study 7 was also carried out in 2022 by a contractor to support the Commission’s above-mentioned work, following a call for services under a framework contract.

2.What was the expected Outcome of the Intervention?

2.1.Background to the ADR Directive 

The current ADR Directive aims to ensure EU consumers have access to high-quality ADR to resolve their contractual disputes arising from the sale of goods or services. To benefit from the ADR system, consumers need to reside in the EU and the traders need to have their statutory seat, central administration or place of business in the EU. The Directive covers both domestic and cross-border consumer-to-business (C2B) disputes throughout the EU. Member States are to establish all the aspects of their national ADR framework, including its governance and the model that ADR entities must follow.

ADR entities may be public or private independent bodies or closely connected to traders and trade associations, and they may have sectoral or general competence in terms of market sectors. Some Member States also provide geographical competence i.e. at regional level (e.g. ES and HU) or a residual system i.e. a centralised ADR scheme resolving a wide range of disputes or covering all disputes not covered by the other ADR bodies (e.g. EE, LV, LT, SK) to ensure there are no gaps in access to ADR.

The procedures vary from consumer arbitration 8 to mediation 9 or ombudsman schemes to reach mediated or arbitrated settlements with traders, delivering binding or non-binding outcomes. 10 Direct negotiation between the consumer and the trader (amicable settlement) is excluded, as well as internal complaint handling procedures operated by the trader. Judicial settlements fall outside of the scope of the Directive. In most countries, ADR proceedings are voluntary for traders although many Member States adopted sector-specific provisions that make trader participation mandatory.

To qualify as quality ADR entity, the entity has to comply with all the quality requirements outlined under Chapter II of the ADR Directive (expertise, independence, impartiality, transparency, effectiveness, fairness, liberty, legality). Member States have to set up one or several competent authorities 11 that should accredit and monitor the compliance of ADR bodies with the quality requirements and notify them to the Commission.

The Directive was built on the European Commission Recommendations 98/257/EC 12 and 2001/310/EC 13 .

2.2.ADR Directive Intervention Logic

The below intervention logic summarises how the EU action was originally expected to work at the time of adoption of the ADR Directive (in 2013):

Considering the minimum harmonisation approach, the aim of the Directive was not to be prescriptive, but principle based. It assigned the following roles to the various parties which should be considered as the EU level input into the system:

These inputs in turn lead to outputs consisting in the transposition, the practical application and enforcement of the Directive. These outputs are directly observable.

The overall expected output is access to quality ADR schemes across the EU providing assurance that ADR entities are up to the required quality standards and subject to assessment and monitoring of ADR competent authorities. The structural aspect of this output was already confirmed by the 2019 Commission report: all Member States had designated competent authorities and put in place accreditation and monitoring procedures and the required sectoral coverage was achieved. The Commission, received over the last eight years a very small number of complaints from consumers flagging gaps in the system e.g. scepticism on the non-impartiality of some ADR entities, delays in providing a final result, traders not complying with the ADR outcome. The limited number of questions permit to conclude that the Directive delivered its desired quantitative output.

However, this output is not sufficient to conclude that the overall objective of a swift and affordable handling of low-value consumer disputes in all markets is achieved, especially in respect to digital markets, which are continuously gaining market share and where consumer disputes are becoming more complex (e.g. involving an intermediary providing a service on a marketplace, involving non-EU traders or hidden marketing techniques and dark patterns) as extensively described in the driver section of the Impact Assessment to which this evaluation is annexed.

2.3.Baseline and Points of Comparison

During the preparatory work of the ADR Directive in 2010-2012, digital markets were not so complex, online shopping had not picked up to the extent we know it today, and the ADR culture in some Member States was either weak or non-existent. The 2011 Impact Assessment 14 which had accompanied the original legislative proposal provided a snapshot of consumer ADR in that era:

·57% of EU consumers considered the resolution of problems more difficult when shopping cross-border;

·78% of EU consumers did not take their dispute to court because they thought it would be too expensive, lengthy and complicated;

·48% of EU consumers thought it was easy to resolve disputes through ADR rather than in court,

·only 9% of businesses reported having ever actually used ADR. 54% of businesses said that they preferred solving disputes through ADR rather than in court and 82% of traders who had already used ADR would use it again in the future.

Losses incurred by EU consumers because of problems with purchased goods or services were estimated at 0.4% of the EU GDP 15 . The ECC annual report 2010 16 reported that out of 44,232 requests for advice and assistance with cross-border complaints and disputes, more than 900 cases (58.5% of the transferred cases) were passed on to out-of-court settlement bodies (ADR); i.e. approximately 0.02% of the total number of disputes. In contrast, below is a more recent snapshot of the transferred cases by ECC-Net to ADR implying that in many Member States, ADR is working well and that the ECCs and ADRs engage in knowledge sharing and cooperation activities at national level. Given the expertise of the ECC-Net in handling cross-border disputes, the Network is geared to take a more active role in facilitating cross-border ADR i.e. in signposting and assisting consumers to file a cross-border ADR claim by focusing on improving awareness and acccess to ADR. 17  

The 2011 Impact Assessment 18 reports that before the introduction of the Directive, 22% of the ADR schemes across the EU did not have a website of their own and half of the existing ADRs did not provide online access to ADR procedure. In 41% of ADR schemes, consumers had no information about the use of, the number of cases and the past performance of the ADR scheme. The ADR Directive had improved consumer information on ADR and obliged ADR entities to have online access.

The 2023 Consumer Conditions Scoreboard 19 records that 45% of consumers felt that it is easy to settle disputes with retailers and service providers through an out-of-court body, compared with 34% who felt that going through the courts is easy. This perception difference is common to all Member States, although the difference varies considerably due to the different ADR landscapes found in each Member State.

The below graph (Figure 24) shows the respondents’ perception on how easy it is to settle disputes with retailers and service providers through ADR and Courts: It is easy to settle disputes with retailers and service providers through an out-of-court body (ADR) and courts - (strongly agree + agree, %)

The oldest cohort (65+) is significantly less likely to agree with the ease of settling disputes via the courts (28%) or through an out-of-court body (39%). When asked about different hypothetical claims of varying value and duration in time, consumers were generally more willing to devote more time and effort to claims of higher value. While 58% of those surveyed would be prepared to drop their case and lose the money for a claim of EUR 50 or less, 31% would use ADR irrespective of the time required for a claim in the range of EUR 5,000 to EUR 10,000.

2.4.State of Play on the Implementation of the ADR Directive across the EU

In view of the minimum harmonisation approach, the Directive does not prescribe a specific model in terms of the ADR entity’s corporate identity, funding model or territorial and sectoral coverage. Equally, the Directive does not prescribe a specific type of ADR procedure or regulate the question of whether participation in the procedure is voluntary or mandatory or whether the procedure’s outcome is binding or not. Member States may establish or maintain quality requirements that go beyond those laid down in the Directive. In complying with their obligation to ensure ‘full ADR coverage’ and designing their national ADR landscapes, Member States therefore enjoy a considerable degree of flexibility in terms of implementation.  

Albeit slight delays by 16 Member States to communicate national implementing measures on time (by mid-2015), a transposition check concluded in 2018 confirmed that all EU countries transposed the ADR Directive in the national legislation in a satisfactory manner. Annex IV.A provides a list of amendments to the national legal frameworks implementing the ADR Directive, as communicated by the ADR competent authorities.

3.How has the situation evolved over the evaluation period?

Within the EU, 43% of retailers are unaware of the existence of ADR as a means to resolve disputes with consumers, 20 while 8% are aware but not willing to use it, and 13% report being aware but not finding a suitable ADR in their sector. 21  The Consumer Conditions Survey of 2021 22 revealed that only 5% of EU consumers who encountered a problem reported it to an ADR body, which accounts for roughly 2,250,000 consumers annually. 23 This figure represents a mere 0.75% of the total number of consumers, and only 15% of those who were dissatisfied with their retailer or service provider's handling of their complaint. 24  

Statistics by ADR competent authorities

Based on data available from 23 Member States 25 , it appears that the use of ADR has been relatively stable since 2018, with the notable exception of 2020, which was an anomaly due to the impact of COVID-19 mostly due to travel services cancellations and the ensuing reimbursement requests that were refused by airlines and service providers in the tourism industry.

The total number of admissible ADR cases between 2018-2021 range from around 500 (in HR) to over 264 000 (in DE). The highest number of disputes launched in a given year was in DE (over 80 000 cases in 2020), followed by IT (over 69 000 cases in 2020), closely followed by FR (67 000 cases in 2020). The lowest number of cases in a given year was in HR (49 cases in 2020). But when the population size is taken into account, the picture changes somewhat such that the highest density of ADR cases per capita are found in NO, EE and LT while the lowest are in the South and East of Europe. The average success rate for ADR cases (i.e. actual number of cases resolved by the ADR entities) between 2018 and 2021 varies enormously from just 17% to 87%. The majority of Member States (16) have a success rate of above 50%. This success rate depends on various factors, including: whether consumers had contacted the trader to try to resolve the dispute bilaterally before going to an ADR, whether the procedure is simple to follow, whether the ADR entity contacted is competent to resolve the dispute, whether the trader engages or not in the ADR process, etc. In most cases (all but four Member States), ADR is not a compulsory step before going to court 26 .

Average time spent per dispute

The Directive provides a 90-day timeframe to resolve a dispute and allows an extension for complex cases even though no definition of complex cases is given. Data shows that the average duration of an ADR procedure is 85 days, although it varies from less than 50 days to 180 days depending on the case. The longest average ADR procedures ranged between 145-180 days (FI, SE, DK), while the shortest average procedures reported took less than 50 days (AT, HR, NL, RO). It is important to remember that these figures refer to averages across the Member States, ADR entities and years (2018-2021), meaning in some cases the ADR procedure took much less time or much longer. For example, Ireland reported that the average in one ADR entity was 25 days (telecom sector), whereas in another (financial services sector), the average case took 847 days across the 4 year period. Similarly, Italy reported annual average ADR procedures between 30 days and 390 days depending on the year and ADR entity. Lengthy procedures may be due to lack of staff or specific expertise within the ADR entity, more time needed to investigate the case especially complex cases submitted in specific sectors e.g. financial. Most Member States are keen on investing in digital tools which will make complaint-handling faster and more cost-efficient (from the submission of the evidence to decision-making) e.g. the use of AI bots would carry out legal assessments such as checking travel documents and analyse the chances of success in a claim; saving the ADR hours of work and achieving a good accuracy rate.

Diverse trader participation

The ADR Directive does not prescribe that ADR should be compulsory on traders, notably to respect one of its objective that the Directive should not prevent consumers and traders from exercising their right of access to the judicial system. In effect, national ADR frameworks are based on the culture, traditions and resources of the relevant Member States; as they deem fit. In six Member States trader participation is always required 27 . In other seven Member States trader participation is mandatory in specific sectors 28 and in further four, trader participation is required under specific circumstances 29 . Data on trader participation is too limited to draw any firm conclusions across the EU. However even for those Member States where trader participation amounted to 90-95% of the cases, the level of participation varies heavily across sectors. Best practices to increase trader participation are: national or EU-sector specific legislation making trader participation mandatory in problematic sectors, naming and shaming, or blacklisting traders who fail to engage in ADR, obliging traders to respond to an accredited ADR entity’s invitation letter to participate in the ADR procedure and ensuring clarity on the intention of the trader to engage or not at an early stage.

Below are some examples where mandatory ADR applies:

11 Member States reported trader participation to be high even if voluntary (i.e. on average trader participated in 90% of all ADR cases between 2018-2021). In some sectors/countries, trader participation is made compulsory not by law but because the trader is part of an organisation making ADR mandatory for its members. The average percentage of disputes where the trader did not reply to the claim or refused to participate is generally less than 10% of the total number of cases accepted for handling by ADR entities in the period 2018-2021; however this percentage fluctuates significantly among Member States:

-In Spain and Croatia, the average percentage of ADR disputes without trader cooperation in the years 2018-2021 is 35% and 20% respectively. In Croatia this amounts to 91 cases, whereas in Spain this means there were over 46,000 ADR cases where the trader refused to participate. 30  

-In four Member States (BG, EL, LU, SK) the recorded percentages are between 5%-10% of traders not willing to participate in ADR between 2018-2021. In addition, reported data from the residual ADR entity in Sweden also shows a non-participation rate of 10% 31 . Data reported by France for 2019 and 2020, show a non-participation rate of 10% and 6% respectively.

-In four Member States (AT, DE, IT, PL) the percentage for non-participation by traders was between 2%-5% in 2018-2021.

-In two Member States (IE and SI) non-participation by traders is less than 1%. In addition, partial data from NL 32 also shows non-participation by traders is under 1%. The Dutch ADR authorities confirmed the high participation rate was mainly in the context of sectoral ADR where their participation is regulated by trade associations rules.

-One Member State reported no cases where the trader refused participation (LT), as the trader's consent is not necessary in the ADR procedure (trader participation is mandatory).

ADR disputes launched by ADR entities where trader did not cooperate

4.Evaluation Findings

This Chapter is based on the data collected from ADR actors, including consumers obtained through:

·Studies: the ADR data collection study, the ADR Behavioural study and the mini-legal study 35 ;

·The multi-lingual backward-looking public consultation published on the “Have your Say” website between 4 April and 27 June 2022;

·The virtual ADR Assembly which the Commission hosted on 28 and 29 September 2021;

·The workshop on digital redress tools during the Consumer Summit which took place on 10 February 2022;

·The hybrid cross-border ADR roundtable which took place on 21 June 2022;

·Workshops organised by the Commission targeting the ADR entities handling travel, financial and energy disputes respectively;

·Conferences organised at national level to which the Commission participated and contributed actively;

·National ADR reports submitted by the ADR Competent Authorities in July 2022;

·Case studies and interviews conducted in view of the ADR data collection study.

More detailed information about the consultation methodology and stakeholders views are found in the dedicated Annex to the Impact Assessment.

4.1.Effectiveness

4.1.1.How successful has consumer out-of-court dispute resolution, in line with the ADR Directive, been for consumer disputes, in quantitative and qualitative terms?

Since the entry into application of the ADR directive, the Commission received less than ten complaints about its effective application via the CHAP complaint-handling platform, petitions or citizen letters. These complaints have been addressed by the Commission through bilateral contacts with the Member States concerned, showing that there are limited problems of compliance to the Directive by the Member States 36 .

4.1.2.What are the challenges flagged by stakeholders?

Diverse trader participation questioning whether or not voluntary participation is the best solution

ADR is based on the concept of voluntary participation of the parties to achieve an amicable solution for the dispute in question. From the data in hand, there is no evidence that mandatory trader participation in ADR is a better solution for consumer outcomes and neither that voluntary ADR is a systemic failure of the Directive to ensure efficient access to ADR across the EU. National or EU sector-specific legislation (e.g.  see Article 26 in the Electricity Directive 37 ) may make ADR mandatory (either in an overarching manner, for specific sectors only, or where disputes do not surpass a specific amount). If the ADR Directive had to introduce mandatory ADR, it would have potentially entered into conflict with constitutional rights in some Member States. One also has to bear in mind the capacity of ADRs themselves potentially facing an immense workload if ADR was mandatory across all sectors. In this context, the specificity of ADR entity in the energy sectors has to be noted, where most ADR follow the “Ombudsman-structure” with guaranteed access to adequate financing which allows them to handle also big-workloads in a cost-effective manner – but this cannot be guaranteed for all sectors. 

The issues are rather to be looked at in how the various Member States have transposed and implemented the Directive including where there could be some specific sectors where a key ADR entity is not functioning well such as financial services ADR in Spain due to a massive delay (at least 4 years) to establish a public Financial Ombudsman. 38  

Trader compliance to an ADR outcome is uneven

Recital 49 of the ADR Directive provides that the Directive does not require the outcome of the ADR procedure to be binding on traders. Thus, the extent to which an ADR outcome is binding on traders depends on the national rules in each Member State. At present, the ADR outcome is only binding in certain ADR procedures/under certain conditions in 17 Member States, while it is never binding in eight Member States. Although many Member States lack accurate data on the level of compliance of traders with the ADR decisions, almost a third of Member States interviewed in view of the ADR data collection study noted that even where ADR decisions were not binding, traders generally still complied with the result 39 , for instance because traders were generally committed to comply with the result if they had already agreed to participate in ADR 40 or where subscription based ADR entities, meant traders were committed to follow their decisions 41 . Voluntary compliance was also driven by traders’ wish to give good customer service and find solutions. The main factors which impact the level of compliance of traders are the legal effects of the ADR decision, the extent to which the compliance by traders is monitored and if the decision is binding, the extent to which it can be/is enforced in practice. Some Member States even introduced the “name and shame” and blacklisting practices which according to them induces positive competition between traders. Although this option may be a go-to option for Member States, politically it is difficult to be introduced in the Directive as it may be seen detrimental to traders’ reputation and potentially increase litigation by traders against ADR entities.

It must be concluded that there is no systemic issue in the ADR Directive regarding the need to strengthen the enforceability of ADR outcomes but rather that it may be a factor to address in certain Member States, in the way the Directive has been transposed, the way a certain ADR entity functions or in relation to sector-specific business cultures.

Low uptake of cross-border ADR

Article 2 (Scope) provides that the ADR Directive applies to domestic and cross-border disputes between consumers residing in the Union and traders established in the Union. Article 5(2)(e ) provides for Member States to ensure that ADR entities “accept both domestic and cross-border disputes”. According to Article 14, “consumers can obtain assistance to access the ADR entity operating in another Member State which is competent to deal with their cross-border dispute”. The Directive does not require ADR entities to accept claims against traders located in other Member States. In practice, consumers who wish to settle a cross-border contractual dispute have in the vast majority of cases to approach an ADR entity located abroad.

Cross-border ADR disputes remain rare because there are too many barriers according to stakeholders, including: low awareness by consumers purchasing in a cross-border context that national ADR entities can accept their cases and difficulties for ADR entities due to the lack of knowledge of the legal framework in another jurisdiction.

The Brussels I Regulation (recast) (EU) No 1215/2012 42 , which applies to the courts and tribunals (and not to out-of-court procedures) determines that the court of the country where the consumer resides has jurisdiction in cross-border cases over consumer contracts. The purpose of this rule, according to Recital 18, is to protect a weaker party by rules of jurisdiction more favourable than the general ones.

The ADR Directive follows a different approach: as a rule, the consumer will need to use the ADR entity of the trader’s country 43 . This adds complexity layers for the consumers: the need to interact with a foreign entity, perhaps in a language they do not understand and/or bear the translation costs. Moreover, while Article 11 of the Directive stipulates that in cross-border cases the ADR entity shall not deprive the consumer of the rights mandatory in the country of their domicile, in practice ADR entities struggle with applying foreign law. 44 Consequently the number of cross-border cases is very low. This should be considered as a serious and systemic issue of the ADR Directive as it does not provide enough guidance and practical elements to ensure access to consumers for cross-border disputes.

ADR awareness in general versus consumer rights awareness

According to findings from the 2022 Consumer Conditions survey 45 , most EU Consumers don’t have a good knowledge of their economic consumer rights. Based on knowledge of four rights – related to the cooling off period, one sided change to contracts, faulty product guarantee and unsolicited products - consumers were categorised according to their overall level of knowledge: high (aware of at least three of the above rights), medium (aware of two) or low (aware of less than two). Across EU countries more than a third of consumers had a low knowledge of their rights (37%), compared with 28% with high knowledge. There was significant variation in these proportions between countries.

Overall Knowledge of Consumer Rights across the EU

Stakeholders contend that awareness of ADR is low. However, there is no indication that this would be lower than consumer awareness of their rights in general as shown in the graph above. The already low level of understanding of consumer rights is worsened when consumers are faced with the complexity of legal terms and conditions governing transactions, especially in the digital world. Where ADR process is complex and time-consuming to understand, as notably is the case in cross-border ADR, consumers are put off from pursuing a low-value claim, or when they are not convinced that it would lead to a successful solution. In most cases they will drop the claim if an initial contact with the trader proves unsuccessful or when they read that the trader will not participate in an ADR process (e.g. as a consequence of general information obligations imposed by the ADR Directive on traders, including those not willing to participate and who will say so ).

Lack of understanding of eligibility requirements

There is also a lack of understanding on the functioning of ADR entities from the consumer side as reflected in the high number of inadmissible complaints (See Annex IV.C). It seems that consumer campaigns or user-friendly information about the benefits of ADR performed in the past for example by the European Consumer Centres 46 , the ADR entities, the European Commission or other consumer associations, did not allow to raise the awareness of consumers. This however goes hand in hand with the low level of knowledge of consumers on their rights which has not improved according to successive Commission consumer surveys.

The level of awareness is uneven across sectors. For example, awareness is higher in the energy/utilities and financial sectors where well-established ADR entities exist and where sector-specific EU legislation requires the compulsory use of ADR to assist vulnerable consumers.

Uneven compliance by businesses to ADR information requirements

Article 13 of the ADR Directive requires traders to provide the website of the ADR entity they are affiliated with in case of a dispute, although, unless national law provides for mandatory trader participation, they may decide not to participate in the ADR process and therefore not give such an information or explain that they will not participate to ADR schemes, (implying they prefer going to court instead). This information is to be provided in a clear, comprehensible and easily accessible way on the traders’ website, where one exists and if applicable, in the general terms and conditions between the trader and consumer.

In 2022, the Commission carried out an ADR behavioural study 47 to assess ADR information to consumers on websites of traders and ADR entities as to how it affects awareness and take-up of ADR. The study concluded that the way the information is presented has a significant impact on consumers’ propensity to use ADR, as well as their understanding. Separating ADR information on to its own dedicated, easily accessible page, or raising the salience of ADR information by signposting it at the top of the page, had the largest effects on increasing consumers’ propensity to use ADR and may discourage consumers from entering into any agreement with traders who do not wish to join ADR schemes. ADR information in the terms and conditions page is less effective because consumers tend not to visit this page (6%) but instead, they go to the “returns and complaints” page (43%). On the other hand, if an ADR entity website highlights the benefits of ADR relative to court via a salient table comparing the attributes of the two routes significantly increases the consumers’ propensity to choose ADR. Such pro ADR disclosure are however not provided for in the ADR Directive and are unlikely to be used by traders as they generally do not want to encourage disputes and would prefer amicable settlements. The Directive however does not provide for sanctions for the breach of information obligations under Article 13 – this is entirely left to national law.

Other barriers

Some stakeholders suggest that access to ADR is made difficult in certain cases due to its cost for consumers. In most countries, ADR entities offer ADR service free of charge or in any case much cheaper than the costs for accessing a court. However, when ADR is not totally free, the consumers calculate the eventual fee and other costs such as the time needed including to understand the process, against the value of the claim. Disproportionate eligibility criteria are also cited by stakeholders in relation to specific countries or sectors and in general the digitalisation of ADR procedures may be a barrier for those with low digital literacy.

The diversity of the ADR landscape may also make it difficult for consumers to find a relevant ADR body, especially in Member States where there are many ADR entities, or where accredited and non-accredited ADRs exist and consumers would not be able to tell the difference. In some Member States, consumers have to reach out to more than one ADR entity to resolve a dispute given the limited competence of each ADR entity. To avoid that consumers remain unsuccessful in trying to find a competent ADR body, the ADR Directive in recital 24 encourages the setting up of residual entities to ensure there are no coverage gaps. Nevertheless, there is no residual ADR entity in ten Member States.

Conclusion

The evaluation shows that ADR Directive is correctly implemented by all Member States, even though some transposed models may prove to be more efficient than others. One systemic issue which has been identified in terms of effectiveness is in relation to access to cross-border ADR.

4.2.Efficiency

There is no conclusive evidence on the costs borne by the various actors needed to achieve the results of the ADR Directive. A lack of quantifiable data from Member States makes it difficult to carry out a detailed assessment of the Directive’s regulatory burden. The extent to which costs have been incurred to implement the Directive in individual Member States largely depends on the national ADR framework in each Member State, including on the existing ADR entities and competent authorities before the Directive was adopted.

4.2.1.What are the costs for each category of ADR actors?

The Directive introduced obligations that were expected to have the following cost implications:

·The setting up of a competent authority and a mechanism to assess and monitor the ADR entities established on its territory;

·A national ADR framework covering all market sectors i.e. either setting up new structures where ADR was non-existent or adding new structures to cover all sectors;

·ADR entities having to set up and maintain a website;

·ADR competent authorities and ADR entities respecting reporting obligations;

·Traders having to provide ADR information to consumers;

·Consumers to access ADR free-of-charge or at a nominal fee;

·The Commission to support ADR entities using the Consumer Programme, list all ADR entities in compliance with the Directive.

Costs to ADR Competent Authorities

ADR Competent authorities incur costs to accredit and monitor the process of ADR entities. Most competent authorities consider accreditation to be the most time-consuming (and therefore costliest) task, as it is necessary to check the conditions, evaluate the application, issue a decision, register the entity in the list of national ADR entities and notify the Commission, providing information on the registered office, authorised natural persons, detailed rules of ADR between consumers and traders, etc. This however is only particularly burdensome where there are many ADR entities so mainly in FR, IT and ES. The accreditation process can also represent high administrative burden for ADR entities this being a potential reason why some ADR entities prefer not to be accredited 48 . Some ADR entities see the reporting requirements - the publication of annual activity reports per Article 7(2) ADR Directive as burdensome and more of a “tick box” exercise. The extensive reporting by ADR competent authorities to the Commission every 4 years is also considered very time-consuming.

About a third of the Member States have less than one full-time equivalent (FTE) carrying out competent authorities’ work. Seven have between one and three, and with 5.5 FTEs France is the exception, and this relates to the unusually high number of ADR entities in France combined with a complex verification processes.

Number of accredited ADR entities per Member State

Costs to the European Commission

The European Commission incurs limited costs to oversee the implementation of the ADR Directive (1 FTE per year). EUR 100,000 per year have been attributed from the Consumer credits in the years 2018-2022 to support the digitalisation of ADR entities and their networking. Managing and publishing the list of ADR entities is part of the overall costs for the ODR platform and is considered a neglible cost.

Costs to ADR Entities

ADR entities’ main costs are the human resources to manage them and provide the ADR procedures. Their different tasks prescribed by the ADR Directive are:

·Providing quality ADR dispute resolution procedures,

·Training ADR staff,

·Providing information to consumers and traders 49 , notably through their website, enabling consumers to submit a complaint online,

·Preparing and publishing annual activity reports 50 , including information on the number and types of complaints, their outcomes, the rate of compliance and any systemic issues identified and recommendations as to how such problems can be avoided or resolved in future, to raise traders’ standards and to facilitate the exchange of information and best practices, notably on their website,

·Cooperating with ADR entities in the resolution of cross-border disputes and conducting regular exchanges of best practices as regards the settlement of both cross-border and domestic disputes 51 ,

·Providing biannual communication complaints information to competent authorities 52 ,

·Providing information for the accreditation process,

·Overhead costs, including IT and compliance to GDPR costs,

·Translation costs, where relevant.

To take an example of costs for an ADR entity, in 2020 the functioning of the Maltese Office of the Arbiter for Financial Services costed EUR 571,592 to resolve 95 “large disputes” and 1,068 “small cases” so an average cost of EUR 492 per request.

The lack of information, including the financial benefits for consumers and traders, does not allow to calculate the minimum number of disputes ADR entities would need to solve to cover their operations. ADR authorities were also asked whether they had ever tried to calculate the minimum number of disputes. Again, no Member State has performed such a calculation. However, as consumer disputes are usually of a low cost, the minimum number of disputes per ADR entity should be quite substantial to ensure cost-effectiveness. The fact that ADR entities may have other responsibilities complicates cost calculation.

The rate of rejected cases by ADR entities is high in some Member States (up to 60% between 2019-2022). Most frequently, reported reasons included “no previous attempts to contact the trader” followed by “the dispute was previously assessed by another ADR entity or a court” and “the value of the claim has not reached an applicable threshold”. The lack of understanding of when and how to use ADR leads entities to waste resources on these cases. Reducing the number of inadmissible cases is key to improve cost-effectiveness.

In most Member States, the entire ADR budget relies heavily on public funding 54 , private funding 55 or a mix of public and private funding 56 . See Annex IV.B for more information.

Costs to Traders

The overall administrative costs that traders incur depend on the funding model of ADR (see above). In some countries, traders bear the costs of some or all ADR entities, while in others, ADR entities are publicly funded and may ask a marginal fee to traders. Even where traders bear the costs of ADR entities, the model can vary. In some cases, traders pay membership fees for instance, which are fixed costs, or they pay a fee for each dispute (or both), which means these costs vary depending on the number of disputes. Where traders pay participation fee, this can range from EUR 10 (CZ) to EUR 100 (IE) and even within a country it depends on the sector. 57

In addition, traders bear the costs of dispute resolution itself, in the form of the financial and human resources needed for dealing with a dispute, including:

Time spent on each dispute, for submitting information and evidence, etc.,

The cost of legal advice (lawyer fees) – if applicable.

Yet, information on these costs is not generally available and will vary widely from one sector to the other, one dispute to the other, etc. In any case, such costs are directly related to the operation of a business which needs to ensure the correct handling of consumers complaints and after sales questions.

Finally, traders incur the costs of the financial and human resources needed for informing consumers of the address and website of the ADR entity/entities that cover their activities. They need to provide this information on their website if they have one, and in the general terms and conditions of sales or service contracts between the trader and the consumer 58 , if applicable. Nevertheless, these informational aspects are considered marginal costs, what is most costly for a business is keeping abreast of all the relevant EU retail market legislation; especially for SMEs to be compliant but also to be able to answer consumer claims.

Costs to consumers

Consumers incur administrative costs when going for dispute resolution. These take the form of consumer fees and time needed for dealing with a dispute. To facilitate consumers’ accessibility to ADR, Member States could either make the procedures free of charge or ADR entities could impose a nominal fee (i.e. affordable and not restricting access to ADR). Of the 25 Member States that answered the survey question on consumer fees 59 , 12 Member States reported that ADR is always free of charge for consumers (i.e. across all ADR entities) in their country. In the remaining 13 Member States, some ADR entities do charge a fee, and these vary significantly: while in 10 Member States the fees charged do not exceed EUR 70, in a few Member States the fees charged can go up to EUR 100-EUR 300 or even up to EUR 1000 in certain cases concerning financial services where the value of disputes may be high.

Overview of fees charged to consumers by ADR entities

Additional costs to consumers may include legal fees if they seek legal advice and/or experts’ costs with daily/hourly fees varying depending on the country, sector, experts’ experience, time needed for the case, length of the report, etc.), which they can share with the trader if both parties agreed to use an expert, for example, to produce a report on the goods or services subject to dispute. Other costs which might be incurred are translation costs and the consumers’ effort and waste of time, especially when the trader does not cooperate. The Justice Scoreboard 2022 64 shows that timeframes and court fees differ significantly across the EU Member States; hence putting off many consumers from lodging a court case to resolve a consumer dispute.

The dissuasive cost of court cases for consumer disputes instigated the need to provide the ADR Directive. No evolution has occurred since 2013 which would make court cases comparatively less costly (on the contrary) and therefore ADR remains the most cost advantageous system both for traders and consumers, but also for Member States which would have instead of financing ADR to give greater financing if each small claim dispute had to go to a court.

4.2.2.Has the ADR system permitted to reduce consumer detriment? 

The improved ADR landscape has been beneficial to traders and consumers as there are on average 300,000 ADR cases per year in the 23 Member States which reported data to the Commission. However, what is important is to assess whether the ADR Directive could be expected to lead to a higher number of cases and a proportional further detriment compensated thanks to an ADR.

The extent of this detriment can be measured by considering the consumer harm that is strictly related to the missed opportunity of not using ADR. By taking into account the 120,000 eligible disputes 65 (i.e. filed by a consumer and confirmed by an ADR entity, as per data transmitted by ADR Competent authorities to the Commission in 2022) that are not accepted by businesses on a yearly basis, the maximum consumer detriment (including cases where consumers were wrong 66 in their claim and the ones they successfully pursue in court 67 , and considering that not all the value of the purchase is part of the dispute or it is given as amicable solution) amounts to EUR 22.2 million per year. 68 In addition to this, the detriment of consumers who brought a matter to the ADR entity which, for various reasons, was not deemed eligible (including extra-contractual claims) must also be taken into account. This group comprises 1.95 million consumers, 69 and the potential additional detriment stemming from the fact that they cannot settle their dispute through ADR amounts to EUR 361 million per year 70 , for a total annual detriment of EUR 383 million. 

4.2.3.Have ADR entities developed cost saving measures since the entry into force of the Directive?

Significant investments by ADR entities in digitalisation has rendered ADR more cost-effective and increased satisfaction rate among users. ADR entities need a safe, secure and intuitive tech solution to improve negotiations and this infrastructure may come at a high cost at the very beginning (investments in VPN, anti-virus/anti-malware software, spam filtering, etc) although in the long-term, it permits a lot of cost savings and avoids endless processing timeframes. COVID-19 accelerated the transition to remote proceedings and more reliance on emails. Remote hearings are effective and more economical than in-person proceedings. While email is the primary mode of communication in most ADRs, it can pose problems such as limits to file-size attachments and it is not always secure.

Digtalisation in ADR is mainly done in two ways, either by using technology to support or enable existing manual processes of administering dispute resolution, and/or by using technology to fundamentally re-engineer the dispute resolution process.

In the legal context more broadly, other AI technologies can also be regarded as important, such as natural language processing (the application of computational techniques to the analysis and synthesis of natural language and speech) 71 , as well as sentiment analysis (the process of computationally identifying and categorising opinions expressed in a piece of text). 72  

Conclusion

ADR costs vary significantly between Member States depending on the existing infrastructure, funding model, number of ADR entities accredited and monitored, consumer and trader fees as well as whether there existed ADR structures previously. The lack of data on costing, makes it difficult to calculate the cost-effectiveness of ADR. However, compared to costs that would be incurred by consumers, traders and Member States if all consumer disputes had to be dealt with in court, the ADR system is much more cost-efficient. Some cost savings could possibly be made by reducing certain reporting burden that have been assessed as disproportionate by many stakeholders. Facilitating digitalisation of ADR and the use of modern technologies, i.e. containing Artificial Intelligence tools, is also a way of increasing the efficiency of ADR systems.

4.3.Coherence 

This section assesses whether the ADR Directive is internally and externally coherent. In particular, we evaluate synergies, duplications and overlaps with the other interventions pursuing similar objectives, such as European consumer legislation and sectoral rules relevant for consumer redress. Several horizontal and sectoral interventions that pre-dated the ADR Directive contained provisions on out-of-court consumer redress, some of them were later amended. In view of the possible application of the ADR directive to a very large number of EU law regulating retail markets, it concentrates on the areas where most significant inconsistencies could exist.

4.3.1.Is the Directive consistent with key redress principles in substantive consumer legislation?

Main consumer law principles for remedies have been strengthened in the 2019 amendment 74 to Directive 2005/29/EC on Unfair Commercial Practices Directive (UCPD), new article 11a consumers harmed by unfair commercial practices, shall have access to proportionate and effective remedies, including compensation for damage suffered by the consumer. As the unfair commercial practices cover pre-contractual and also after sales stages, the limitation in the ADR Directive to disputes pertaining to a contract may have restrictive effects on which consumer rights are effectively considered by ADR entities.

Moreover, as the scope of the ADR directive only includes the contract where the consumer pays or undertakes to pay a fee, there may be a situation where a consumer and a professional have a legal relationship (such as accepting terms and conditions of an intermediary website), but the fees are paid by the trader or the consumer does not pay a price but provides personal data to the trader. The Consumer Rights Directive (CRD) has been amended with the new Article 3(1a) to ensure that its rules apply when the contract involves provision of consumer’s data in lieu of payment. 75

Sector specific legislation, which provide some ADR provisions usually tend to have a wide scope covering the rights and obligations established in the sector specific instrument: Article 24(1) of the Directive 2008/48/EC (Consumer Credit Directive)  76 puts a specific obligation on the Member States to ensure that adequate and effective out-of-court dispute resolution procedures for the settlement of consumer disputes concerning credit agreements (and not only credit contract) are put in place, using existing bodies where appropriate. The Directive 2014/17/EU (Mortgage Credit Directive) 77 follows a similar approach, 78 but extends the scope to the disputes with the credit intermediaries and appointed representatives. Finally, Directive 2014/92/EU 79 (Payment Accounts Directive), while making specific reference to the ADR Directive, expressly mentions in the scope “pre-contractual disputes concerning rights and obligations established by the Payment Accounts Directive” 80 . Directive (EU) 2019/944 (the Electricity Directive) 81 clarifies the scope to rights and obligations established under this Directive.

The Telecommunication sector is however an exception to the trend. The original Article 34 of now repealed Directive 2002/22/EC (Universal Service Directive) 82 required an option of out-of-court procedures for “unresolved disputes, involving consumers, relating to issues covered by this Directive”. Later amendments, and eventually the Directive (EU) 2018/1972 (Electronic Communications Code) limited the obligation to “performance of the contracts”.

It must be said that there are some other differences with the sectoral legislation. As the latter applies as “lex specialis”, these differences do not pose a coherence issue. For example, while the ADR Directive obliges the traders committed or obliged to use ADR to provide this information spontaneously, 83 on their websites and in terms and conditions, some other legislation, such as Package Travel Directive also requires this information to be included in the confirmation of the contract.

4.3.2.Is the Directive internally coherent? 

The ADR Directive sets out requirements related to expertise, independence and impartiality of the ADR entities. Of those criteria, independence is crucial to build the trust of the parties, as confirmed by responses to the public consultation 84 and recent behavioural experiments. 85  

However, due to their wording certain articles may create confusion as to how to ensure that entities ran by a trader or by a professional association are independent. Article 6(5) stipulates that ADR entities that make decision “by college” must be composed of an equal number of representatives of consumers’ interests and of representatives of traders’ interests. Meanwhile, Articles 6(3) and 4 refer to collegial ADR body (or collegial body nominating ADR representatives) that include representatives of consumer organisations, to counterbalance representatives of the traders or those employed or paid by professional associations.

The difference between the wording (consumer interests vs. consumer organisations) creates an impression that the notion of consumer organisations and representatives of consumers interests are differentiated. This has generated one of the complaints received by the Commission, and observations by BEUC on the lack of clarity in relation to the role of representatives of consumers associations in collegial ADR bodies.

4.3.3.Is the approach to ADR models in EU sector specific legislation compatible with the minimum harmonisation principle of the ADR Directive? 

The ADR Directive is a minimum harmonisation directive which leaves it to the Member States to decide on the governance, funding model, mandatory participation and the nature of the outcomes. Sector specific legislation may however go a step further in prescribing how ADR models need to function in the sector in question, for example:

1.    The Mortgage Directive requires Member States to ensure that participation in ADR is “not optional” for the financial providers, credit intermediaries or authorised representatives (recital 77);

2.    The Electricity Directive stipulates that the participation of electricity undertakings in out-of-court dispute settlement mechanisms for household customers shall be mandatory unless the Member State demonstrates to the Commission that other mechanisms are equally effective;

3. In the field of passengers’ rights, 86 while the role of the National Enforcement Bodies (NEBs) is different from ADR, the NEBs may play a role in handling individual complaints and providing consumer compensation, if the national rules provide for it. According to the CJEU judgement in Case C‑597/20 87 , NEB, as an administrative body, may compel the trader to issue an individual compensation as long as both parties still have access to court. 88 Some NEBs are also “double-hatting” as ADR entities.

These differences, however, do not pose a problem as the sectoral legislation is specific enough to ringfence the traders to be covered.

4.3.4.Is the ADR Directive coherent with the recently adopted EU laws? 

The ADR Directive stipulates that collective redress and ADR are parallel processes and not mutually exclusive. Directive (EU) 2020/1828 of the European Parliament and of the Council of 25 November 2020 on Representative Actions for the protection of the collective interests of consumers (RAD Directive) 89 introduces collective judicial redress and does not impact the ADR Directive as its logic and scope are different. ADR is, by definition, an out-of-court procedure while RAD focuses on actions before the courts and administrative authorities. Further, while the ADR Directive deals with any contractual disputes as long as one party is a trader and another one is a consumer who pays or undertakes to pay a fee, Article 2(1) of RAD limits the scope of Representative Action to infringements of the provisions of EU consumer law which are committed by traders and which harm or may harm the collective interests of consumers, or, for redress action, interests of the group of consumers.

Article 21 Digital Services Act (DSA) 90 , prescribes the use of out of court dispute resolution when a user is not in agreement with platforms’:

·decisions whether or not to remove or disable access to or restrict visibility of the information;

·decisions whether or not to suspend or terminate the provision of the service, in whole or in part, to the recipients;

·decisions whether or not to suspend or terminate the recipients’ account;

·decisions whether or not to suspend, terminate or otherwise restrict the ability to monetise information provided by the recipients.

The scope of this provision is narrowly restricted to decisions made by platforms in relation to their appreciation of whether a content is illegal or in breach of the platforms’ terms and conditions. In practice, this consists mainly in the case of consumers when they post content that is illegal, such as racist or they sell products prohibited when acting outside of their professional activity (otherwise they would not be considered as consumers and therefore their relationship with the platform would be of a B2B natures).

While there is thus no conflict between this DSA article and the ADR directive the duplication of dispute resolution entities that may be created by the two legal frameworks is likely to raise questions on the national level, e.g. to what extent existing Consumer ADR bodies could be certified also as dispute resolution bodies under Article 21 DSA. The quality requirements established by the Consumer ADR Directive are sufficiently general to allow for the design of Consumer ADR bodies that at the same time comply with the characteristics and conditions established by Article 21 DSA.

However, it should be noted that Article 21 DSA appears to prescribe a very wide personal scope for disputes submitted to a dispute resolution entity certified under that article: According to Article 21(1) DSA, recipients of the platform provider’s service can submit their dispute to any dispute settlement body certified under that article. As the provision appears not to establish any territorial limitation to the residence of the recipient or the establishment of the platform provider or the dispute settlement body, it would appear that a dispute resolution body, once certified under Article 21 DSA, would have to accept disputes from any recipient of any online platform covered by Article 21 DSA.

4.3.5.Conclusions

The evaluation showed that the ADR Directive is not coherent with main EU consumer protection laws and sector specific legislation when it comes to the scope definition. This poses a risk of de facto scope limitation of the ADR processes to contractual disputes only. There is also an internal coherence issues in relation to the role of consumer associations in collegial dispute resolution bodies. On the other hand, the ADR Directive is coherent with two very important legislation adopted recently: the RAD and the DSA, while their interplay may however create practical problems and possible confusion on the ground.

4.4. Relevance

This section gives an overview of external factors which occurred since the adoption of the Directive and had unintended impacts or effects with respect to its objectives, whether positive or negative and which put into question the continued relevance of the Directive in view of today’s consumer needs.

4.4.1.To what extent are the scope and objectives of the ADR Directive still relevant?

Emergence of online platforms/marketplaces

The Digital Markets Act 91 and the Digital Services Act recognised the need to set new models to regulate the platform economy. Most large online platforms have their own dispute resolution systems which de facto are imposed on consumers and traders. Private (non-compliant to the ADR directive) ODR systems are taking up the market of dispute resolution by being cheaper, faster and easily accessible online. Such dispute resolution mechanisms (the new step in complaints-handling mechanisms) are not regulated under EU law and they may not pose issues as to their fairness as assessed in the Impact Assessment to which this evaluation is attached.

The extremely rapid development of online trade – including from non-EU traders, the market dominance of few platforms, the majority of publicity being now digital, the high prevalence of online unfair practices and the imposing of dispute resolution systems by large platforms mean that consumers are exposed to increased unfair practices and at the same time risk from being able to access a quality ADR procedure.

Increase of complaints with non-EU traders

The single market stimulates trade, as it makes the EU a more important trading partner at global level. It fuels growth and competition and creates new opportunities for businesses, giving them access to a domestic market of 447 million consumers. The number of complaints received by the ECC relating to non-EU traders fluctuated between 5-7 % between 2019-2021; only representing a small portion of the actual number of complaints relating to non-EU traders, as ECCs are not usually referred to for disputes against non-EU traders. A study 92 by the Federation of German Consumer Organisations (Verbraucherzentrale Bundesverband e.V. – vzbv) and the individual consumer associations of Germany’s federal states found that while consumers had a lot of confidence in online marketplaces, and appreciated the convenience on making purchases online, they were often confronted with unlawful practices, and left unable to enforce their rights, particularly as regards purchases from sellers based in non-EU countries. Results from the Market Monitoring survey 2020 93 that was conducted in September and October 2020 highlighted the following issues:

problems with orders or purchases outside the EU were more frequent than with those purchased within the EU (41% compared with 23%);

the most frequent complaints were problems with delivery (long delivery times, goods not delivered) and poor-quality goods;

where problems arose with purchases made outside the EU, most of those affected contacted the merchant or shop directly (80%), but more than a third were unable to resolve the problem in this way.

As participation in ADR is voluntary in most cases for traders, it should not be a barrier for non-EU traders to participate voluntarily in ADR executed by EU ADR entities.

Increase of unfair commercial practices

The 2021 Consumer Conditions Survey shows that unfair commercial practices are prevalent, particularly as concerns consumers feeling pressured by persistent sales calls/messages urging them to buy something or sign a contract (41% reported that they had experienced this). It also noted several problematic online advertising practices 94 / contractual practices, which included hidden adverts placed within search results (77% of consumers reported having experienced this) and consumer reviews that did not appear genuine (66% of consumers reported having experienced this). In terms of the social media use of online markets, Consumer Protection Cooperation (CPC) authorities further noted the following concerns 95 :

lack of transparency on the use of personal data (e.g. in the context of personalised advertising),

aggressive practices to impose cookies,

inefficient age verification mechanisms, putting children at risk;

challenges by innovative marketing techniques of big market players in the social media and entertainment sector, such as neuro-marketing (using brain imaging to fine-tune advertising) and how this might affect vulnerable consumers, such as children.

unfair persuasive techniques employed by online markets, such as false messages on scarcity, social proof, automated fake price discounts, and countdown timers urging consumers to rush through a purchase. Negative nudging practices, such as subscription traps or overly burdensome opt-out processes were also prevalent concerns.

In 2022, CPC authorities carried out a sweep on dark patterns. 96 Under the coordination of the Commission, authorities of 23 Member States, Norway and Iceland checked 399 websites and applications of retail sellers active in the sales of products for their own account. 148 out of 399 webshops screened included at least one dark pattern out of the following:

42 websites used fake countdown timers: dynamic indicator of a deadline urging and pressuring clients to purchase a product. The timer is however fake when it resets after the expiry with the same offer still valid or it expires but the offer it claimed remains valid even after expiration;

54 websites directed consumers towards certain choices - from subscriptions to more expensive products or delivery options - either through their visual design or choice of language False hierarchy: design of interfaces in a way that directs consumers towards certain choices, either through visual design or language used;

70 websites had hidden information on a product or service by using very small fonts, non-contrasting colours or placing information in a less visible place.

The increased importance of digital markets also in offline transactions (in view of the dominance of digital advertising) means that the ADR Directive scope is drafted in a way which undermines its relevance because of the explicit reference to contractual disputes.

4.4.2.How has the ADR Directive responded to consumer needs in crises situations?

Impact of COVID-19 on ADR

The current ADR Directive stood to the test during the COVID-19. The overall increase of 15% of ADR disputes across the EU was handled well by all ADR entities especially by those entities which had the right infrastructure, despite some difficulties in mail delivery, some teething problems to switch to digital applications for virtual hearings, and skeleton staff workforce in the peak of the pandemic due to more sick leave requests. COVID-19 raised the importance and contributed to the growth of ODR, as the theoretical and practical aspects of ADR were found to work well in the online environment. 98 Importantly, ADR providers could rely on methods that had already been tested, such as virtual and online platforms to conduct ADR sessions (e.g. Zoom, Microsoft Teams, and others).

The main problem was to comply with the 90-day timeframe to decide ADR disputes. In France, 40 % of the disputes handled by the Ombudsman of the Authority for the Regulation of Online Gaming (ARJEL) exceeded the 90-day window; the Ombudsman in the Tourism and Travel (MTV) reported that in over 40% the 90-day window had to be exceeded given the heavy workload. According to a mini survey of the ADR entities conducted by the Commission in the first week of May 2020, it was concluded that there was an increase of 33% travel ADR disputes between January and April 2020 in comparison to the same period in 2019 100 .

The European Consumer Centres received a record number of consumer queries (170,000 requests, an increase of 44% compared to the same period in 2019) throughout March and April 2020 with the top 3 sectors being air passenger rights, accommodation services and package travel. 101 Many transport and travel service providers issued vouchers instead of cash reimbursement for cancelled trips due to COVID-19. The Commission preserved the existing consumer rights through Recommendation (EU) 2020/648 on vouchers offered to passengers and travellers an alternative to reimbursement for cancelled package travel and transport services in the context of the COVID-19 pandemic. 102 Under the Package Travel Directive, if a package trip is cancelled due to “unavoidable and extraordinary circumstances”, travellers have the right to get a full refund of any payments made for the package, without undue delay and in any event within 14 days after termination of the contract. In this context, the organiser may offer reimbursement in the form of a voucher to the traveller. However, this possibility does not deprive the travellers of their right to reimbursement in money. Reimbursement by means of a voucher could only be possible if the passenger agrees. The Commission recommended that the vouchers should be:

ocovered by insolvency protection set up at national level;

orefundable at the latest 12 months following the issuance of the voucher upon request of the traveller, and automatically reimbursed after its expiry;

oflexible on the range of services e.g. booking the same route under the same conditions as the original booking or package;

oflexible on the operator with whom the new booking can be done;

otransferable to other passenger without additional cost.

To assist the EU travellers in view of the COVID-19 outbreak, the Commission published useful information, ranging from a Practical Guide for transport operators and travellers 103 to follow during all the stages of the journey, information related to border restrictions and consumer rights including on vouchers and reimbursement options to consumers 104 . On 10 June 2020, DG JUST and DG MOVE had co-organised an online meeting for all travel ADR entities registered on the ODR Platform to give further clarification on the interpretation of the Commission Recommendation on vouchers 105 .

An increase in the use of ADR was noted for example in France, Italy and Spain, mainly due to deliberate actions by the Member States to facilitate its application:

in France, Decree No 2019-1333 of 11 December 2019 introduced an obligation to resort to conventional mediation or conciliation prior to launching proceedings before the judicial court that do not exceed an amount of EUR 5 000 106 ;

in Italy, mandatory mediation was extended to cases concerning failure to comply with contractual terms (or delay in compliance) when the conduct of the defaulting debtor was caused by the duty to abide by the rules laid down with a view to containing the spread of COVID-19 107 ;

in Spain, the number of complaints submitted increased after the ADR competent authority published an explanatory guide for the online filing of complaints to enable investors to continue exercising their rights, explaining the submission process to investors and how to access the complaint after it has been submitted.

The increase of ADR disputes also emerged due to disruptions in parties being able to perform their contractual obligations, such as late payments, difficulties with the production of goods due to a lack of supply or transport, labour shortages, the impossibility to deliver goods, and closure of facilities.

The impact of COVID-19 on ADR triggered a reflection on whether national ADR contingency plans are necessary for ADR entities to be well-equipped in case of an avalanche of disputes.

Impact of energy crisis on ADR

The energy crisis led to a signifcant an increase of disputes 108 related to sudden price hike of bills which are putting vulnerable consumers at risk and imposed changes to contractual conditions by energy providers. For instance, in Belgium energy disputes went up from 9,000 disputes in 2021 to over 20,000 disputes in 2022. In an online meeting hosted by the Commission on 19 November 2022 with energy ADR entities, it became evident the need to look into safeguards for vulnerable consumers in addition to the specific legislation which already caters for their needs.

Results of a survey published in November 2022 109 by the Commission confirm that almost half of European consumers (48%) have concerns about paying their bills in the following six months. It also shows that a large majority of them (71%) have changed habits to save energy at home. Cooperation at national level is highly recommended in certain circumstances. There is a need for a more systematic approach to vulnerable groups. Minimum requirements for offline support, as well as other accessibility checks (such as a dedicated helpline, training obligations for ADR staff on how to provide ADR to vulnerable consumers, the publication of specific policies for vulnerable consumers, differentiating the types of vulnerability as part of wider institutionalised exchange and the obligation to have specific procedures for vulnerable groups 110 ), but also the exchange of best practices could support this. Thresholds making it clear what a ‘nominal fee’ to ensure that fees charged to consumers do not form a barrier to access. This is for example the case with the Cyprus Center for ADR, which includes six different ranges of purchased goods/services with different fees for mediation and conciliation 111 .

In view of the above scenarios which led to signifant increase of ADR cases, one may consider that collective ADR is insufficiently promoted in the Directive. Collective ADR is only mentioned in Recital 27; only six Member States (AT, ES, HR, RO, SE, SI) have collective ADR in the national law, although in practice no such claims occurred. Collective ADR can be efficient for all parties:

for the ADR entity that has economies of scale when dealing with one case or one group of cases, instead of several disparate ones,

for the trader who has less admin to deal with,

and for the consumers who may not have all need to provide extensive supporting evidence.

As it is still considered as a novelty, more investment is needed at EU level to increase awareness-raising among consumers and traders and technical knowledge about how it works in practice. 113

So-called group claims can be handled by ADR only in eight Member States out of the surveyed 29 (AT, EE, ES, FI, HR, LU, SE, SI). For example, in Spain, there is an administrative practice of ADR entities to gather cases that are based on the same grounds and circumstances and that are solved by one resolution.

In addition, in three Member States, although grouped claims are not explicitly considered in the national law, ADR entities have grouped claims in practice (FR, IS, NL). 115  

Impact of the withdrawal of the United Kingdom from the EU on ADR

As of the end of the transition period i.e. 31 December 2020, the ADR Directive stopped applying to the UK traders and consumers. All listed ADR entities established in the UK were no longer incentivised to participate in ADR procedures launched in other EU countries; hence EU consumers may no longer have the right to ADR to resolve cross-border disputes against UK traders; unless the ADR entities agree to handle their cases. UK-based ADR entity European Car Rental Conciliation Service (ECRS) 116 was established in UK in 2009 to help EU consumers resolve complaints concerning cross-border vehicle rentals. In fact, major car rental companies are registered to this ADR scheme. This entity being based in the UK still resolves disputes for EU consumers however it is no longer required to report to the Commission on the status of its ADR activities; nor does it have to comply with the quality requirements listed in the ADR Directive.

Many EU consumers traditionally have a habit of buying from UK (mostly from Cyprus, Ireland and Malta) due to proximity or historical ties to the UK, UK and EU consumer law are still similar but may differ as respective laws evolve over time; hence the impact is yet to be seen. The Commission published information on the impact of Brexit on consumer protection in a dedicated Preparedness Notice 117  to ensure that EU consumers have clear information on their rights, including the lack of access to ADR.

Conclusion

The development of digital markets has led consumers to be faced with more problems while their capacity to use quality ADR bodies is limited by the existence of platforms dispute resolution systems. Furthermore, the scope description of the ADR Directive may be too restrictive in terms of which disputes are in the scope. The restriction of the scope to traders established in the EU is also depriving many consumers from accessing fair redress systems. In crises situations, e.g. COVID-19 and the recent energy crisis, ADR procedures proved to be important mechanisms to deal with the increased number of consumer issues that the crises generated. These crises therefore do not question the relevance of the Directive but the question is whether certain mechanisms should be strengthened notably to allow ADR entities to deal with more cases at the same time.

4.5.EU added value

4.5.1.Could the objectives of the ADR Directive have been achieved sufficiently by the Member States acting alone?

Clearly, had the ADR Directive not been adopted, some Member States would continue not having an ADR framework to resolve consumer disputes or at least not across all market sectors and/or in compliance with the quality requirements. The 2011 Impact Assessment provides a bird’s eye view of the EU ADR framework at that time:

In total, there were 492 notified ADR entities to the Commission in 2011; across the EU; with Germany alone having notified 203 ADR entities.

The accreditation of ADR entities in line with the quality requirements introduced by the ADR Directive has improved the standards of ADR across the single market. Some pre-existing ADR schemes had to make structural changes to strengthen their autonomy vis-à-vis trader organisations to ensure a high level of trust among consumers and traders. In France, the national competent authority deregistered several ADR entities in the past because of their lack of compliance with the quality requirements. Consumers do not always trust trader-funded ADR entities. Conversely, traders perceive ADR entities as consumer agencies hence it is important that there are EU-wide measures aimed at improving trust of both parties in ADR entities, such as imposing equal representation of traders and consumers within the board of ADR entities and stronger supervisory role of competent public authorities towards ADR entities.

Due to the minimum harmonisation approach, Member States still have the liberty to extend the scope of the ADR Directive i.e. to cover disputes stemming from non-contractual obligations e.g. related to unfair advertising, pre-contractual obligations, civil disputes by consumers (e.g. injury in a shop), B2C disputes to cover disputes related to returned empty parcels, defamatory comments or fake reviews tarnishing the reputation of traders, etc. However as challenges are the same across the EU, only a EU level approach can bring value added in the perspective of a single market where consumers and traders are increasingly active cross border.

Better quality of consumer ADR across the EU

Following the adoption of the ADR Directive, Member States notified over 400 ADR entities to the Commission which are currently listed on the Commission website 118 . Consumers have easy access to the accredited ADR entities in their Member State and have clear information on the competence, costs and procedure of each ADR entity in their native language. Consumers are confident that such ADR entities have been accredited by competent authorities and are in compliance with the quality criteria found in the ADR Directive. This is important in case they have to refer their dispute to an ADR entity established in another Member State and they are not familiar with the ADR culture and procedures implemented there. According to the Open Public Consultation, 49% of the respondents claimed that clear quality criteria boosts ADR uptake in cross-border ADR. Stakeholders suggest that some clarifications are needed to ensure even quality e.g. to ensure that a balance is sought between the human element and fairness when using digital tools, to clarify the parallel approach between ADR and court litigation and to guarantee independence for trader-led ADR entities. It is not crystal clear that the information held by ADR competent authorities about the ADR entities is sufficient to enable a proper assessment. Moreover, not in all Member States consumers have recourse to a specific complaint forum to report their concerns about the functioning of the ADR entities in their Member State.

More operational capacity to ADR entities

Since 2018, the Commission has been awarding grants to ADR entities through a call for proposals. It earmarked EUR 1 million per year in 2018, 2019 and 2021 and EUR 500,000 in 2020 119 from the Consumer Programme 2014-2020 120 and EUR 1 million in 2022 from the Single Market Programme 121 . More than 80 ADR entities notified to the Commission have benefitted from these low-value grants (i.e. max EUR 60,000) to:

raise consumers and traders awareness on ADR systems,

invest more in digitalisation to improve communication among parties, case-handling and consistency of ADR outcomes,

facilitate the handling of cross-border ADR disputes, and

improve access to ADR (e.g. improved effectiveness of national ADR infrastructure and safeguards to vulnerable consumers).

Despite online or physical info-sessions organised by the European Innovation Council and SMEs Executive Agency (EISMEA), the grants are never fully disbursed. Although the application has been simplified to a limited extent as there are some parts which cannot be adapted from a technical perspective, some ADR entities do not have sufficient resources to design and implement the project or the financial resources to cover the 50% co-financing rate. For 2022, the Commission announced a substantially higher co-financing rate of 90%, proving its priority to boost consumer confidence in ADR which is crucial for consumers highly affected by rising inflation and to ensure that even ADR entities with limited financial resources would be able to benefit from this grant. Annex IV.D shows the list of ADR grant awardees. In 2023, the Commission allocated EUR 1 million again for ADR grants and extended the application to grants over EUR 60,000.

EU-wide networking

Without EU intervention, it is highly unlikely that Member States would have taken an initiative to developing their ADR frameworks fit for cross-border disputes. EU ADR networks like the Travel net, FIN-Net and Energy Mediators Group (EEMG) have contributed to cross-border ADR cooperation and sharing of best practices. The Commission organised 2 ADR Assemblies (in 2018 and 2021 122 ) and other workshops 123 to facilitate the exchange of best practices among EU qualified ADR entities, big traders and stepped up its communication through the creation of an online platform for the ADR competent authorities to ensure consistent and efficient communication. 124 FIN-Net meetings discuss the approach to applicable law in cross-border ADR, the benefits of digital tools and governance issues, amongst other topics. In February 2023, FISMA contacted the ADR Competent Authorities of 4 Member States (BG, CY, LV, RO) to encourage notified financial ADRs in these Member States to join FIN-Net. The Commission participated in national ADR events to get more insight on the implementation of ADR on the ground. 125

4.5.1.Was there improved legal certainty?

Uniform interpretation by the Court of Justice of the EU (CJEU) on Consumer ADR

As outlined in Recital 60, the Union adopted the Directive in line with the principles of subsidiarity and proportionality. The minimum harmonisation may not have decreased the pre-existing fragmentation of ADR frameworks in Member States while, after adoption of the directive, certain Members States may have gone beyond the regulated minimum standards. The CJEU has in at least 3 cases given clarifications on the interpretation of the ADR Directive or the previous Commission Recommendation 98/257/EC of 30 March 1998; requiring national courts to interpret the national ADR legislation in the light of the wording and the purpose of the ADR Directive (effet utile).

In the Alassini 126  case, the CJEU was receptive towards national laws that impose a number of conditions are first met to guarantee a party has effective access to Courts should the ADR process fail to settle the dispute. The Court clarified that national legislation that prescribes recourse to a mediation procedure as a condition for the admissibility of legal proceedings in front of a civil court is compatible with the Directive as long as that ADR procedure does not result in a decision which is binding on the parties, that it does not cause a substantial delay for the purposes of bringing legal proceedings, that it suspends the period for the time-barring of claims and that it does not give rise to costs — or gives rise to very low costs — for the parties, and only if electronic means is not the only means by which the settlement procedure may be accessed and interim measures are possible in exceptional cases where the urgency of the situation so requires.

In Case C-75/16 127 , the CJEU confirmed that the voluntary nature of ADR is compatible with any form of compulsory mediation, as long as the parties are not prevented from exercising their right of access to courts. 

In Case C-380/19 128 , the CJEU ruled on companies’ obligations to provide information on ADR; according to Article 13 ADR Directive in light of Article 6(1)(t) of the Consumer Rights Directive. The CJEU concluded that businesses have the obligation to inform consumers about ADR proceedings not only on their websites but also in the general terms and conditions of their contracts. It in particular ruled that the information on the ADR mechanisms need to be shown prior to signing a contract.

Relationship between national Courts and ADR processes is divergent across the EU

A 2018 study by the European Law Institute and the European Network of Councils for the Judiciary 129 depicts that there is patchwork on how ADR and Court systems work together; which may undermine the trust and confidence in such mechanisms and their ability to delivery cost-effective, timely and fair dispute resolution across Member States’ borders. In Italy, ADR is mandatory before initiating a court procedure. There are other States where the penalties imposed by the courts for failing to participate in an ADR make such participation effectively mandatory.

The study stressed that the lack of links make it difficult for consumers to choose the best solution to resolve a dispute, notably because:

othere is limited availability of user-friendly information (FAQs) to parties of the ADR process and how it relates to the Court litigation; also addressing the principle of confidentiality and the duty to participate in ADR in good faith, how their rights might be affected by the conduct in the ADR process;

oit is difficult to judge from the outset the quality and independence of the ADR process and its suitability to the particular dispute and to the parties e.g. whether a dispute is likely to raise a question of law that might be more appropriate to be determined by a Court;

olow training of judges on ADR, limited sharing of best practices and no mapping of different models.

As ADR has been developing in different models at national level, so has justice systems, there has been no parallel evolution between Court systems and ADR across the EU. The Justice Scoreboard, for example, highlights that Court timeframes and fees also vary to a large extent. 130 .

Conclusion

The ADR Directive has left a positive impact on the single market because it ensured access to quality out-of-court dispute resolution to all EU consumers, irrespective of their country of residence. For some Member States without ADR culture, the transposition of the Directive meant a new effective consumer rights to access high quality ADR. The minimum harmonisation approach has been welcomed and it has been strongly recommended by stakeholders to be maintained. ADR entities benefitted from EU-level actions which offered them a platform for exchange of best practices and financial assistance to improve their infrastructure, capacity building and ADR awareness. The Court of Justice gave further clarity on some provisions in the ADR Directive to ensure legal certainty. One issue however which is not regulated in the Directive is the conditions to access judicial proceedings that differ across Member States where having pursued an ADR may be a compulsory requirement.

1.What are the Conclusions and Lessons learned?

1.1.Six main lessons from the evaluation of the ADR legislation

Below are the main lessons which derive from this evaluation report:

1.2.Conclusion

Overall, the ADR Directive has proven to be a successful redress mechanism for EU consumers to resolve their disputes - an improved situation for consumers compared to pre-ADR directive times. The objectives of the Directive are however only partially achieved for a number of issues related to a narrowly defined scope, the complexity of procedures and some internal definition inconsistencies, the limited feasibility for domestic ADR bodies to act on cross border disputes, etc. In addition, the recent development in digital markets are clearly questioning its continued relevance since many of disputes related to online transaction may either be considered out of scope by ADR bodies, or are never escalated to a quality ADR body due to the growing importance of private Online Dispute Resolution systems provided by market places.

The Commission has committed itself in the Work Programme 2023 131 to propose some legislative amendments to the current legislation to improve the ADR framework to better protect consumers from digital threats. The revised ADR Directive will aim at broadening access to fair, cost-effective and user-friendly tools to solve ADR claims, notably cross-border disputes by providing more assistance and information to consumers on the procedure and ensuring that costs remain proportionate. The revision will also take into account the increasing importance of digital markets which require fast and efficient mechanisms but also fairness and impartiality and the lessons learned above. The drivers, problems, objectives and options proposed are discussed in the main body of the impact assessment.

Annex I: Procedural information

1.Lead DG, Decide Planning/CWP references

Lead DG: DG JUST

Decide Planning:    PLAN/2022/1533

2.Organisation and timing

The evaluation of the ADR Directive and ODR Regulation was coordinated by an Inter-Service Steering Group, which was established to provide feedback on the back-to-back evaluation and impact assessment process, with representatives from:

–DG Communication Networks, Content and Technology (CNECT)

–DG Competition (COMP)

–DG Energy (ENER)

–DG Environment (ENV)

–DG Financial Stability, Financial Services and Capital Markets Union (FISMA)

–DG Internal Market, Industry, Entrepreneurship and SMEs (GROW)

–DG Mobility and Transport (MOVE)

–DG Health and Food Safety (SANTE)

–Secretariat General (SG)

–Service Juridique (SJ)

The Inter-Service Steering Group met 3 times, on 26 August 2022 to discuss the draft Call for Evidence; on 26 January 2023 to discuss the policy options the Commission considered to be included in its proposal to revise the ADR Directive and on 20 March 2023 to receive comments on the evaluation and the impact assessment reports which were circulated before. Between meetings, the members of the Group were invited to submit further input in writing or to call for bilateral meetings with JUST for further clarifications.

The data collection study which supported the evaluation of the ADR Directive and ODR Regulation, executed by Tetra Tech International Development Sp. z o.o. (Tetra Tech, Lead), in association with the Centre for Strategy and Evaluation Services (Europe) Limited (CSES) and Valdani Vicari & Associati Brussels SPRL, took place between January and October 2022. The consultant also participated in 3 meetings with stakeholders: on 8 March and 29 August with the ADR competent authorities and on 21 June 2022 at the cross-border ADR roundtable.

3.Exceptions to the better regulation guidelines

The Better Regulation Guidelines and Toolbox were followed without any exceptions.

4.Consultation of the RSB (if applicable)

5. Evidence, sources and quality

The evidence findings of the external support study fed into the analysis of this evaluation Staff Working Document. The consultant used the data of the Open Public Consultation which the Commission held in 2022 in its analysis. During the support study, the consultant used a mix of approaches including an evaluation matrix, desk research, interviews, a targeted consultation and case studies.

Annex II: Methods and analytical models

To support this evaluation, an external contractor carried out a Data Collection Study between January and October 2022. The data was based on:

a)The analysis of the national ADR reports filled in by the ADR Competent Authorities;

b)National research

c)EU level Desk research;

d)ADR behavioural study;

e)Interviews;

f)2 Open Public Consultations;

National ADR Reports

DG JUST worked on a Questionnaire addressed to the ADR Competent Authorities to facilitate the process of the national ADR report which the authorities are to submit every 4 years in accordance with Article 20(6) ADR Directive. DG JUST held a meeting with ADR Competent Authorities to finalise the questionnaire and to give an update of the process on 8 March 2022.  The below questionnaire was distributed on the WIKI platform on 18 March 2022 to be filled in through the EU survey by 15 April 2022 with a final formal deadline of10 July 2022 in English or in another EU language. Throughout this period, the study team monitored the response rates on a regular basis and several reminders were sent to the ADR competent authorities to increase the response rate. By 15 April only 10 survey responses were received (BG, CZ, ES, FR, HR, LT, LV, PL, SE, SK) and until 10 July, 22 Member States had responded to the survey (IE, DK, FI, SI, AT, NL, DE, PL, NO, HU, IT, PT, EL, ES, LT, FR, BG, SK, HR, LV, CZ, SE). DG JUST sent reminders to the 8 Member States for which a survey response was missing 132 , and by the 15 July 2022, 26 Member States had responded. 29 national ADR reports were received, all except for: Liechtenstein 133 . The contractor organised follow up interviews to all national ADR reports.

National research

The national research was launched on 11 April 2022 and the team was made of a national researcher from each Member State, Norway and Iceland. After the review by DG JUST of the 1st Interim Report (containing the findings from 10 Member States), the interview guides for the survey follow up interview were adjusted to include several additional questions of interest to DG JUST.

In several countries, national researchers faced lack of cooperation on the side of the national authorities leading to delays in completing the national research reports (e.g. Cyprus, Greece, Luxembourg, Malta). DG JUST followed up with these authorities.

The national research has been completed for all Member States, but the second survey follow up interviews did not take place with all ADR authorities (BE, EL, LI, SI).

National Report on Alternative Dispute Resolution (ADR)

The European Commission is proposing this template to assist the competent authorities in the Member States in drawing up their national application report pursuant to Article 20(6) of Directive 2013/11/EU on alternative dispute resolution for consumer disputes.

This template is using the tool “EU survey”, that will facilitate the collection of national reports in a comparable manner. We kindly ask national authorities to complete their report in EN or in their native language by 15 April 2022.

The EU survey can generate a pdf or excel report that can be used for national purposes. This template is structured in three parts:

Part I: ADR procedure in your Member State

Part II: Activities of ADR entities

Part III: Best practices, shortcomings & recommendations

The template will need to be completed by the ADR competent authority designated as the single point of contact in your Member State. In order to complete Part II, information will need to be collected from all competent authorities in your Member State (if multiple authorities exist in your Member State).

PART I: ADR PROCEDURE IN YOUR MEMBER STATE

Section 1.1: Introduction

1.Your authority’s name

2.Member State where your authority is located

3.Please confirm that your authority is:

□ the competent authority designated as the single point of contact in your Member State in case of multiple competent authority

□the only competent authority in your country

Section 1.2: Scope & coverage

4.Are all contractual consumer disputes covered by at least one ADR entity in each of the economic sectors covered by the ADR Directive 134 (please see Part II, Question 7 below) in your Member State?

□ Yes

□ No

If no, please indicate gaps in coverage:

Is there a residual ADR entity operating in your Member State?

□ Yes

□ No

If yes, what is the name of this residual ADR entity:

Section 1.3: Accreditation, quality criteria and monitoring of ADR entities

5.In the past 4 years, have you received accreditation/assessment requests? If yes, how long does the assessment take and how much resources do you need? What is the feedback from the ADR bodies on the accreditation procedure? Did you modify your accreditation process over the past 4 years and if yes how and why?

How do you monitor the compliance of ADR bodies with Directive 2013/11/EU and what kind of monitoring mechanism is used:

□ Spot-checks,

□ Annual activity reports (Art. 7(2)),

□ Bi-annual reports (Art. 19(3)),

□ Other monitoring mechanisms (please specify in the text box below)?

Please specify the frequency (if relevant) of such monitoring:

Have you delisted 135 ADR bodies in the last four years? If yes for which reasons?

Are there any other consumer dispute resolution bodies/tools in your country that are not accredited as quality ADR entities in accordance with the ADR directive, but which still resolve consumer disputes out-of-court?

□ Yes

□ No

□ I don’t know

If yes, please explain why those bodies are not accredited:

Section 1.4: Collective ADR

9.Is ADR possible in case of collective claims (opt-in/opt-out procedure, where the claim is brought on behalf of all those who fall within a defined class of claimants unless they take positive steps to opt out – see Recital 27 of the ADR Directive) under your national law?

□ Yes

□ No

11.    Is ADR possible for disputes claimed by multiple consumers (so-called grouped claims, which lead to a settlement of a large number of similar small claims instead of having to process each claim individually) as the same procedure?

□ Yes

□ No

Section 1.5: Cross-border ADR

12.Are the ADR procedures for cross-border disputes in your Member State different from the procedure for domestic cases?

□ Yes

□ No

If yes, please explain how these are different:

13.How do you asses the functioning of the ADR Directive in cross-border disputes in your country? What are the obstacles and/or challenges encountered? What solutions have you implemented?

Section 1.6: Funding model

14.Is the funding model of the ADR procedure in your Member State based on:

□ Public funding

□ Private funding (i.e. costs are borne by traders)

□ Mix of public and private funding

□ Other

Please explain:

Do ADR entities have a profit or not-for-profit character in your Member State?

□ Profit

□ Not for profit

□ Mix of profit and not-for-profit

□ I don’t know

Please explain:

Section 1.7 Other Questions

15.Are there customised procedures in place for vulnerable consumers (particularly vulnerable due to their mental or physical infirmity, age or credulity – see Article 5(3) of the Unfair Commercial Practices Directive)? Consumers may also be deemed as vulnerable based on their low socio-economic status, low education level, not being able to speak a particular language, or a minority status or having no IT skills.

□ Yes

□ No

If yes, please explain:

How can consumers complain about the functioning of the ADR entities in your Member State? Are you aware of any complaints over the past 4 years? If so, how were they handled? Which body is in charge of such complaints? Please specify:

Please elaborate further in case your Competent Authority has specific governance structure or internal procedures which are relevant to highlight under PART I:

PART II: ACTIVITIES OF ADR ENTITIES

Please note that to complete Part II, information will need to be collected from all competent authorities (if multiple authorities exist in your Member State). We therefore ask the ADR competent authorities to collect the relevant data from all ADR entities notified to the Commission and consolidate the data. If not all the requested data is available for all the years, we encourage you to add the most recent data and provide more information in the open text boxes, where relevant.

Section 2.1 Statistics

The below statistics should cover all accredited ADR bodies in your country. However, if only partial data is available, please indicate the coverage of the data you are providing

1.How many complaints (i.e., before the admissibility check as per Article 5(4) ADR Directive was carried out) were received by all ADR entities of your country?

2.How many complaints received by the ADR entities were subsequently withdrawn by consumers?

3.How many complaints were refused by the ADR entities, on the grounds listed in Article 5(4) ADR Directive?

The percentage of complaints refused for the following reasons:

a)no previous attempts to contact the trader

b)the complaint has been frivolous/vexatious

c)the dispute was previously assessed by another ADR entity or a court

d)the value of the claim has not reached an applicable threshold

e)the complaint was not lodged in due time

f)the resolution of a complaint would undermine the effective functioning of the ADR entity

g)any other reason

Please include comments in the text box below, if any:

How many disputes have been accepted for handling per year (i.e., the total number of complaints minus those refused or withdrawn)?

4.[If answer to Part 1 Q 5 above is “yes”] How many consumer complaints are submitted to the residual ADR entity? How many are rejected? How many have been accepted?

5.Of all the ADR disputes handled by the ADR entities covered by your competent authority, can you elaborate more on the types of disputes handled? (please include numbers and text if appropriate in the table below):

Section 2.2: Outcome of ADR disputes

6.Of all the ADR disputes handled by the ADR entities covered by your competent authority, how many of the ADR disputes* ended up in a resolution (i.e., where parties reached an agreement or agreed with an outcome proposed by the ADR entity, or a binding outcome was delivered)? Please provide available data to the extent possible.

(* = complaints that became disputes/ were not rejected or withdrawn)

If you have no data available, please describe your assessment of the success rate:

Of all the ADR disputes handled by the ADR entities covered by your competent authority, what was the number of disputes per year where the trader did not reply to the claim/refused to participate? Please provide available data to the extent possible.

Please add any comments here on the level of participation of traders in ADR in your country:

Of all the ADR disputes handled by the ADR entities covered by your competent authority, how many days on average ADR entities take to issue a final decision?

11. In this respect, was there any progress made over the last 4 years in terms of time taken to resolve a dispute?

□ Yes

□ No

□ I don’t know

Please elaborate, if needed:

12. Of all the ADR disputes, in how many cases was there a judicial review of the ADR outcome (i.e., cases which were tried in court after an ADR procedure had been finalised)? Please provide available data to the extent possible.

Please add any comments here on the judicial review of the ADR outcome in your country:

Please use the below box to elaborate on specific definitions in your national ADR law which is of relevance, notably as the ADR directive is of minimal harmonisation and/or give more/other statistical data which could not fit the above boxes:

Section 2.3 Monitoring & compliance

13. Who, if any, monitors or verifies traders’ compliance with the outcome of the ADR procedure by the parties? Please provide details in the text box below:

In case there is no automatic enforceability of ADR outcome in your country, to what extent do traders respect the ADR outcome?

□ Very likely

□ Likely

□ Neutral

□ Unlikely

□ Very unlikely

□ I don’t know

□ Not applicable

Please include comments in the text box below, if any:

Section 2.4: Resources and costs

14.What fees or charges do consumers have to pay to use the ADR system in your country? Have these increased or decreased since 2018?

15.Has there been any data collection/study (e.g. cost-benefit analysis or impact assessment) on the cost of ADR in your country?

□ Yes

□ No

□ I don’t know

If so, what were their key findings? Please provide weblinks to the studies in the text box below:

Section 2.5: ADR Digitalisation

16.Which of the following digital tools do accredited ADR entities in your Member State use?

□ Website

□ Online forms to file a complaint

□ Digital case management tools

□ Video-conferencing facilities for ADR hearings

□ Advanced solutions/legaltech (such as chatbot)

□ Other

□ None of the above

Please specify advanced/legaltech and “other” digital solutions in use and whether the uptake of digital tools by accredited ADR entities is increasing. If not, what are the challenges?

Are there online dispute resolution systems in your Member State which are not maintained by the accredited ADR entities? E.g. ODR systems designed by law offices, private claim companies or traders

□ Yes

□ No

□ I don’t know

If relevant, please elaborate on whether you evaluate their relevance and fairness to resolve consumer disputes and whether you are aware of any complaints against these ODR systems:

If relevant, please elaborate on specific challenges and opportunities linked to ADR digitalisation in your Member State:

PART III: BEST PRACTICES, SHORTCOMINGS & RECOMMENDATIONS

This part requires information on best practices, shortcomings and recommendations regarding the period 2018-2021

Section 3.1 Best practices & cooperation

What measures have been taken in your Member State to promote/incentivise the participation of traders in ADR and how do you assess the success of these measures? (please provide data supporting your assessment)

What measures have been taken in your Member State to increase the awareness of consumers on ADR and how do you assess the success of these measures? (please provide data supporting your assessment)

*(Please elaborate on the formal (e.g. Memorandum of Understanding, other form of agreement) or non-formal cooperation (e.g. sharing of data related to problematic traders, trainings for staff, co-organisation of public events, etc.) in Q.3-Q7 below)

If there is more than one ADR competent authority in your Member State, please provide a short description of the cooperation among competent authorities:

Please describe the cooperation between ADR competent authorities and ADR entities and other relevant stakeholders (e.g., law enforcement authorities, regulators, etc.) in your Member State. This can be, for instance, administrative cooperation between ADR entities and competent supervisory authorities or regular inter-institutional consultations:

Please describe the cooperation between ADR entities (Article 16 ADR Directive):

Please describe the cooperation between ADR entities and the national authorities enforcing Union legal acts on consumer protection in your Member State (Article 17 ADR Directive):

What other steps have been taken by your authority to improve the functioning of ADR, including to increase the use of digital tools in ADR?

Do you already foresee other actions throughout 2022/2023 which might improve the functioning of ADR?

Section 3.2 Challenges and shortcomings

4.How has the COVID-19 pandemic impacted the use and success rate of the ADR system in your country? Are there any lessons learnt from the application of the ADR and ODR legislation during the COVID-19 pandemic?

5.In your opinion, to what extent are EU-wide actions (e.g. ADR networks such as FIN-NET, TRAVELNET, and EU specific legislation) successful in resolving cross-border disputes? Do you have other suggestions?

6.Are there any other problems, shortcomings or gaps to the ADR Directive that you would like to mention?

Section 3.3. Recommendations

7.Would you have any recommendations for the improvement of the ADR Directive, if this had to be revised in the near future?

Note: Once you submit your survey, you will be able to download your answers and re-use the form to develop the ADR report. We recommend that you use the same structure as in this survey.

Contact: JUST-ADR@ec.europa.eu

EU level desk review

An external contractor conducted an extensive EU level desk review of sources addressing the legal framework, EU policy documents, reporting from the Commission on the implementation of ADR/ODR, related European Commission studies and reports, Commission materials from meetings, trainings and conferences, publications from consumer and trader organisations, national level reports, relevant data, and other sources (e.g., academic publications). Moreover, the Commission also contracted the services of a legal professor, Prof Stefan Voet to carry out a mini legal study “Recommendations regarding the future needs of ADR” which is accessible here .

ADR Behavioural Study

The study sought to identify potential policy options that could improve the effectiveness and relevance of the ADR framework, with an overarching objective to assess ways of providing ADR information to consumers on the websites of traders and ADR entities in terms of how it affects awareness and take-up of ADR. The study began with a preparatory phase to review existing literature in the fields of behavioural science and ADR generally, as well as relevant EU legislation. The findings of the literature review were used to inform policy options relating to the provision of ADR information by traders and ADR entities, to be tested via subsequent behavioural experiments.

The next phase involved both online and laboratory-based behavioural experiments conducted in several Member States. These were conducted as a sequential study, whereby the results from the online experiment were used to refine the experimental treatments tested in the lab. The online behavioural experiment was conducted in four countries (Austria, Italy, Poland, and Sweden) with a total of 4,050 respondents. The lab experiment was conducted in two countries (Germany and Spain) with a total of 601 respondents. In addition, eye tracking was also conducted with 100 of the lab respondents in Spain.

The experiments simulated the process of browsing traders’ websites to find information on ways the consumer could resolve a dispute that they had with the trader. Experiment treatments changed the structure, salience, and content of ADR information, to test the effects of these changes on intention to use and understanding of ADR. In the second part of the experiment respondents were placed on an ADR entity website where, again, information provision was varied to test the effect on their propensity to choose ADR to resolve their dispute.

Table 1Treatments tested on the trader websites – online

Table 2Treatments tested on the trader websites – laboratory

Table 3Treatments tested on the ADR entity website – online

Table 4Treatments tested on the ADR entity website – laboratory

For the trader websites, the main outcome measures are the proportion of respondents indicating their next step would be ADR (measured via questions asked after respondents viewed the websites), and respondents’ understanding of ADR after seeing the websites. Similarly, for the ADR entity website, the main outcome measures are the share of respondents choosing to go to ADR, and respondents’ understanding following the website. For both website types, understanding was measured as respondents’ average score on test questions.

EU level interviews

To collect EU-level feedback on the relevance and shortcomings of the ADR / ODR framework, as well as on specific issues of efficiency, we conducted seven interviews. These include the EU level scoping interviews conducted in the inception phase.

Table 1: List of EU-level interviews

Case studies

To gain a richer understanding of the specific context, dynamics, and cross-cutting issues of the ADR/ODR Framework, five case studies were selected; three sectoral case studies covering the travel sector, e-commerce and financial services sector and two horizontal case studies on the use of Artificial Intelligence in ODR and accreditation. The 5 case studies are accessible here.

The sample of Member States covered by the case studies was agreed by DG JUST after the submission of the inception report. The rationale for the country selection considered criteria such as population and market size, a geographic balance between western, central, eastern, southern and northern Europe, and the diversity in the situation regarding the number and types of ADR entities. On the latter, for the sectoral case studies, Member States with a specific sectoral ADR entity were prioritised.

Each case study covers a sample of three Member States. However, in some case studies, the contractor interviewed stakeholders from other Member States outside the original sample due to the client’s interest in an additional Member State after the agreed sample or to fill stakeholder gaps. Therefore, the table below shows the selected Member States covered under each case study (in green) and the additional Member States partially or entirely covered in some case studies due to additional interviews with stakeholders outside the country sample (in yellow).

Table 2: Country sample used for case studies

The case studies are based on desk research and insights from different types of stakeholders representing the sample of Member States. The table below shows the number of interviews conducted per stakeholder group for each case study. It is important to note that some interviews were used for more than one case study e.g. the AI in ODR, accreditation and e-commerce case studies used feedback from other case studies. In addition, in some case studies specific questions were asked as part of the national level interviews with ADR authorities and ODR contact points.

Overall, across the sectoral and horizontal case studies, 43 interviews were conducted and have been used for the case studies and analysis for this report.

Table 3: Overview of stakeholders consulted for the case studies

Open Public Consultations

I.Backward-looking consultation

Running in parallel with other information gathering exercises, a public consultation was set up through the online survey tool, EU survey, to collect views on the functioning of ADR and ODR and the consumer enforcement mechanism from the general public, and relevant stakeholders, including consumer organisations, trader organisations, and ADR entities.

The questionnaire was developed by DG JUST, with the support of the study team. Besides standard profiling questions, the OPC comprised 14 technical questions focussed on the following topics:

Respondents’ experience of online retail as consumers and traders in 2021;

Respondents’ overall awareness of dispute resolution mechanisms available to consumers and traders;

Respondents’ views on ADR systems; and

Respondents’ opinions on the role of public authorities in the context of cross-border disputes.

The backward-looking open public consultation ran from 4 April 2022 to 27 June 2022. By this date, 121 complete responses were received and analysed for the purposes of the study. The summary report and full analysis of the OPC is found here .

II.Forward-looking consultation and Call for Evidence

The summary report of the Public Consultation is found here . The outcome of the Call for Evidence is found in the Stakeholders Consultation Annex to the Impact Assessment accompanying the Commission legislative proposal amending the current ADR Directive.

Annex III: Questions Matrix for the ADR Data Collection Study

RQM Application and results

RQM Efficiency

RQM Relevance

RQM Shortcomings and lessons learnt

Annex IV.A: Amendments to the national legal frameworks implementing the ADR Directive 181

Annex IV.B: Statistics on ADR Disputes (2018-2021)

ADR complaints and disputes received by ADR entities (before the admissibility check in line with Article 5(4) ADR directive) between 2018 and 2021, as reported by Member States, Norway and Iceland

Number of complaints refused by ADR entities (considered outside of admissibility criteria)

Proportion of ADR complaints refused by ADR entity

Number of disputes launched (accepted for handling by ADR entities)