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Thursday
May022013

The Pleasures of Class-Action Lawsuits Slam Into France

Class-action lawsuits allow the little guy to stand up to a multinational corporation and seek redress for some injustice. The idea is that hundreds of thousands of little guys band together and promise a lawyer a big part of the take. Thus motivated, the lawyer, or more likely, the law firm, will do their darnedest to hound the company, drag it into court, and extract a huge settlement to be split fairly and speedily among the aggrieved.

In theory, it compensates the little guy, gives the company pause, and encourages it to mend its ways. The little guy by himself wouldn’t have the means to accomplish that. Justice comes down to money, and class-action lawsuits extend the lever. It’s a world-famous all-American product, and now it’s about to be imported, of all countries, by France!

Consumption Minister Benoît Hamon presented the legislation to the Council of Ministers on Thursday; it’s expected to reach Parliament in mid-June. It has been kicked around for a while, but now they’re getting serious.

“We want a quick procedure that would allow consumers to obtain compensation down to the euro for damages they suffered,” he said, adding, perhaps tongue in cheek, that the bill was intended to give consumers “a little purchasing power again.”

French consumers, if they get the short end of the stick, have in some cases no legal way of addressing the problem. There are “some holes in the protection of consumers,” Hamon admitted, “particularly in the possibility of being compensated for economic damages.” He listed consumer contracts and anticompetitive practices. “For 20 to 30 years, we have experienced a considerable liberalization of the European market but consumer rights have not evolved at the same pace,” he said. The key measure in the legislation is the possibility of bringing “actions de groupe” – class-action lawsuits.

Before French consumers get too excited: I’ve been in three so far. In the first one, after many years of litigation, I got a coupon for a relatively small amount, but I’d have to buy another product from that company to benefit from it. A promo! In the second case, AT&T was the defendant. It also took years. Then, after I’d already forgotten about it, I got my check: $1.37.

The third case was the Foreign Currency Fee Litigation that claimed that Visa and MasterCard had charged hidden fees for credit card purchases in foreign currency. The period covered some of the years when I was traveling overseas almost all the time, starting in 1996. My credit card statements were full of foreign currency transactions. This being the digital age, I had the statements on my hard-drive and was able to fill out the claim form. The suit was finally settled for a headline-grabbing amount.

In October 2011, I got my check. The way I figured it, it amounted to about 20% of the hidden fees. I wasn’t made whole. But the lawyers got immensely rich. Credit card companies stopped charging hidden fees; now they charge them as a line item on the statement. Other than that, nothing has changed.

In France, the “actions de groupe” provisions have been broadsided by lobbyists. Critics pointed their fingers at the abuses and excesses of the American model. So the law has been watered down with “safeguards,” Minister Hamon reassured his leery compatriots dreading the Americanization of their legal system. Only the 16 approved consumer associations could initiate actions de groupe, he said. He pointed out the evils of the American system: “Many people want to make money on the backs of consumers,” but “we want to avoid that,” he said.

There are other consumer protection goodies in the bill, and Hamon went through some of them. It would extend the period for being able to rescind an online purchase from seven days to 14 days. The law would also allow consumers to cancel multi-risk home insurance any time after the first year. Currently, these policies can only be canceled on their anniversary date, and it must be requested a month in advance. People don’t remember the date, miss the deadline, then watch their premiums go up for another year. Premiums have risen three times faster than the rate of inflation over the past three years, he said. With consumers being able to cancel policies more freely, competitions would keep prices in check. And consumers would gain in purchasing power.

Other provisions in the law are aimed at cartels. Through their collusion, consumers might end up paying “20% more than what they should pay,” he said. And there is nothing like a good action de groupe by a million aggrieved French consumers represented by a specialized law firm to hound companies into submission and obtain compensation – or so they imagine.

But if actions de groupe are handled the all-American way, they won’t be “a quick procedure that would allow consumers to obtain compensation down to the euro for damages they suffered,” as he’d suggested. Instead, they will take years, make lawyers rich, change corporate behavior only minimally if at all, and leave consumers with dubious coupons and checks for €1.37.

The French government is saddled with enough problems; in theory, it no longer needs to create new ones. But now it wrote another excellent chapter on how to interfere with private-sector businesses, hamper entrepreneurs, and encourage them to start up their operations elsewhere instead of creating jobs in France. Read.... The French Government’s Exquisite Bullying

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