Maximum or Minimum?

I’m referring to maximum or minimum harmonization of EU directives. Why should consumers be interested in such a subject?

Let’s see what we’re talking about. Maximum harmonisation of EU acquis occurs when no Member state can go above the requirements or benefits given in the Directive. Minimum harmonisation occurs when the Directive stipulates the minimum requirements or benefits. In this case the Member State can provide tougher requirements or give greater benefits.

Up till now the main approach has been minimum harmonisation as this makes it easier for the Member States to reach agreement. On the other hand, this approach has provided the main setback to the Single Market. The reason is that it has led to market segmentation where business exploits the situation to extract higher profits by charging higher prices.

A case in point is the price difference (after the exclusion of any form of taxation) that one finds regarding cars. The EU continuously monitors the price dispersion of cars. Though the dispersion varies from time to time, there is still price dispersion which means that the Single Market (same price, excluding taxation, throughout the EU27) is not working properly, at least, regarding cars.

The matter is more complicated when we come to consumer rights as these are not that obvious as prices. Many consumers tend to shy away from buying across borders as they are not sure that the level of consumer protection in the other country is the same or better than their own. One example is the level of protection offered to consumers re bank deposits.

How many consumers knew that before the recent financial crisis locally based banks registered in the Netherlands, apart from better interest rates, offered better protection as the Dutch Deposit Guarantee Scheme was much better than that offered by locally registered banks? Since October this has changed as the Dutch Government is offering protection for up to the first €100,000 (the present level is applicable for a period of one year) whereas the Malta Government is guaranteeing the same level but for an indefinite period since no time period was mentioned in Malta. The good thing about this is that this is not a pre-election promise and thus stands a better chance of being implemented if the need arise. I’m saying this as, up to the present, the Government has not taken any specific legal measure to ensure this.

The above is only one example of the various levels of consumer protection one finds in the EU countries. Thus it would be a step forward to go for Maximum harmonisation where the level of protection would be the same everywhere within the Single market.

But why are so many consumer organisations against the introduction of such a principle in consumer protection? The reason is simple. The way Maximum harmonisation is being implemented is not one which takes the best condition one can find in the Member countries and then implementing it. The measures which are being included are the result of what is agreed at the Council of Ministers. Thus it is the outcome of the political process where extensive haggling takes place.

The result is that the Maximum harmonisation many a time is pegged at a level which is below that which has already been achieved in countries where consumer organisations are strong. That is why the main opposition for the implementation of this principle comes from the Nordic countries.

Mind you, this is a generalisation. In Malta we were latecomers in the introduction of consumer protection. However, we used this to our benefit as, when we finally came down to introducing the necessary legislation, we used the experience gained in other countries to introduce measures which were many a time above the minimum required by EU law. We also used the experience of countries outside the EU which have the best consumer protection – Canada, Australia and New Zealand. Consequently, we should be interested in this issue as, if the present trend continues, we would be one of the countries to lose some of the present consumer rights.

But is there a way out? Yes, I believe that the way is that indicated above. I believe that we should go for Maximum harmonisation but at the initial stages we should take the best one find in all the EU27 member states. In that way, consumer protection in Europe would experience a quantum leap while on the other hand we would be experiencing the converging to the Single Market. All depends on how much consumers and their organisations are aware and are ready to take a stand on this issue. Finally, it all depends on whether the respective governments of the EU27 Member States will succumb to the pressures of business or else for once stand up for consumers.