Introduction and background

• Author: Consumers, Health, Agriculture and Food Executive Agency (European Commission), Deloitte consortium, IPSOS, London Economics
• Pages: 14-25

1. Introduction and background

1.1 Objectives and scope of the study

The European Union (EU) has placed strong emphasis on consumer protection since the

early 1970 s. In th e fi eld of consumer policy, there are currently two main strategies in

place to ensure a correct functioning of the markets from a consumer perspective: the

‘European Consumer Agenda’ and the ‘Consumer Programme 2014-2020’. The

former is set to be an action plan for the next years and is aligned to both the Europe 2020

goals and the growth strategy of the EU. It responds to four main objectives: (1) improving

consumer safety; (2) enhancing knowledge; (3) improving implementation; and (4)

stepping up enforcement and securing redress as well as aligni ng rights and key p olicies

to economic and societal challenges1. The latter is th e financial instrument that backs the

implementation of the current consumer agenda2. The Consumers, Health, Agriculture and

Food Executive Agency (Chafea) is in charge of implementing the Consumer Programm e.

In this regard, the Agency helps to improve the consumer c onditions across the EU 3 and

collaborates closely with the relevant Directorate Generals (D Gs) of the European

Commission (EC).

In this context of consumer protection, the EC periodically monitors the functi oning of

consumer ma rkets to ensure that consumers are treated fair and are protected.

Specifically, the r eal estate market has c onsistently displayed symptoms of mal

functioning regarding consumer protection. In their l atest ‘Consumer Market

Scoreboard 2016 edition’4, the Commission observed that the market for real estate

services showed the worst performance of the 42 markets surveyed. Moreover, an analysis

by country showed a 19-point difference in the Market Performance Indicator (MPI)

between t he country w here the real estate market performed best (Malta) and the one

where it performed worst (Croatia). The sector scored relatively better in Western and

Northern Europe, while it scores l ess than average in the Southe rn and Eastern European

countries. The worst performance was noted in the composite indicator that includes

aspects such as consumer trust, consumer problems, choice and c omparability of offers

and the extent to which consumer s’ expectations are met. It i s also worth noting that the

2013 edition displayed a comparable situation5.

In addition, the market also seems to be highly complex, as evidenced by different studies

undertaken at EU level. Complexity is caused by numerous factors , for example:

• Several professionals are usually involved in real estate transactions;

• Different steps are included in the process of buying, selling, renting or letti ng a

property;

• Information asymmetries are observed in the market;

• Controversy arises on the way more or less regulation, as well as different types of

regulation, may affect levels of consumer protection.

Additionally, different legal traditions and national regulations may be found in the 30

countries in scope: this is reflect ed in variations across the c ountries in terms of market

functioning and regulation of real estate professions. Hence, to understand why the

consumer is experiencing problems and is being d issatisfied with th e market, an analysis

of the national frameworks is required. This will allow to understand which practices across

1 European Commission, (2012). “A European Consumer Agenda - Boosting confidence and growth”. SWD (2012)

132 final. Available at: http://ec.europa.eu/consumers/archive/strategy/docs/consumer_agenda_2012_en.pdf

2 European Parliament, (2015). “Consumer Protection in the EU: A policy overview”. In-depth analysis. Available

at: http://www.europarl.europa.eu/RegData/etudes/IDAN/2015/565904/EPRS_IDA(2015)565904_EN.pdf

3 European Commission, (2016). “About CHAFEA”. Available at: http://ec.europa.eu/chafea/about/about.html

4 European Commission, (2016). “Consumer Markets Scoreboard. Making markets work for consumers”. Available

at: http://ec.europa.eu/consumers/consumer_evidence/consumer_scoreboards/12_edition/docs/consumer

_markets_scoreboard_2016_en.pdf

5 Idem