BRUSSELS, April 11 (Reuters) - The European Union plans more powers for consumers to sue firms like Volkswagen after the Dieselgate scandal showed the limits of consumer protection authorities to curb corporate cheating.
Wednesday's proposal by the EU executive would give consumer groups the ability to launch collective action on behalf of clients and hand consumer protection authorities stronger powers to sanctions rule breakers.
Amid frustration in Brussels with rule-flouting by powerful industries like tech and carmakers, fines will increase to up to four percent of annual turnover for companies deemed to have trampled on the rights of a large group of consumers.
"In a globalised world where the big companies have a huge advantage over individual consumers we need to level the odds," Europe's Justice Commissioner Vera Jourova said.
"Consumer authorities will finally get teeth to punish the cheaters. It cannot be cheap to cheat."
EU regulators say that, after VW was caught using software to cheat emissions test by U.S. authorities, they lacked the tools to ensure EU car owners received the same kind of compensation offered to U.S. clients.
Unlike U.S. law, the new legislation does not give law firms the right to launch class action but it opens the door for citizen rights groups to do so - a legal avenue currently only available in a handful of member states.
The European Consumer Organisation (BEUC) called the initiative long overdue, but cautioned that judges and national authorities would still hold large sway in deciding whether to allow collective action in what may be a laboriously long process.
"For too long, consumers have not had the access to justice," BEUC head Monique Goyens said.
However, business lobbies have criticised the plans, which still need approval from national governments and the European Parliament. They warn of a proliferation of lawsuits, saying EU citizens already enjoy some of the world's strongest consumer protection rules.
In response, Jourova said the new rules would not allow U.S.-style profit-seeking class action suits.
In a bid to deliver Commission President Jean-Claude Juncker's promise of a "new deal for consumers", the proposal also tackles concerns over online rights and food brands being sold with inferior ingredients in different parts of Europe.
The new rules also ramp up pressure on social media networks and email providers like Facebook and Google's Gmail .
It would extend the application of EU consumer law to "free" digital services for which consumers provide their personal data instead of paying with money, such as cloud storage services, social media and email accounts.
Consumers would also gain the right to pre-contractual information and to cancel contracts within 14 days. (Reporting by Alissa de Carbonnel @AdeCar Additional reporting by Julia Fioretti Editing by Robert-Jan Bartunek)