In its public consultation on the review of the Market Surveillance Regulation (EU) 2019/1020, the European Commission suggests the possibility of “establishing an EU Market Surveillance Authority” to improve enforcement against products that do not comply with EU legislation regulating the environmental and safety requirements of products (“product legislation”).
The Commission’s review aims to address the gap between the EU’s strong regulatory capabilities — its ability to adopt EU-harmonizing product legislation — and the inconsistent and sometimes weak enforcement of such legislation at Member State level. The objective is to strengthen the EU’s internal market by creating a level playing field across Europe and tackling non-compliant imports. The Commission anticipates better enforcement to contribute towards protecting consumer safety and the environment, while also reinforcing Europe’s competitiveness.
In this blog post, we briefly discuss different existing examples of possible models of an EU market surveillance authority (“EU MSA”) and the different stumbling blocks that its creation would need to address. An EU MSA would likely increase the risk of enforcement against economic operators, particularly foreign producers, but would also facilitate compliance through better coordination among Member States and a more consistent enforcement approach.
Different Possible Models for an EU MSA
The structure and powers of a possible EU MSA would likely fall somewhere between two distinct models currently found in the EU.
One option, where the EU MSA would have very limited enforcement powers, would resemble the “network enforcement” approach of the General Product Safety Regulation (EU) 2023/988. This model leaves day-to-day market surveillance and corrective action to national market surveillance authorities, supported by an EU-level Consumer/Product Safety Network and the Commission. While primarily aimed at administrative cooperation, it also provides for coordinated inspections — such as sweeps — of specific products or product categories, along with the publication of aggregated results. Under the GPSR, sweeps are initiated and carried out by national market surveillance authorities, while the Commission acts in a coordinating role unless otherwise agreed, and may participate when invited, but does not have independent investigative powers.
At the opposite end of the spectrum, the EU MSA could be designed as a highly centralized agency with significant enforcement powers, similar to the European Securities and Markets Authority (“ESMA”) under ESMA Regulation (EU) 1095/2010 and Credit Rating Agencies Regulation (EC) 1060/2009 (as amended). ESMA is a highly centralized supervisory and enforcement body, able to investigate, inspect, and sanction specific categories of market participants, rather than merely facilitating cooperation between Member State authorities.
The EU has also implemented different enforcement approaches in different areas of law that are between these two opposite models. For example, the EU Type-Approval Regulation (EU) 2018/858 empowers the European Commission to carry out compliance inspections, oversee type-approval procedures, and impose fines in certain conditions. Similarly, the Medicines Regulation (EC) No 726/2004 empowers the European Medicines Agency to initiate investigations and propose to the Commission the imposition of penalties up to 5% of a marketing authorization holder’s EU turnover in the preceding business year. Regulation (EU) 2018/1139 also grants the European Union Aviation Safety Agency the powers to propose to the Commission penalties of up to 4% of the annual turnover, or 2.5% of average daily turnover, on non-compliant economic operators.
Challenges in Establishing an EU MSA
Creating an EU MSA with meaningful powers to enforce EU product legislation would, however, require the EU institutions and Member States to address significant challenges and legal issues.
First and foremost, Member States would have to show the political will to create a new agency that would supersede some of their sovereign enforcement powers. Indeed, an MSA with powers to enforce EU internal market rules would entail a step forward in European integration.
In addition, even if political will exists, creating an EU MSA would require addressing important legal and practical issues, such as:
- Legal basis: What would be the legal basis of an EU MSA with any enforcement powers and what should be the limits of such powers given that the EU Treaties make clear that it is for the Member States to take the necessary measures “to ensure fulfillment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union”?
- Subsidiary and Proportionality: Can an EU MSA comply with the EU principles of subsidiarity and proportionality? Can effective enforcement be better achieved at EU level?
- Targeted Violations: What type of EU product legislation requirements should the EU MSA enforce? Should its mandate cover all requirements under EU environmental product directives or regulations, or be limited based on the legal act’s form and legal basis? Should enforcement only cover violations that are likely to have a significant EU impact?
- Targeted Operators: What type of operators should be the target of the EU MSA’s enforcement? Should it be limited to only large operators with a significant EU impact?
- Nature of Enforcement Powers: Should the EU MSA be empowered to impose enforcement measures directly — similar to agencies such as the ESMA — or should its enforcement role be limited to proposing the imposition of penalties to the European Commission or the Member States?
- Types of Enforcement Measures: What kind of enforcement measures would the EU MSA propose or impose? Would these include only economic penalties, or also other enforcement measures, such as orders to suspend the marketing of products, recalls, or withdrawals?
- Allocation of Penalties: Who would be the beneficiaries of any economic penalties imposed? The EU budget, the MSA and or Member States?
- Funding: Last but not least, how would the EU MSA be funded? Would it rely entirely on the EU budget, or would it have its own sources of revenue?
Whether the EU opts for a coordination model or a more centralized authority, the discussion around an EU MSA will signal how far the EU may be willing to advance integration to strengthen product compliance. The final design could recalibrate the balance of enforcement responsibilities between Brussels and Member States and will significantly impact the compliance strategies of companies marketing products in the EU.