"Young promise" or just a consumer? CJEU in C-365/23 [Arce]

Today the Court of Justice has delivered a truly remarkable judgment that I am eager to share with readers of this blog (available here, even though for now only in French and Latvian). The decision concerned a contract concluded between "A", a professional in the business of offering career development services for sports talents, and "C", then 17 and represented by his parents to the ends of concluding the contract. 

According to the contract, concluded on 14 January 2009 for a period of fifteen (15) years, A would offer a wide range of services in support of C's development as - hopefully, professional - basketball player. In return, C would pay A 10% of all the net revenue he was to earn for the duration of the contract, plus VAT, as long as such income would pass the threshold of 1500 euros per month. 

A bit over a decade into the contract, A sued C for failing to fulfil their obligations under the contract, with a claim amounting to over 1,6 million euro - 10% of what the player had earned from sport clubs until that point in time. [We are not sure how this was calculated, but A would likely know since accounting services were included in the contract]

Latvian tribunals, which were competent to adjudicate on the dispute, were not keen to grant A's claim: the demand was rejected in first and second instance on ground that the term was unfair under Latvian consumer law; A took the case to the Latvian Supreme Court, which in turn raised *twelve* preliminary questions for the CJEU. Luckily, not all questions have to be answered and not were equally challenging, so the analysis here will be limited to the most salient points. All have to be seen to pertain to the Unfair Terms Directive - from the definition of consumer under that directive to the scope of minimum harmonisation. 

Consumer contract?

First: was the "career development services" contract a consumer contract? The referring court noticed (see para 31) that across different jurisdictions different stances were noticeable concerning similar cases, with a court in France having concluded that a young talent concluding a comparable contract had to be considered a consumer, while an earlier German case has excluded the applicability of consumer law to the type of services at hand. 

The Court of Justice answered that, to the extent that the minor at hand was not a professional player at the time of concluding the contract, they should be considered consumers - and hence enjoy consumer protection. The fact that the player later engaged in professional sports does not change this conclusion as the party's quality as consumer must be, for the purposes of unfair terms rules, ascertained only with reference to the moment that the contract was concluded. The fact that the contract concerned the player's "eventual professional career" doesn't change this conclusion either. 

While the Court recalls its previous decision in Costea, other decisions concerning the notion of consumer when "bordering" professional activities, such as Gruber, were not discussed. This means, however, that it is difficult to immediately assess the reach of the judgment: will this "generous" take also cover adults who engage comparable services in the hope to undertake a professional activity that they have not engaged in yet, or is this interpretation limited to the case of minors who have not engaged yet in the relevant professional activity? AG Rantos' reasoning in his opinion, as reported on in Joasia Luzak's overview of last month, seems to suggest a broad applicability (which may go against the common assumptions in several member states!).

"Price" term exempted from control?

Having established that the Directive was applicable to the contract under consideration, the CJEU had to consider whether the term was actually subject to the unfairness test. This was contentious since article 4(2) of the Directive famously dictates that the test shall not concern "the definition of the main subject matter of the contract nor to the adequacy of the price and remuneration". A claimed that the term should then not be subject to judicial control. The CJEU agreed as to the applicability of the exception - in line with the second part of article 4(2) then, the national courts would only be able to assess the term's unfairness if the term did not comply with the requirement of transparency - being "in clear and intelligible language". 

In this respect, the CJEU seemed to suggest that the term may not comply with the transparency requirement: it is however for the national court to ascertain whether the term was sufficiently clear that the consumer could understand its impact on their legal and economic position. In this respect, the Court considers that both the information provided to the consumer (and their representatives!) at the time of concluding the contract and, interestingly, the term spelling out what services A would provide against the agreed remuneration should be seen as relevant to the assessment. Furthermore, since Latvia had not yet explicitly implemented the exemption of article 4(2) by January 2009, it is possible that on the basis of minimum harmonisation the term would still be open to scrutiny even if transparent. The Court then proceeds to answer questions that would be relevant in case the term can be subject to control. 

Is the term unfair? 

As we know, it is for national courts to decide whether a specific term is unfair; the CJEU, however, can provide parameters to support the national courts, which they have done in a number of cases. In this specific case, the Court adopts a reasoning which is in some way new - at least to the extent that it seems to establish a hierarchy or order of reasoning between the two prongs of the unfairness test - that the term causes a significant imbalance contrary to good faith. While these two elements (good faith and significant imbalance) are often considered as hardly distinguishable, the Court here suggests that one should "at first" consider the possible violation of the principle of good faith, and "second" ascertain the eventual existence of a significant imbalance. This is not unheard of, as the references in the decisions show, but it is usually not regarded as more than a style clause. 

In assessing whether the term is unfair, thus, the CJEU asserts, the national court should consider on the one hand whether the professional, dealing in honest and reasonable way, could expect the consumer to accept the term in individual negotiations, while on the other hand considering national default rules to ascertain whether the clause created a significant imbalance in the rights and obligations of the parties (compared to their rights in case nothing had been agreed). In doing so, and this is genuinely new, it can consider "fair market practices" around the pricing of similar services at the time of the contract's conclusion, or "the obligations that a reasonably informed consumer could expect to incur" (see para 84). The Court takes these additional criteria from the AG's opinion and it will be interesting so see whether this reference to market practices will prove to be incidental (it is after all a rather niche subject!) or take hold. 

Fundamental rights?

Finally, the Latvian Supreme Court wanted to know whether fundamental rights should be considered in assessing the term - in particular the right to property (art 17 EUCFR) and the requirement for public authorities and private entities to pay the highest attention to the "best interest of the child" when taking decisions concerning minors (art 24 EUCFR). In this sense, the CJEU first observes that the Charter is applicable (see para 99) to the questions at issue since they fall within the MS's implementation of EU law (on this, the Court has been holding that this applicability is in no way affected by minimum harmonisation, which we won't be again questioning now). Setting aside with no further ado the relevance of article 17, the Court focusses on article 24: indeed, national courts should take it into account when making decisions concerning the unfairness of terms included in contracts concluded by (at the time of conclusion) minors. This is in line with fairly established idea on the indirect horizontal application of fundamental rights. At the same time, the CJEU seems cautious to avoid over-protective applications: consideration of the best interest of the child, the Court explain, does not exclude that the national court could consider the fact that the parents, concluding the contract on the child's behalf, were familiar with the environment of professional sports, or the fact that C was already 17 at the moment of concluding the contract (see para 103). 

Hence to conclude: C was a consumer; the clause is in principle exempted but may be open to control either because lacking transparency or because Latvian law did not incorporate the exemption at the time the contract was concluded; if the national court does assess the clause, they should consider national default rules, good market practices of the time as well as the best interest of the child, but also consider that supposedly competent parents acted as representatives. Also, not discussed here because not at all surprising, if the term would be found unfair the national court would not be able to proceed to mitigation of the due sum - which opens to the usual drama around consequences since the contract would then likely be invalid. 

What will happen once the case is back with the Latvian courts then? Readers who have access to Latvian sources - do reach out to let me know! This case has all the ingredients of an instant classic.

Information duties in consumer credit: the CJEU in C-677/23

At the end of January, the CJEU delivered another judgment interpreting Directive 2008/48 on Consumer Credit. In C-677/23 A. B., F. B. v Slovenská sporitel’ňa a.s. consumers alleged that the credit contract did not contain all the necessary elements provided by the Directive. The dispute thus involved the interpretation of Article 10 (2), which provided the mandatory content for the credit contract. Two subparagraphs came under scrutiny in this case.

Duration of the credit agreement

One problem was that the credit contract did not provide for its entire duration. However, it did lay out the number of instalments to be paid. Under Article 10(2)(c), the credit agreement shall specify clearly and concisely the duration of the credit agreement. The question for the CJEU, therefore, was whether it is sufficient to comply with this provision by indicating the number of instalments. 

 

The CJEU concluded that since the duration of a credit agreement is closely linked to the performance of the parties' contractual obligations “the indication of the duration of the credit agreement, in accordance with Article 10(2)(c) of Directive 2008/48, does not necessarily have to be made through a formal indication of the precise date on which that agreement begins and ends, provided that its terms enable the consumer to determine that duration without difficulty and with certainty” (para. 43).

Assumptions used in the calculation of the APRC

The second question considered by the CJEU was about interpretation of Article 10(2)(g) according to which the credit agreement shall specify in a clear and concise manner “the [APRC] and the total amount payable by the consumer, calculated at the time the credit agreement is concluded; all the assumptions used to calculate that rate shall be mentioned." The wording in the contract was the following: "The credit has been granted immediately, in full; the borrower shall fulfil his or her obligations under the terms and conditions and within the time limits set out in the credit agreement; the interest rate shall apply until the end of the credit relationship". Another part of the contract provided that “the agreement shall be concluded for a … fixed period until the full settlement of all relationships arising in connection with the credit granted". The consumers considered these unclear. 

 

The CJEU considered the purpose of the provision and asserted that it is aimed at making the consumers aware of their rights and duties (para. 58). Moreover, reference to the assumptions must enable consumers to verify whether the APRC has been calculated correctly and, if not, to assert their rights, particularly the right of withdrawal, the period of which is extended in case of breach of Article 10 (para 59). Reference to the assumptions should also enable consumers to exercise their other rights provided by national legislation, including sanctions for non-compliance, which in this case, under the applicable Slovakian law, meant that the credit is interest-free (para 59). 

 

The CJEU concluded that assumptions used for the calculation of APRC are "vitally important" for consumers (para. 61), which meant that the "the assumptions used to calculate the APRC must be expressly mentioned in the credit agreement and that it is not sufficient in that regard that the consumer may himself or herself identify them by examining the terms of that agreement" (para. 64).

Concluding thoughts 

 

This judgment reinforced the importance of consumer information for the enforcement of consumer rights. Whilst it is questionable to what extent assumptions in the calculation of APRC are understandable for individual average consumers with no legal and financial background even if they are expressed in clear and precise language, the CJEU rightly held that if information is scattered around the contract and not expressed clearly and straightforwardly it is even more difficult to consumers to comprehend the effect and consequence of the terms of their contract. This judgment is, therefore, a further push towards clearly structured and worded contracts that at least give consumers a chance to understand their rights and duties and enforce their rights accordingly.

The judgment continues to be relevant under the new Directive 2023/2225 on Consumer Credit, which contains the scrutinised provisions in Article 21(1)(d) and (g).

Case CJEU, C-510/23: national procedural time limits, public enforcement and consumer law effectiveness

In case CJEU, C-510/23, Trenitalia v. Autorità Garante della Concorrenza e del Mercato, the Court of Justice took a stand on the necessity to ensure that time limits enshrined in national procedural laws concerning administrative proceedings shall not impair the ability of effectively tackling anti-competitive or anti-consumer behavior.

The case concerns a sanction addressed by the AGCM, the Italian consumer and market authority, to Trenitalia, the primary Italian rail transport company. Trenitalia challenged the decision in court, claiming that the Authority did not respect the 90-day time limit prescribed by Italian law to start the proceedings. This infringement would lead to the annulment of the sanction imposed to Trenitalia for unlawful behavior. The administrative tribunal of the Lazio region referred therefore to the Court of Justice the question on whether this Italian legal provision was compliant with EU law; and specifically, with Articles 11 and 13 of the Unfair Commercial Practices Directive. The Court stated that EU law does not preclude national legislation to impose certain time limits for concluding or starting administrative proceedings, given however that these limits do not undermine the effectiveness of consumer law. The procedural autonomy of Member States must be balanced with the need to guarantee effective consumer protection.

The case was decided in parallel and coherently with Case C-511/23, Caronte&Tourist v. Autorità Garante della Concorrenza e del Mercato, regarding the same issue of law. This latter case concerned the proceedings for anti-competitive behavior started by the AGCM against the corporation “Caronte&Tourist”, the main provider of ferry services across the Strait of Messina, connecting the Italian regions of Sicily and Calabria. The CJEU established the illegitimacy of national legislation requiring the competent Authority to commence the investigation for alleged infringement of competition law by notifying the statement of objections to the undertaking within a period of 90 days. The CJEU further held that the measure sanctioning the lack of respect of that period of time by annulling the final decision undertaken by the Authority, and also precluding to begin a new infringement procedure for the same practice and state of affairs, was not consistent with EU law, and specifically with Article 4(5) and Article 13(1) of Directive (EU) 2019/1, to empower the competition Authorities of Member States to be more effective enforcers and to ensure the proper functioning of the internal market. 

Both rulings confirm the importance of effective enforcement of EU competition and consumer protection law. However, while the Trenitalia case emphasises more the need to balance procedural autonomy with effective consumer protection, the Caronte&Tourist case seems to go slightly further, making explicit the necessity for national laws not to impose constraints, also regarding procedural time limits, which could hinder the overarching goal of competition in the internal market. To this aim, the Court resorts to the principles of effectiveness, equivalence, and effet utile.

Artificial intelligence in financial services - new report by Finance Watch

Today, Finance Watch, a non-profit association dedicated to reforming finance in the interest of European citizens, published a new report: 'Artificial intelligence in finance: how to trust a black box?' authored by its Chief Economist Thierry Philipponnat.

As AI-powered systems increasingly drive financial decision-making in areas such as creditworthiness assessments, insurance pricing and investment products, the report asserts that the core principles of financial regulation accountability, responsibility, and transparency are being tested.

Against this backdrop, the report identifies several critical concerns: 

• Lack of transparency: AI models operate as “black boxes”, generating outputs without clear explanations of their reasoning, making human oversight and intervention impossible.
• Consumer protection under threat: In retail finance, the deployment of AI could lead to opaque creditworthiness assessments (see for an example here), pricing discrimination, discriminatory lending, and misleading financial advice. 
• Supervisors face AI challenges: Supervisors tasked with enforcing regulation face challenges in keeping pace with financial institutions' deployment of AI and delivering on their mandates.
• Market stability is at risk: Increasingly dependent on third-party AI providers, financial institutions face operational risks from unregulated external systems and concentration risks, where a handful of dominant AI firms control critical models and infrastructure, creating systemic vulnerabilities. 

As a response, the report urges a reassessment of the financial regulation framework: 

1. Expand the scope of the AI Act to cover all financial services
2. Establish a clear liability regime that holds providers of AI-powered services accountable for damages caused by an output of an AI system
3. Conduct a regulatory gap analysis to ensure all AI-driven financial activities are adequately regulated.

Credit reference agencies, consumer profiling and the GDPR: the CJEU in C-203/22

On February 27, 2025, the CJEU delivered an important judgment on the interpretation of Article 15(1)(h) and Article 22 of Regulation (EU) 2016/679 on General Data Protection (GDPR) in C-203/22 CK Magistrat der Stadt Wien v Dun & Bradstreet Austria GmbH.

The facts

The mobile phone operator refused CK’s request to conclude or extend the mobile telephone contract for a monthly payment of a mere EUR 10. The refusal was justified with CK not passing a creditworthiness check with the credit reference agency D & B, which carried out an automated assessment. Unsurprisingly, CK was unhappy with the decision; her credit score was good. She brought the matter to the Austrian data protection authority and, with this, started a long way to the preliminary reference, going through various instances and avenues for protection.  

The referring court raised several questions, which the CJEU grouped into essentially two questions:

The first question

Must Article 15(1)(h) be interpreted as meaning that, in the case of automated decision-making, including profiling, within the meaning of Article 22(1), the data subject may require the controller to provide, ‘meaningful information about the logic involved’ in the decision making, which would mean an exhaustive explanation of the procedure and principles actually applied in using personal data to obtain a specific result, in this case, a creditworthiness assessment.  

According to Article 15 (h), the data subject has the right to obtain from the controller confirmation as to whether his/her personal data is being processed, information on the use of automated decision-making where applicable, including profiling, referred to in Article 22(1) and (4), and meaningful information about the logic involved, as well as the significance and the envisaged consequences of such processing for the data subject.

Article 22 provides that the data subject shall have the right not to be subject to a decision based solely on automated processing, including profiling, and that certain data enlisted in Article 9(1) GDPR such as racial or ethnic origin, religious beliefs cannot be considered in data processing.

Profiling, in this context, means automated processing of personal data, consisting of using personal data to analyse or predict the consumer's economic situation.

In its analysis, the CJEU first turned to a literal interpretation of the wording of Article 15 (h) and concluded that the concept of ‘meaningful information’ under that provision may have various meanings in different language versions of GDPR, which should be taken to be complementary to each other. In addition, the ‘logic involved’ in automated decision-making, which constitutes the subject matter of ‘meaningful information’ is capable of covering a wide range of ‘logics’ concerning the use of personal data and other data with a view to obtaining a specific result by automated means. The CJEU held, that the provision covers all relevant information concerning the procedure and principles relating to the use, by automated means, of personal data with a view to obtaining a specific result.

The CJEU next turned to contextual analysis of the concept of ‘meaningful information about the logic involved’, within the meaning of Article 15(1)(h). In this analysis the CJEU looked at the  Guidelines on automated individual decision-making and profiling for the purposes of Regulation 2016/679 and other provisions of the GDPR providing information duties of data controllers. The CJEU concluded that information duties relate to all relevant information that should be provided in clear, concise, transparent, intelligible and easily accessible form, using plain and clear language

Finally, the CJEU looked at the purpose of the provision, asserting that the purpose of the data subject’s right to obtain the information provided for in Article 15(1)(h) is to enable him or her to effectively exercise the rights conferred on him or her by Article 22(3), namely, the right to express his or her point of view and to contest the relevant decision. This, in turn, requires the right to obtain an explanation of the decision.

The CJEU then concluded that under Article 15(1)(h) the right to obtain ‘meaningful information about the logic involved’ in automated decision-making must be understood as a right to an explanation of the procedure and principles actually applied in order to use, by automated means, the personal data of the data subject with a view to obtaining a specific result, such as a credit profile. In order to enable the data subject to effectively exercise the rights conferred on him/her by the GDPR and, in particular, Article 22(3), that explanation must be provided by means of relevant information in a concise, transparent, intelligible and easily accessible form. Notably, the court further provided guidance on what is considered to be ‘meaningful information about the logic involved’ in automated decision-making. The procedures and principles actually applied must be explained in such a way that the data subject can understand which of his/her personal data have been used in the automated decision-making and the extent to which a variation in the personal data taken into account would have led to a different result. The requirements of Article 15(h) cannot be met by the mere communication of a complex mathematical formula, such as an algorithm, or by the detailed description of all the steps in automated decision-making since neither of those would constitute a sufficiently concise and intelligible explanation.

Second legal question

Another important contribution of the present judgment is the consideration of the relationship between Article 15(1)(h) and Directive 2016/943 on trade secrets, given that D&B argued that the logic of their automated decision-making, including what information is considered in which way, is a trade secret and should, therefore, not be disclosed.  

The CJEU highlighted that the protection of personal data is not an absolute right. Restrictions are possible of the scope of the obligations and rights provided for in, inter alia, Article 15 of the GDPR, but only when such a restriction respects the essence of the fundamental rights and freedoms and is a necessary and proportionate to safeguard the protection of the rights and freedoms of others. However, the result of any consideration on the limits of the protection of personal rights should not be a refusal to provide all information to the data subject.

The CJEU concluded that Article 15(1)(h) must be interpreted as meaning that, where the controller takes the view that the information to be provided to the data subject is a trade secrets, within the meaning of point 1 of Article 2 of Directive 2016/943, that controller is required to provide the allegedly protected information to the competent supervisory authority or court, which must balance the rights and interests at issue with a view to determining the extent of the data subject’s right of access provided for in Article 15 of the GDPR.

Our analysis

This decision is significant in addressing the long-standing problem of the lack of transparency in automated decision-making by credit reference agencies,  an important problem in the EU. Given that in most countries we have access to our credit reports we can know what data is considered in their decision making in producing a credit score and a credit report, however, credit reference agencies have refused disclosing the way this data is processed, the logic behind their decision making, in what way and to what extent various data is considered (weighted) in their decision making.  Although based on this decision, consumers are still not entitled to get hold of that information directly, but a first step has been made by mandating disclosure to the relevant authority who then makes a decision on whether or not to disclose it to the consumer, balancing the rights and interests of the two parties. This and other judgments of the CJEU (see C-634/21 SCHUFA Holding) may be gradually bringing transparency into this traditionally very untransparent area.

As credit reference agencies nowadays use artificial intelligence for automated decision-making, the judgment is relevant for advancing transparency considerations of AI systems.

Finally, given that the judgment tackles the operation of credit reference agencies, which are frequently used by creditors to assess the affordability of loan applications, it is relevant for responsible lending rules in Directive 2023/2225 on consumer credit (CCD2), which in Article 18 refers to creditworthiness assessment based on automated processing of personal data. 

"Initial commitment period" of two years in phone subscriptions - aka when is long enough long enough? CJEU in C‑612/23

 Many readers will have had the experience - signing up for a new mobile (phone) contract and opting for the 2-year commitment in order to obtain the best terms, and then again starting a new contract with the same provider when a new and more attractive offer comes about. What happens then with the remaining months on the new contract?

Vodafone Germany thought, we learn through xxx, that these months should just be added to the next contracts. In the case of the two consumers on behalf of whom the German Verbraucherzentrale brought a case, the new contracts they signed after upgrading to a new device and service level were drafted as including a minimum commitment of 26 months, in one case, and "24 months after the expiry of the original commitment period" in the other case. 

German courts disagreed on whether this extension, which meant that even though the parties had agreed mutually to a new contract the old contract would "live on" in terms of commitment, was in line with the Universal Services Directive, according to which (article 30 para 5)

Member States shall ensure that contracts concluded between consumers and undertakings providing electronic communications services do not mandate an initial commitment period that exceeds 24 months. Member States shall also ensure that undertakings offer users the possibility to subscribe to a contract with a maximum duration of 12 months.

Was this maximum "initial commitment" period, the ECJ was hence asked, limited to the first contract between a consumer and a service provider, or did the same capping also apply to subsequent contracts, so that they should not (directly or indirectly) bind the consumer for more than 24 months?

The Court begins its analysis by acknowledging (para 30) that the different language versions may point in more or less ambiguous directions: whereas in some versions it is clear that the rule was meant to regulate *commitment periods* irrespective of contractual form, in some other languages "initial" could refer to both the period and the contract, so that only the first contract would be covered by the restriction. The task is then to solve this ambiguity in a way that secures uniform application throughout the Union. 

In the following paragraphs, the Court takes a deep dive in the competitive reasons behind the rule, under the Universal Services Directive in the original formulation as well as under the more recent amendments and finally the new Directive (EU) 2018/1972 of the European Parliament and of the Council of 11 December 2018 establishing the European Electronic Communications Code (OJ 2018 L 321, p. 36).

The gist of the reasoning is that the rule is meant to make sure that consumers should be able to "change providers when it is in their interests... without being hindered by legal, technical or practical obstacles, including contractual conditions, procedures, charges and so on."(recital 47 Dir 2009/136) While reasonable minimum contractual periods are allowed, they should not be used to make it more difficult "potentially for long periods, for consumers to change provider"and thus to deprive them "of the possibility to take full advantage competition in the field concern" (para 33).

While it can be considered that after the first contract the consumer has sufficient information about the provider, this doesn't mean that they should be prevented from changing provider "if a more attractive offer were to present itself" (para 34). 

This leads the court to conclude that, considering that the level of protection afforded to consumers should not be lowered by their choice to enter a second contract with the same provider (para 35), the provision should be interpreted to mean that "initial commitment period" applies not only to the first contract between a provider and a consumer, but also to any successive contract between the same parties, "including when it was signed and put into effect before the expiry of the initial contract". 

As a rather habit-driven and not so savvy consumer who tries to use their device for at least four to five years (and encourages all readers to do the same!), this blogger has never experienced similar issues. However, it would be interesting to see whether the problem was typically German or also present in other jurisdictions: one can see how it can be tempting for companies to have their cake (the new contract) and eat the last slice of the previous cake too. According to the Court's overview, at least the Italian and Portuguese language version would seem to have left abundant space for an ambiguous interpretation. Wonder whether there will now be hundreds of consumers potentially claiming two or a few months worth of subscription as undue payments? Please let us know if you have stories on this!

Sanctions for Not Providing Essential Information in Credit Contracts - CJEU in Lexitor II (Case C-472/23)

Foto von Towfiqu barbhuiya auf Unsplash

The case concerned a debt collection agency (Lexitor), acting as an assignee of the rights of a consumer who had concluded a consumer credit agreement with a bank for an amount of approx. 9.000 EUR. In addition, the consumer was required to pay capital interest (approx. 4.500 EUR) and a commission fee (approx. EUR 1.100), whereas the Annual Percentage Rate of Charge (APRC) was specified at 11.18%. Lexitor argued that, since the APRC was partly calculated on the basis of unfair contract terms, the bank had failed to provide the correct APRC in the agreement. Consequently, Lexitor sought to recover the total sum of interest and costs as a sanction prescribed under national law. 

The first question was whether the creditor had failed to fulfil its obligation to provide the APRC in the credit agreement where the APRC was overstated due to certain contract terms being declared unfair. The Court emphasised that, although the actual APRC would indeed be overstated if calculated with reference to non-binding unfair contract terms, Article 19(3) of the Consumer Contract Directive (CCD; Directive 2008/48 on credit agreements for consumers) requires that the APRC be calculated based on the assumption that the credit agreement is to remain valid for the period agreed and that the creditor and the consumer will fulfil their obligations under the terms and by the dates specified in the credit agreement (para 34). Consequently, where the APRC is determined in accordance with the mathematical formula set out in Annex I to the directive - incorporating the total cost of credit to the consumer, including costs payable under the contract’s terms - the creditor does not infringe its obligation to provide the APRC in the credit agreement. This remains the case even if some of the terms on which the APRC was calculated are subsequently declared unfair and therefore not binding on the consumer (para 35).

The Court also addressed the question of whether listing various circumstances under which charges connected with the performance of the credit agreement may increase, without enabling the consumer to determine whether those circumstances have arisen, constitutes a breach of the creditor’s information obligation under the CCD. The Court referred to its established case law, holding that the terms of the credit agreement must be drafted transparently so that an average consumer can foresee, on the basis of clear and intelligible criteria, the changes that may be made to such charges (paras 41–44). Applying this principle to the contract terms in question, the Court concluded that where a credit agreement enumerates specific circumstances justifying an increase in charges without enabling the average consumer to ascertain whether those circumstances have materialised and their effect on the charges, this constitutes an infringement of the creditor’s obligation to provide information (paras 45–47).

Finally, the Court considered whether Article 23 CCD precludes national legislation that, in cases of infringement of the creditor’s obligation to provide information under Article 10(2) CCD, imposes a uniform penalty depriving the creditor of its right to interest and charges, irrespective of the seriousness of the infringement or its effect on the consumer’s decision. The primary concern was whether such a sanction would be proportional (para 51). Drawing upon its previous case law, the Court reaffirmed that Article 10(2) CCD sets out essential information that consumers must receive to assess the extent of their liability. A breach of this obligation may be sanctioned under national law by the forfeiture of the creditor’s entitlement to interest and charges (paras 53–54). The Court then turned to the specific circumstances of the case. Since the obligation to provide the APRC had not been infringed (first question), it focused instead on the conditions under which costs related to the performance of the agreement (such as commission fees) could be changed, considering this equally vital information under the CCD due to its impact on consumers’ financial obligations (para 55). The Court emphasised that the principle of proportionality does not preclude a Member State from imposing a uniform penalty depriving the creditor of its right to interest and charges for breaches of information obligations under Article 10(2) CCD, including those relating to the calculation of charges connected with contract performance, even where the gravity of the infringement may vary (para 57).

A Short Comment

The Court’s answers to the second and third questions are not surprising. It confirmed that the average consumer standard has been employed to assess the transparency of contract clauses under the CCD framework, as seen previously in BMW Bank, and has been extensively applied in consumer credit case law since Kásler. The response to the third question reaffirms that the information contained in a credit agreement (Article 10(2) CCD) is essential for the consumer to make an informed decision; consequently, failure to comply with this obligation may trigger sanctions under national law. The Court appears to have linked the proportionality of the sanction to the essential nature of the information provided.

The Court’s reasoning in relation to the first question, however, may be called into question. A literal interpretation of Article 19(3) CCD does not address the unfairness of terms used by the creditor but instead focuses on two distinct elements: first, that the APRC’s calculation is based on the assumption that the credit agreement remains valid for the agreed period; and second, that both parties will fulfil their respective obligations under the agreement. The unfairness of certain contract terms, on the other hand, means that they are null and void ab initio under Article 6(1) of the Unfair Contract Terms Directive, with the consequence that no obligations arise from them.

The first part of Article 19(3) CCD assumes the continued validity of the credit agreement. However, since finding the terms at issue null and void is unlikely to render the agreement invalid - as they do not appear to be essential to the contractual obligation (see Profi Credit Polska III, paras 68–70), although this must be verified under national law - this part of Article 19(3) CCD would not apply here. The same reasoning extends to the second part of Article 19(3) CCD: if obligations based on unfair terms do not exist ab initio, there is no obligation to fulfil on the side of any of the party.

It is also unclear how concluding that the APRC’s calculation, when partially based on unfair contract terms - leading to an overstatement of the APRC - does not infringe the information obligation under Article 10(2)(g) CCD, would contribute to achieving a high level of consumer protection. This raises at least three concerns.

First, in such cases, creditors would not face additional disincentives against using unfair terms in credit agreements. This appears inconsistent with Recital 20 of the CCD Preamble (“Creditors’ actual knowledge of the costs should be assessed objectively, taking into account the requirements of professional diligence”), which suggests that creditors could reasonably be expected to know when they are using unfair terms.

Second, since the APRC was overstated, it is unclear how the average consumer could accurately determine - not merely approximate - the extent to which the stipulated APRC would affect their future rights and obligations under the credit agreement. This appears to contradict the Court’s reasoning in its response to the second question, where the transparency of information is deemed crucial for consumer decision-making.

Third, it also seems to conflict with the Court’s reasoning in Pereničová and Perenič, here it held that an incorrect APRC constitutes false information regarding the total cost of credit and the price under Article 6(1)(d) of the Unfair Commercial Practices Directive (UCPD), as it causes or is likely to cause the average consumer to make a transactional decision they would not have otherwise taken (para 41). However, the Court may have drawn a distinction between cases where the actual APRC is lower than that stipulated in the contract (Lexitor II) and those where it is higher (Pereničová and Perenič), as well as between the transparency requirements under the CCD and those under the UCPD. Yet, these distinctions are not explicitly addressed in the commented judgment. Further clarification from the Court on this point would be necessary to provide much-needed clarity.

Price calculation indications in online offers: Misleading or not? CJEU in NEW Niederrhein Energie und Wasser (Case C‑518/23)

 On 23 January, the CJEU provided further clarity on what amounts to a misleading omission in an invitation to purchase under the UCPD (Case C‑518/23). The case concerns an online electricity tariff calculator operated by the German company NEW Niederrhein Energie und Wasser. Based on customer input, the calculator generates a tariff offer that the customer can accept, resulting in a contract with NEW. However, the generated tariff appears lower than the actual price as it fails to indicate a variable percentage increase – a ‘compensatory’ amount charged by the electricity distribution network operators for the use of low-tariff electricity for high-tariff purposes. The legal question is whether this missing information constitutes a ‘misleading omission’ under Art. 7(1) and (4)(c) UCPD.

The CJEU first confirmed that the tariff offer generated by the calculator qualifies as an ‘invitation to purchase’ under Art. 7(4)(c) UCPD and that information about the compensatory amount constitutes material information thereunder (‘the manner in which the price is calculated’). Thus, this information must be included in the invitation to purchase to enable the average consumer to make an informed transactional decision (para 33). However, Art. 7(4)(c) UCPD does not prescribe how price calculation methods should be communicated (para 37). More broadly, the UCPD does not contain ‘any specific details concerning the question of the degree to which material information must be communicated, and by what medium this must be done’ (para 40). As such, it cannot be implied that pricing indications must enable the consumer ‘to calculate that price himself or herself and thus reach a final numerical result’ (para 39). Instead, such indications can be displayed in various ways, such as a percentage range, a conditional percentage or a fixed percentage with an indication that it may vary over time (para 41).

Then, referring to the general scheme of Art. 7 UCPD, the CJEU established that the required extent of price calculation indications in the invitation to purchase should be assessed ‘on the basis of the factual context of that invitation and the medium of communication used’ (para 46). As to the latter, the tariff calculator does not seem to impose limitations of space or time (Art. 7(3)UCPD). The CJEU continued to highlight a couple of factors as to the ‘factual context’, which, of course, are ultimately for the national court to ascertain. First, since the electricity distribution network operators in Germany retain different and fluctuating percentages for the compensatory amount, it would require ‘disproportionate resources’ for NEW to indicate to consumers the exact percentage in real time (para 49). Second, the generated price offer contains a link to NEW’s general terms and conditions, which do include information on the applicability of the compensatory amount and that it has been set at 25% by the local network operator of the area of NEW’s registered office (para 50). If such information is visibly displayed and consumers’ acceptance is technically conditional on their consent to the terms and conditions, the omission of the percentage increase in the generated price offer does not constitute a misleading omission.

In conclusion, the UCPD does not require the inclusion of the specific percentage of a variable price component in an invitation to purchase, as long as it ‘indicates the applicability in principle of such a percentage, together with a possible scale and the components having an impact on that percentage’ (para 52). There you go: while a specific percentage is off the hook, some general indication of price variability is nonetheless required. The CJEU seems to suggest that an indication in the company’s terms and conditions is sufficient – thereby expecting the average consumer to read them. But why can’t the CJEU ask for such an indication to be included in the displayed price offer itself? Is the CJEU asking too much from the average consumer? Or do national courts still have the discretion to exercise their faculty of judgment (see para 36)?

Passenger rights when flights are cancelled - CJEU in flightright (C-642/23) and Qatar Airways (C-516/23)

On January 16 the CJEU issued two judgments further interpreting Regulation 261/2004 on air passenger rights, in the cases flightright (C-642/23) and Qatar Airways (C-516/23). 

flightright (C-642/23)

A passenger booked via a tour operator a flight operated by Etihad Airways from Düsseldorf (Germany) to Brisbane (Australia), via Abu Dhabi (UAE) with an open return ticket. The flight from Düsseldorf to Abu Dhabi was cancelled and the tour operator declared insolvency before reimbursing the cost of the ticket. The passenger's father contacted the air carrier on their behalf and agreed to a change of the reservation, as well as a few steps of compensation, consisting of redeemable miles for EA flights to the value of the payment made, additional miles of ca 380 Euro, and further 5.000 Etihad Guest Miles. The passenger was required to set up a loyalty account with EA to obtain compensation, which they did. Unfortunately, the credit of the miles did not take place.

The legal question in this case was whether the passenger validly accepted the offer of the air carrier, to be compensated in redeemable miles/flight vouchers, considering that they have not provided their 'signed agreement' as is required by Art. 7(3) Regulation 261/2004. Could the action of setting up a loyalty account with the air carrier, to which the miles would have been transferred, be equivalent to a handwritten signature? (para 18) The question is highly relevant, considering that the Regulation 261/2004 priorities monetary compensation for passengers, while in practice air carriers often attempt to provide compensation via vouchers. The requirement of a signature can prevent passengers from unknowingly or erroneously agreeing to give up their right to monetary compensation, demanding their free and informed consent (para 22). Previously, the CJEU recognised that also other forms of providing express, definitive and unequivocal acceptance of reimbursement in vouchers are acceptable, e.g., a consumer filling in a form on air carrier's website and choosing in it compensation in vouchers (para 23). A handwritten signature is, therefore, not required (para 25). However, setting up a loyalty account with an air carrier does not need to amount to this form of acceptance, as a passenger may have had other intention when taking this action (para 27).

Qatar Airways (C-516/23)

Passengers in this case reserved return flights with Qatar Airways from Frankfurt am Main (Germany) to Denpasar (Indonesia), with a stopover in Doha (Qatar). They benefitted from a promotional campaign for health professionals, which allowed them to make a reservation by only paying for taxes and charges related to the booking. QA cancelled reserved flights. Further, no flights were operated to Denpasar by this carrier during the following period of 1.5 years. When the flight route was renewed the passenger demanded re-routing of their previously cancelled flights. As the carrier did not comply, passengers reserved the new flights themselves, paying partially with their frequent flyer programme's benefits for the new flights.

As per Article 3(3) Regulation 261/2004 its provisions do not apply to passengers travelling 'free of charge or at a reduced fare not available directly or indirectly to the public', the first question was as to the applicability of passenger protection rules to this situation. The CJEU decided that Regulation 261/2004 remains applicable here. The main arguments are based on the literal and contextual interpretation. First, the phrase 'free of charge' is normally interpreted in a way, which precludes passengers who pay taxes and other charges from being included in its scope (para 25). Second, other rules regulating air travel (Art. 23 of Regulation No 1008/2008) consider taxes and charges as elements of the total price of the plane ticket (para 26). Third, reduced fare is available to the public, even if it is not available to all members of the public, but e.g. only to health professionals (paras 34-36, 38). 

Finally, Article 8(1)(c) Regulation 261/2004 allows passengers to ask for re-routing of their flights at a later date, at the passenger's convenience. Could this occur years later though? The Court highlights that the decisive factors here are: passenger's convenience and wish to be re-routed at a specific date, limited only by seat availability (para 54). There does not seem to be a temporal link required then between the date of the cancellation and when re-routing is to occur (para 55). This interpretation cannot be invalidated by airlines stating that following it may demand from them payment of unreasonable operating costs. The CJEU recalls that passenger protection may justify even substantial negative economic consequences for certain economic operators (para 59).

Both these cases provide a useful clarification of provisions that were previously less challenged but contain terms ripe for various interpretation.

Suppliers sharing names with producers beware - CJEU in Ford Italia (C-157/23)

 

Photo by Benjamin Scheidl on Unsplash

In December the CJEU issued the judgment in the Ford Italia case (C-157/23), which focused on the scope of the notion of an apparent producer, that is a person presenting themselves as a producer by putting their name, trade mark or another distinguishing feature on a consumer product, pursuant to Article 3(1) of the old Product Liability Directive. As the new Product Liability Directive contains the same provision (Article 4(10)(b)), this judgment is bound to shape the interpretation of an apparent producer's notion going forward. 

The CJEU followed the advice of AG Campos Sánchez-Bordona, which we commented on previously ('Unintentionally becoming an apparent producer...'). The literal interpretation of Article 3(1) of the PLD requires apparent producers to take action to mislead consumers as to their participation in the production process by 'putting' their name etc. on a product. The CJEU explains that such active steps do not need to be limited to a physical act of placing a name etc. on a consumer product. Instead, we should look into the 'conduct of a person who uses the affixing of his or her name, trade mark or other distinguishing feature on a product in order to give the impression of being involved in the production process or of assuming responsibility for it' (para 40). This is a very liberal approach, as what suffices is the sole fact of apparent producers benefiting from presenting themselves as actual producers, stemming from consumers believing the product's quality will be higher as if they have bought it directly from the actual producer (para 41).

In the given case it did not matter then that Ford Italia did not put their name or trade mark on the car that has been sold to a consumer, which car proved defective. It was sufficient that they shared (a part of) their name and trade mark with the actual producer, Ford WAG, and it was present on the car. Moreover, CJEU emphasised that apparent and actual producers are jointly and severally liable, which means consumers may choose to raise a claim against the apparent producer (para 44). National procedural rules may then allow such apparent producers to have recourse from the actual producer (para 47).

As a side note, it is worth it to note para 45 of this judgment. In it the CJEU addresses interpretation of Art. 3(3) of the PLD, which requires suppliers to promptly identify the actual producer in order not to be held liable instead of them. The CJEU recalls the historical background to this provision, which seems to suggest that more could be required from suppliers in such cases than simply 'referring' consumers to actual producers, with whom consumers may not be familiar. As Italian courts in the Ford Italia cases wanted the supplier to 'implicate' the actual producer in the actual proceedings, rather than simply identifying them, this may indeed prove to be the proper course of action.