Sunday, 6 October 2019

Monitoring duties of online platform operators before the Court - case C-18/18 Glawischnig-Piesczek

Before the summer we briefly referred to the opinion of Advocate General Szpunar is case C-18/18 Glawischnig-Piesczek (see: Recent developments in online content moderation...). Last Thursday, the Court of Justice delivered the judgment in the case, clarifying the interpretation of Articles 15 and 18 of Directive 2000/31/EC on electronic commerce

Source: Pixabay
Background of the case

The case concerned a defamatory comment published on Facebook about a member of the Austrian Greens party, Ms Eva Glawischnig-Piesczek. The politician brought an action against the operator, requesting it to cease and desist from publishing photographs of her if the accompanying text contained allegations identical to those declared illegal or having equivalent content. In doing so she relied on Austrian provisions authorizing the courts to order host providers to terminate or prevent an infringement, in line with Articles 14(3) and 18 of E-Commerce Directive. The referring court, however, run into doubts whether an order to remove or disable access not only to a particular item of information, but also to equivalent items complied with Article 15(1) Directive 2000/31. Pursuant to this provision, Member States shall not impose a general obligation on providers of, among others, hosting services to monitor the information which they transmit or store, nor a general obligation actively to seek facts or circumstances indicating illegal activity. The referring court also wondered about the territorial scope of such an order (for a similar discussion about the right to be forgotten, see: No one-size-fits-all approach to search engine de-referencing...)

Judgement of the Court

The Court gave a comparably broad reading to Article 18 Directive 2000/31 concerning judicial powers to adopt measures designed to terminate alleged infringements and prevent further impairment of the interests involved. According to the Court, Member States enjoy a broad discretion in relation to actions and procedures for taking necessary measures (para. 29). Such a margin of discretion is due to, among others, the rapidity and geographical extent of the damage arising in connection with information society services. Both of these factors were also clearly at play in the present case (para. 36).

Having said that, the Court decided to distinguish between injunctions concerning information whose content is identical to the one which was previously deemed illegal and injunctions concerning information with equivalent content (whose message remains "essentially unchanged and therefore diverges very little from the content which gave rise to the finding of illegality", para. 39).

In the former case, the Court confirmed broad powers of the national court and found that a host provider can be ordered to block access to or remove information with identical content, irrespective of who requested the storage of that information. The injunction granted for that purpose cannot be regarded as imposing on the host provider a general monitoring obligation, but rather concerns the monitoring ‘in a specific case’ (paras. 34, 37). 

When it comes to information with equivalent content the Court sought a balanced solution. It considered that injunctions should generally be able to extend to information, the content of which, "whilst essentially conveying the same message, is worded slightly differently, because of the words used or their combination, compared with the information whose content was declared to be illegal" (para. 41). The objective of an injunction, however, may not be pursued by imposing an excessive obligation on the host provider. To achieve this objective, the injunction must properly identify the specific elements of equivalent information, such as the name of the person concerned, the circumstances of the infringement and equivalent content to that which was declared to be illegal (para. 45). The monitoring of and search for information required of the host provider should be limited to information containing the elements specified in the injunction and be capable of being carried out by automated search tools and technologies (para. 46). Differences in the wording of equivalent content must not, in any event, be such as to require the host provider concerned to carry out an independent assessment of that content.

As regards territorial scope, the Court once again confirmed the broad reading of Article 18(1), Directive 2000/31, which "[did] not make provision ... for any limitation, including a territorial limitation, on the scope of the measures which Member States are entitled to adopt" (para. 49). Following the judgment, therefore, the E-Commerce Directive does not preclude the relevant injunctions from producing worldwide effects. Member States must, nevertheless, ensure that the measures which they adopt take due account of the rules applicable at international level.

Concluding thoughts

The judgment of the Court has multiple implications. Firstly, it strengthens the protection of parties affected by illegal content, but seeks to achieve this without undermining the validity of Article 15. As such, it does not provide for a straightforward solution to each and every future case and sets quite demanding requirements for both national courts and host providers. The former need to define what content they consider to be equivalent to that which had been deemed illegal. How courts will cope with such a task remains an open question. Host providers, in turn, must be ready to to take steps to monitor their platforms for identical or equivalent information, which - as the Court suggests - may require the use of technological tools. The same seems to be true for smaller platforms, even if arguments related to rapidity and geographical extent of the damage may not apply to them with equal force.

The judgment in C-18/18 Glawischnig-Piesczek is clearly relevant beyond the social media context. As noted by Christian Twigg-Flesner in a recent entry, the ruling can also be applied to other platforms like online marketplaces. Operators of such platforms could be required to take steps to monitor their content e.g. as regards the recurring presence of misleading information. The question remains whether the same could also become true for persons engaging in illegal actions.

Finally, attention should be drawn to the brief part of the judgment concerning territorial scope of online moderation. One cannot help noticing the similarity between this question and the one addressed in recent Google case. In Glawischnig-Piesczek, the Court did not provide for an equally balanced framework, but limited itself to stating that injunctions with worldwide effects are not precluded by Directive 2000/31. This remains in line with the opinion of Advocate General Szpunar - notably, the same AG whose advice was followed in the Google case. Both findings are, therefore, not necessarily inconsistent. In fact, the opinion in Glawischnig-Piesczek explicitly refers to the Google case. According to the AG, like with the right to be forgotten, "the legitimate public interest in having access to information will necessarily vary, depending on its geographic location, from one third State to another" (para. 99). Consequently, the limitation of extraterritorial effects of injunctions concerning harm to private life and personality rights, for example by way of geo-blocking, may remain "in the interest of international comity" (para. 100). Whether this is how the Court's reference to "the rules applicable at international level" is going to be read, nevertheless, is far from certain.

Friday, 4 October 2019

Financial expertise does not preclude qualification as consumer – CJEU in Petruchová (C-208/18)

Yesterday, the CJEU issued a judgment in the case C-208/18 Jana Petruchová v FIBO Group Holdings Limited (the case has not yet been published in English; the link refers to the French version). The case concerns an individual contract for difference (CfD) concluded between the claimant and the defendant and, particularly, the definition of a ‘consumer’ in the context of financial investments under Article 17(1) of the Brussels Regulation. The preliminary question referred to the CJEU was whether Article 17(1) of the Brussels Regulation should be interpreted as meaning that a person who engages in the trade of foreign currency exchange is a consumer or whether the individual’s financial knowledge and expertise, the complex nature of the contract, and the risks involved determine that that person is not a consumer. A summary of the facts of the case and an analysis of AG Tanchev’s opinion can be found here.

It is noteworthy that the defendant never argued that the claimant was acting in the sphere of her professional activities (para 46). In fact, the claimant was, at the time of the conclusion of the contract, a university student, which leads the CJEU to immediately ascertain that the contract was not concluded within the scope of the claimant’s professional activities. Instead, the argument is that the professional nature of the contract is not the only criterion that matters when determining whether a party qualifies as a consumer. However, just like AG Tanchev, the CJEU rejected this argument. The CJEU declared that factors such as the amounts involved in the financial transactions, the risks of financial losses associated with such contracts, the financial knowledge or expertise that the person might have or its active engagement in such financial operations are irrelevant in the qualification of a person as a consumer (para 59). In this sense, the CJEU reaffirmed that the crucial test is whether the contract relates to the person’s professional activities or whether the contract’s goal is to satisfy the individual’s personal needs (para 56).

This conclusion is not surprising, since the CJEU had already established (for example, in the Schrems case) that the concept of consumer has an objective character and that it is not connected with subjective aspects such as the particular knowledge that the individual has about the object of the contract (para 55).

Furthermore, the CJEU concluded that even though the definitions of a ‘consumer’ present in other EU legislative instruments are interpretively relevant (para 61), the fact that financial instruments are excluded from the scope of the Rome I Regulation is irrelevant in this case, since the two Regulations pursue different goals (para 64). The qualification of an individual as a ‘retail client’ is also irrelevant for the qualification as a consumer (para 77).

Thursday, 3 October 2019

Half-baked transparency rules in Kiss and CIB Bank (C-621/17)

The CJEU issued another judgment today interpreting provisions of the Unfair Contract Terms Directive, in the case Kiss and CIB Bank (C-621/17). We have provided an extensive comment on AG Hogan's opinion in this case previously (AG Hogan in Kiss and CIB Bank...). The judgment has not yet been published in English (providing comments in that language seems low on the list of priorities of the CJEU - looming-Brexit impact?), but as our blogging team is international, we are able to provide you with a summary.

Generally, the judgment is rather brief but there are some important statements made in it, and some confusing ones.  The national court may have a difficult time applying this judgment.
 
Core terms
 
The CJEU supports AG Hogan's opinion that it is the national court who needs to decide whether a given contract term is a core term (para. 33). In the given case the consumer claimed unfairness of terms establishing certain additional charges placed on him when he took out a consumer credit. To the CJEU it does not look like the consumer questioned the adequacy of these charges in exchange for the provided services, but rather more generally contested the reason for having been charged them. Consequently, the CJEU indicates to the national court that it was likely not a core term at stake, which makes art. 4(2) UCTD inapplicable (para. 35).
 
A subtle distinction has been made in this case. After all, the consumer demanded the recognition of unfairness as he was not told what services these charges were supposed to compensate. Therefore, he did question the existence of a relation between the charges and the services they were supposed to cover. However, pursuant to the CJEU, this apparently does not amount to questioning the adequacy of a charge in exchange for the provision of a service.

Interpretation of transparency under Art. 4(2) and Art. 5 UCTD and substantive transparency
 
An important side note perhaps, where the CJEU deviates from the reasoning of AG Hogan: In para. 36 the CJEU clearly states that the same requirements for the principle of transparency apply under art. 4(2) and art. 5 UCTD. The CJEU confirms again its judgment in the case Kásler. It also reiterates - after Bucura judgment - the importance of the substantive aspect of the principle of transparency (para. 37). As the contested terms specified the percentage of charges, the duration the charge would need to be paid for, as well as the method of its calculation, the CJEU considers the economic consequences of having to pay these charges to be foreseeable to the consumer (para. 39).

Are credit providers required then to list services for which they charge payments?

... maybe?? This is where the judgment could use some more of the transparency it is trying to evaluate. If we read paras. 43-44 the CJEU seems to indicate that despite there not being a general obligation for credit providers to list all services provided in exchange for various charges, the protection of a weaker contractual party awarded to consumers by the UCTD requires that consumers can reasonably understand or deduct the character of actually provided services on the basis of a contract, as a whole. This should especially facilitate consumers' evaluation of whether various charges or services do not overlap. This btw is exactly the point that Mr Kiss was making, as he claimed that the charges he was asked to pay for are to compensate the bank for services, for which the bank already charges credit interest rates. On the one hand, the national court should then examine whether such an overlap does not occur, which forces the credit provider to account for the services that a given charge aims to compensate. On the other hand, however, the conclusion of para. 45 is not that subtle. There, the CJEU only draws attention to the first part of its conclusions: that the principle of transparency does not require credit providers to list all services provided in exchange for a given charge. 
 
So, could we infer from the judgment that whilst credit providers do not have to list all services, they should list some of them, justifying why a given charge was set? Not necessarily, as the CJEU further repeats that not listing services for which a given charge was issued does not automatically breach the principle of transparency, provided the consumer can reasonably understand or deduct the character of actually provided services on the basis of a contract, as a whole (para. 54). The credit provider may then take a risk of not listing the services that a given charge should cover, if they think they could later claim that the consumer should have had an idea of what these services might have been.

Art. 5 UCTD as part of the unfairness test under Art. 3(1) UCTD
 
Another important clarification, in spite of AG Hogan's opinion, is the CJEU stating that assessment of the transparency of a contract term pursuant to art. 5 UCTD is one of the elements of the unfairness test under Art. 3(1) UCTD (para. 49). The CJEU reiterates the principles of the unfairness test as established in older case law (Aziz and Constructora Principado) (paras. 50-51). 

It will, therefore, not be easy for consumers to claim that not having received information on the list of services, for which a given charge is issued, they were unfairly treated by credit providers;
  • first, they would have to be able to prove the lack of transparency, which the credit provider may dispute by stating the consumers should have been able to deduct what services a charge has reasonably covered;
  • second, they would need to be able to prove that they were put at a significant disadvantage by the lack of specificity of these services, which the CJEU does not seem to be convinced had been the case as the consumer's legal position did not seem to deteriorate (para. 55).

CJEU in Dziubak (C-260/18) - no replacement of unfair terms with "usages"

This morning, the CJEU published a much-awaited decision (only available in French and Polish ATM) on unfair terms in foreign currency-indexed loans. In Dziubak, a Polish couple has sued Raffeisen bank over the terms setting the indexation mechanism in the credit contract that the consumers had concluded with the bank. Said terms applied a known mechanism - indexing outstanding amounts in line with the PLN-CHF buying rate and quantifying instalments (due in Zloty) via the selling rate. The particularity in this case was that the bank used its own exchange rate tables, hence being able to directly determine the applicable rates. 

The referring Polish court had no doubts that the terms were, as the Dziubaks had claimed, unfair. However, the court was in doubt as to what the consequences of such finding should be. 

The concerned consumers maintained that the contract should be invalidated. In the alternative, they demanded the court to remove the indexing mechanism and leave the interest determination terms in place - meaning that the contract would become one in national currency, but with an interest rate indexing which is not the one typical for contract in Zlotys.

According to the referring court, such a solution would transform the nature of the contract and hence be in contrast with basic principles of the Polish legal order, such as freedom of contract. As the parties had concluded a foreign currency-indexed credit contract, replacing it with a regular variable interest mechanism would denature the original agreement. 

Raffeisen, on the other hand, suggested that the gap resulting from the removal of the unfair terms could be filled by resorting to general principles of fairness and customs. Interestingly, according to the referring court, one possible outcome of such exercise would be... to reintroduce the unfair terms to the affected contracts, as a reflection of what is "customary" in the relevant market.

As we know, previous CJEU case-law has set very strict limits to the possibility of replacing an unfair term by means of national rules - in particular, the Kásler decision allowed making use of national supplementary or default rules when the contract would otherwise be invalid and such invalidity would be contrary to the consumer's interest. But one crucial question in Dziubak is precisely this - who decides what is (not) in the consumer's interests? Can a court decide that maintaining an unfair term in place is better for the consumer than invalidating the whole contract, even as the consumer maintains otherwise?

Against this background, the CJEU (by and large in line with AG Pitruzzella's opinion, that we discussed earlier) reached a number of conclusions:

1) If national legislation requires a contract to be considered invalid when the removal of an unfair term would change its nature given the resulting difference in its main object - such as could be the case if a foreign-currency indexed rate is turned into a regular variable interest mortgage - such legislation is compatible with the Directive;

2) In this case, the Kasler standard means that invalidation of the contract must be the outcome where the consumer so prefers: given that the Court's case-law grants the consumer final word on whether an unfair term must be considered as binding on them, a fortiori they must be able to decide whether rescuing the contract is or not in their own interest. In this respect, the "interest of the consumer" can only be assessed with reference to the moment when the controversy takes place;  

3) General principles or rules are not tantamount to supplementary or default rules which apply when the parties have not made specific provisions. As these rules do not equally express the legislator's view as to what would make a reasonable balancing of interests in a specific constellation, the application of general principles by a national court cannot be considered to enjoy the same "presumption of fairness" as default rules and hence cannot be used to replace unfair terms; they can thus not be used to supplement the contract in order to prevent its invalidity. 

Back in Poland, the Dziubaks' legal team seems to have taken this judgement as a victory:
Source: twitter
This appears slightly puzzling from a legal point of view: in fact, by indicating that no replacement by means of general principles can take place, the Court seems to have indicated that either the unfair terms are maintained or the contract (and other similar contracts) must be invalidated - would this not be getting many consumers "stuck" with unfair terms if they do not have the money to return all the outstanding capital immediately?

The concrete circumstances may however be of importance - since in 2015 the Swiss franc underwent a major appreciation against (the Euro and, as a consequence, other European currencies such as) the Zloty, which had already depreciated significantly in 2008-2009, many consumers have paid very high instalments which were supposed to mainly cover interests. If the original contracts are invalid, however, it could be possible to claim that only the capital sum is due - and then a settlement of accounts may counterintuitively play in favour of quite a few consumers. Furthermore, it could be that the decision will trigger a wave of settlements or renegotiation, which again may turn out as a gain for Polish lenders.

As far as other consumers are concerned, however, the decision looks like a mixed bag - first, the deference to national rules of contract law may mean quite diverging levels of protection across Member States; second, the Court's resolve to prevent all sort of gap filling interventions when no supplementary rules are readily at hand may actually have a chilling effect on consumers who may not want to start proceedings if the result is that they have to choose between an invalid contract and the original unfair term. On the bright side, the prospective of courts starting to replace unfair terms with equally unfair customs seems to have been washed away. Congratulations to Ms Dziubak and her lawyer's daytime drinking improv!

Wednesday, 2 October 2019

CJEU confirms stricter requirements for valid cookie consent - case C-673/17 Planet49

Yesterday the Court of Justice delivered its judgment in case C-673/17 Planet49, concerning the requirements for a valid consent to the storage of cookies. The judgment largely falls in line with the previous opinion of Advocate General Szpunar, on which we reported in an earlier post (see: Pre-ticked checkboxes NOT informed consent...).

Background of the case

Source: Pixabay
To recall, the case involved a promotional lottery whose prospective participants were asked, among others, to provide personal details and agree to be contacted by various sponsors. Besides several items, to which users agreed by ticking corresponding boxes, the form included another, already pre-ticked checkbox, which concerned the placement of cookies by Planet49. German consumer organisation vzbv questioned the validity of such 'consent' under Directive 2002/58/EC on privacy and electronic communications. Following a 2009 amendment, Article 5(3) of that Directive required Member States to ensure that the storing of information, or the gaining of access to information already stored, in the terminal equipment of a user is only allowed on condition that the user concerned has given his or her consent, having been provided with clear and comprehensive information, in accordance with Directive 95/46/EC, inter alia, about the purposes of the processing.

As readers may remember, Directive 95/46/EC was, in the meantime, repealed and replaced by the General Data Protection Regulation. The E-Privacy Directive was also supposed to be replaced with a regulation, with the aim to increase coherence with the GDPR. The respective proposal, however, got stuck in the legislative pipeline. The Court was not distracted by these facts and decided to interpret Directive 2002/58 in the light of both Directive 95/46 and Regulation 2016/679.

Judgment of the Court

First of all, the Court agreed with the Advocate General that consent referred to in Article 2(f) and in Article 5(3) of Directive 2002/58 cannot validly be obtained by way of a pre-ticked checkbox which the user must deselect to refuse his or her consent. To support this conclusion, the Court referred to the requirements for consent to be 'specific' and 'unambiguous' under Directive 2002/58 as well as the even more detailed wording of the GDPR.

Importantly, the Court did not elaborate on the requirement that consent must be ‘freely given’, arguing that a corresponding question had not been asked by the referring court. Response to such a question - one of major importance to the digital economy - would involve an assessment whether user’s consent to the processing of personal data for advertising purposes constituted a prerequisite to that user’s participation in a promotional lottery. As noted in our previous post, the Advocate General elaborated on this matter in a way that was subject to criticism. Against this background, self-restraint showed by the Court is to be welcomed.

As regards the question whether the interpretation set out above should differ, depending on whether or not the information stored or accessed on user's terminal equipment qualifies as personal data, the Court responded with a clear 'no'. This remains in line with the rationale of Directive 2002/58 which aims to protect the user (including natural persons acting for business purposes) from interference with his or her private sphere, regardless of whether or not that interference involves personal data.

Finally, as regards the scope of information to be provided to the user before obtaining his or her consent, the Court opted for a broad reading of Article 5(3) of Directive 2002/58 in conjunction of Article 10(c) of Directive 95/46 and Article 13(1)(e) of the GDPR. In this respect, the Court, once again, sided with the Advocate General, stressing that "clear and comprehensive information implies that a user is in a position to be able to determine easily the consequences of any consent he or she might give and ensure that the consent given is well informed. It must be clearly comprehensible and sufficiently detailed so as to enable the user to comprehend the functioning of the cookies employed" (para. 74). The Court considered that information on both the duration of the operation of cookies and whether or not third parties may have access to them had to be provided to the user.
 
Concluding thought

The judgment in Planet49 strengthens the protection of privacy in the digital sphere, not only of consumers stricto sensu, but of internet users more generally. Moreover, the Court confirmed that the standard of 'cookies protection' does not depend on whether or not user's personal data is involved. Privacy, according to this reading, concerns the very fact of placing pieces of software on user's 'terminal equipment'. This resembles the way in which some consumer authorities have read the notion of 'aggressive practices' under Directive 2005/29/EC on unfair commercial practices, also beyond the cookie context (see especially the Italian decision against Facebook). Whether or not such an approach to the UCPD will hold, and how it might be related to standards of disclosure, is still an open question (on the latter, see the judgment of the Court in Wind Tre, para. 45 et seq). When it comes to the E-Privacy Directive these questions do not emerge: here, without doubt, the duty to inform provides a further layer of protection to the one provided by the consent framework. The E-Privacy Directive, therefore, is quite remarkable: it combines high standards of consumer law and data protection law and applies them beyond their traditional scope. Hopefully, internet users will truly be able to benefit from it.

Saturday, 28 September 2019

Underused consumer ADR and ODR platforms - Commission's report

Some of our readers may be interested in the report that the European Commission has published this week assessing the functioning of the ADR/ODR systems for consumers across the EU. Whilst remaining positive about the ADR/ODR options for consumers, the Commission expresses mild concern about the fact that these dispute resolution platforms remain underused. The reports conclusion mentions as problematic: 
  • ADR awareness and perceptions (e.g. awareness is lower in SMEs than in large retailers; consumers consider ADR as biased towards traders or as traders' customer care service; traders worry about ADR being biased towards consumers);
  • The navigability of national ADR landscapes (e.g. if a Member State has a large number of certified ADR entities, there is lack of clarity to which of them to turn to, and sometimes due to their specialisation consumers may need to seek full dispute resolution with more than one entity at the same time);
  • Traders' uptake of ADR (on average, 1 in 3 retailers is willing to use ADR at the moment);
  • Workflow on the ODR platform (e.g. the fact that the dispute will not be referred from an ODR platform to an ADR entity unless the parties agree on the ADR entity hinders the dispute resolution; currently, the ODR platform is perceived as not providing sufficient information on consumer rights and redress options).
The Commission intends to further encourage traders to refer their disputes to ADR/ODR platforms, promoting their use in special campaigns, as well as by organising the second ADR Assembly in 2020. It also indicates in the report best practices on improving the awareness of ADR/ODR platforms in various countries, as well as on how to clarify the ADR landscape (read the full report here).

Friday, 27 September 2019

Consumer law & the Kardashians

The UK’s Advertising Standards Authority (ASA) recently banned three beauty advertisements, since the ads in question misled consumers and breached the UK’s Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing (CAP Code). The three ads, originating from three different beauty salons, appeared on Instagram in December 2018/ January 2019 and promoted beauty products and non-invasive cosmetic procedures. The decisions can be found here, here and here.

Besides advertising prescription-only medicines such as Botox, the beauty salons posted pictures of reality TV personalities Kim Kardashian and Kylie Jenner while promoting their own beauty treatments. Furthermore, two of the beauty salons added the terms ‘Kylie Jenner Package’, ‘Win the Kylie Package’ and the hashtag ‘kyliepackage’ to the text next to the photo of Kylie Jenner. According to the ASA, these practices ‘misleadingly suggested the package would give customers lips, cheeks and jawline that closely resembled those of Kylie Jenner’. The ASA concluded that the ads were misleading because the beauty salons did not provide sufficient evidence that substantiated the ads’ implicit claim that Kylie Jenner’s features could be achieved through the use of the advertised products only. Besides, in the ASA’s opinion, these practices misled consumers into thinking those products were used by the celebrities in question.

From a EU consumer law perspective, the act of posting pictures of widely recognized celebrities is an act by a trader directly connected with the promotion of a product to consumers, which would fall under the scope of the Unfair Commercial Practices Directive (UCPD). Under the UCPD, the conduct of the beauty salons would likely be considered an unfair commercial practice, even when based on a more tenuous link than the one mentioned by the ASA. The mere posting of the pictures of Kim Kardashian and Kylie Jenner does not have to cause consumers to think these celebrities used the products in question, but merely that using the products in question would make them look like these celebrities. This practice is likely to materially distort the economic behaviour of the consumer, since it is likely that, because of this practice, the consumer will acquire the product in the hope of looking like a celebrity. Specifically, this practice could be considered a misleading action under Article 6 of the UCPD. This explains why one of the beauty salons’ counterarguments – that it would be almost impossible for a consumer to look like a celebrity after a non-surgical cosmetic procedure – is legally irrelevant; what matters under EU law is how the average consumer perceives the pictures, even if (perhaps especially if) that perception is affected by biases.

The invasion of social media platforms such as Facebook or Instagram by misleading advertising and marketing campaigns raises several consumer law issues, stemming from the protection of children and teenage consumers to the blurred lines between an advertisement and an influencer’s ‘real’ opinion. In fact, the boundaries between what is an ad and what is not an ad are often unclear, so much so that the average consumer (if there is one) severely struggles with realizing when she is being targeted by marketing campaigns. Indirectly, this case also highlights the need to further study advertising and consumer law in the light of influencer marketing.

Tuesday, 24 September 2019

No one-size-fits-all approach to search engine de-referencing - CJEU in Google

Earlier this year we reported on the two opinions of Advocate General Szpunar concerning several aspects of the right to be forgotten: 1) the role of search engine operators in relation to sensitive data; 2) the nature of the respective obligation to respond to de-referencing requests; and 3) territorial reach of required de-referencing measures.

Today the Court of Justice delivered judgments in both cases. Importantly, despite the fact that the questions were referred from the point of view of Directive 95/46, the Court also took General Data Protection Regulation 2016/679 into account (by which Directive was replaced in the meantime), in order to ensure "that its answers will in any event be of use to the referring court".

Source: Pixabay
The direction of both judgments generally remains in line with the interpretation proposed in both opinions. In case C-136/17, the Court confirmed that restrictions on the processing of certain categories of sensitive data apply also to operators of search engines. Like in AG's opinion, that prohibition was nonetheless read in the context of responsibilities, powers and capabilities of search engine operators. Restrictions on the processing of sensitive data thus concern the stage of ex post verification triggered by a request from the data subject. The judgment further lays down which steps a search engine operator must take when assessing the notification (and these are far from trivial).

Judgment in case C-507/17 concerned the territorial scope of de-referencing measures which a search engine operator must take. The Court referred to the objective of ensuring a high level of protection of personal data in the EU, pursued by both Directive 95/46 and Regulation 2016/679. It further admitted that a de-referencing carried out on all the versions of a search engine would meet that objective in full and argued that the EU legislature enjoys competence to lay down such an obligation (para. 58). That being said, the Court considered that the EU lawmakers have not done so, thus far. In consequence, for the time being, EU data protection law does not require search engine operators to carry out a de-referencing on all world-wide versions of a search engine. Importantly, however, the Court also did not exclude a possibility for a supervisory or judicial authority of a Member State to weigh up, in the light of national standards of protection of fundamental rights, a data subject’s right to privacy and the protection of personal data concerning him or her, on the one hand, and the right to freedom of information, on the other, and, where appropriate, to order such de-referencing (para. 72).

As regards the EU, the Court began by observing that, in principle, de-referencing is to be carried out in respect of all Member States (para. 66) and, if necessary, the search engine operator should be obliged to take sufficiently effective measures to ensure the effective protection of the data subject’s fundamental rights. Measures of this kind should have the effect of preventing or, at the very least, seriously discouraging internet users in the Member States from gaining access to the links in question while searching on the basis of that data subject’s name (para. 70). The Court left the question open whether automatic redirecting to a different national version of the search engine's website constitutes such a measure. It would seem that such blocking or redirection would then fall under the exception to customers' right of access to online interfaces, set out in Article 3(3) of Regulation 2018/302 on geo-blocking

At the same time, however, the Court accepted that the interest of the public in accessing information may, even within the Union, vary from one Member State to another, meaning that results of the balancing exercise are not necessarily the same for all the Member States. The Court thus emphasized the role of cooperation between supervisory authorities in the Member States as an adequate framework for reconciling the conflicting rights and freedoms. It is through this framework, therefore, that a de-referencing decision, covering all searches conducted from the territory of the Union on the basis of a data subject’s name, should be adopted (para. 69).

Monday, 23 September 2019

Thomas Cook's liquidation puts package travel rules to a test

Earlier today Thomas Cook, one of the world's oldest package tour organizers, entered compulsory liquidation, affecting about 600,000 travellers. The company explained its financial problems by a variety of factors: from political unrest in important holiday destinations to prolonged Brexit negotiations. Since the decision comes before the UK's exit from the EU, the follow-up process, including important consumer protections, is subject to Directive 2015/2302 on package travel.

A short history of package travel law

Source: Pixabay
Harmonised rules on package travel belong to the earliest EU instruments of consumer law. The relevant discussions date back to the 1981 Council resolution on a second programme for a consumer protection and information policy, and were based on pre-existing laws on package travel in Member States like the UK. Directive 90/314/EEC on package travel was first to harmonise this framework at the European level. It introduced a set of minimum protections for the travellers who bought 'packages', defined as a pre-arranged combination of not fewer than two tourist services (in particular transport and accommodation), sold or offered for sale at an inclusive price, when the service covered a period of more than twenty-four hours or included overnight accommodation. The directive laid down rules on pre-contractual information, the content of contracts, consumer's right to transfer the package, changes to contract terms, liability for non-performance as well as security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency.

This framework was recently updated in the wave of a broader reform of the European consumer law. As of 1 July 2018, Member States are obliged to apply national measures implementing a new act - Directive 2015/2302 on package travel and linked travel arrangements. Unlike its predecessor, the updated framework provides for a full level of harmonisation. It addresses a similar set of matters as Directive 90/314/EEC, but in a much more comprehensive way. 

Insolvency protection

As regards insolvency protection, Article 17(1) of Directive 2015/2302 requires Member States to ensure that organisers established in their territory provide security for the refund of all payments made by or on behalf of travellers insofar as the relevant services are not performed as a consequence of the organiser's insolvency. If the carriage of passengers is included in the package travel contract, organisers shall also provide security for the travellers' repatriation. Pursuant to next paragraphs, an organiser's insolvency protection shall benefit travellers regardless of their place of residence, the place of departure or where the package is sold and irrespective of the Member State where the entity in charge of the insolvency protection is located (para. 3). When the performance of the package is affected by the organiser's insolvency, the security shall be available free of charge to ensure repatriations and, if necessary, the financing of accommodation prior to the repatriation (para. 4). For travel services that have not been performed, refunds shall be provided without undue delay after the traveller's request (para. 5).

This provides an interesting background for the today's coverage of Thomas Cook's liquidation. The UK government and the Civil Aviation Authority are reported to have launched "the largest repatriation in peacetime history" codenamed Operation Matterhorn. Hotels accommodating Thomas Cook customers have been informed that the cost of accommodation will be covered by the government, through the Air Travel Trust (ATT) Fund/ Air Travel Organiser’s Licence (ATOL) cover. Assistance will reportedly be provided to all customers, regardless of their nationality. It can be assumed that customers whose return flights were scheduled to countries other than the UK will also be able to reach their destinations, although current statements focus understandably on UK travellers. A dedicated website is further being launched "to let customers know how to get their money back", which suggests that refunds for services not performed will also be available.

Customers of Thomas Cook are therefore likely to obtain the protection provided under Directive 2015/2302. The ATT/ATOL cover appears to be directly linked to this framework. It requires ATOL holders to pay a fee of £2.50 for each traveller, which is held in a fund managed by the ATT. This fund is used to support consumers currently abroad and provide financial reimbursement for the cost of replacing parts of the package. While all of this points to the well-functioning package travel scheme, parts of today's reporting are painting a slightly different picture. 

For example, the UK government announced that it is "stepping in" to assist all impacted passengers, including those who are not ATOL protected. Considering that Thomas Cook is an ATOL holder, a question can be asked: which group of travellers is in fact covered by this statement and how significant this group is?

Of interest are also the widely reported last-minute rescue talks carried out between the company and the UK government. Prime Minister Boris Johnson revealed that the government had rejected a request from Thomas Cook for a bailout, while questioning whether directors of the company were "properly incentivised" to avoid bankruptcy. This seems to disregard the existence of insolvency protections discussed above, to which companies of this kind are also contributing. As long as the United Kingdom remains in the EU, it is also required to ensure an effective functioning of this scheme.

Concluding thought

Today's news about Thomas Cook's liquidation is remarkable for a number of reasons. It concerns one of the oldest organisers of package tours, established in the UK, which itself is on its track to leave the European Union. It raises the question about the functioning of existing insolvency protections and especially how they will apply to travellers from outside the UK. One can also wonder if their situation would be different, had the liquidation happened post-Brexit.

Thomas Cook's story also sheds light on the broader transformation of the travel sector. What the company has not mentioned as a likely factor for its financial troubles is the growing role of direct booking channels and new types of intermediaries, like online platforms. While effects of this transformation on the long-established companies like Thomas Cook may be regretted, its story should primarily be a wake-up call for the law- and policymakers. The potential connection between increased regulatory burdens and the inability to compete with other travel companies is perhaps one of the questions to be asked. More importantly, however, the collapse shows that package travel is no longer the principal way how people travel and this is not really reflected in the legal framework. The 2015 reform of package travel law has partially extended its scope to the so-called "linked travel arrangements", thus capturing at least part of the transformation. For now, however, the discussion does not ensure that interests of those who prefer to assemble their trip on their own are adequately safeguarded.

* The author carries out a research project on consumer protection in the collaborative economy, financed by the National Science Centre in Poland on the basis of decision no. DEC-2015/19/N/HS5/01557.

Friday, 20 September 2019

CJEU in Lovasne Toth: 0-0 for AG Hogan and consumer protection

Dear readers, yesterday the Court of Justice (third chamber) published its decision in Lovasné Toth, a Hungarian case concerning the potential unfairness of contractual mechanisms facilitating debt recovery on the side of banks.
The referring court doubted the compatibility with the Directive - and with Hungarian law - of a clause allowing the lending bank to ask a notary, who had also underwritten the contract containing the clause itself, to certify the consumer's non-performance and turn the agreement into an executive title on the basis of the bank's own records.
In the proceedings before the CJEU, it appeared that there was some disagreement, in Hungary, whether such term did or did not have as a result an inversion of the burden of proof, to the consumer's detriment, in comparison with the otherwise applicable rules. The Kuria, ie the highest court, deemed the term to merely repeat Hungarian law. Some lower courts, however, disagreed.
Terms inverting the burden of proof to the consumer's disadvantage are blacklisted in Hungary and they are included in the Directive's annex at point q, concerning terms having the object or effect of:

excluding or hindering the consumer's right to take legal action or exercise any other legal remedy, particularly by requiring the consumer to take disputes exclusively to arbitration not covered by legal provisions, unduly restricting the evidence available to him or imposing on him a burden of proof which, according to the applicable law, should lie with another party to the contract.

Hence, if the terms in question did invert the burden of proof, they were illegal under Hungarian law, but Hungarian courts were divided on the issue. Was there possibly a different way of considering the terms unfair? This question must have been in the mind of the referring court when they formulated their preliminary ruling request - resulting in four possibly quite confusing questions. 

The first question sought to ascertain whether the Directive's annex on its own was tantamount to a total prohibition of terms reverting the burden of proof upon consumers. The CJEU's answer to this question is quite straightforward - no it does not. Member States legislators can include such terms in a so-called "black list" of forbidden terms, but otherwise the annex is always subject to the interpretation of national courts, who must consider the list in connection with the general criteria of article 3.
The second question tried to push the interpretation of the annex: if the list envisages terms that have the object or effect of hindering the consumer's access to justice, what about terms that legally do not do so while in practice making the consumer believe that their redress options are limited? To this question the court of justice answers in the negative, affirming that only an actual legal impediment is covered by the provision. On the other hand, should a notary stipulation such as the one in consideration make it possible for the creditor, under the applicable law, to have a final incontestable claim to the outstanding amounts - then the stipulation would be covered by the annex and very possibly be unfair.
The third preliminary question is the one that gets the potentially most controversial answer: if a clause if grammatically clear but its effects can only be understood by interpreting a controversial provision of the applicable law, should the professional provide the consumer with additional information in order to comply with the duty to use clear and comprehensible terms? This question arises in connection with a number of cases in which the court had said that clear and comprehensible means that the consumer must be able to understand what the consequences of a certain term are for their economic (Invitel) or legal (VKI v Amazon) position. Where provisions of national law actually directly impacted the meaning of a certain term, the cases suggested, not recalling them in the contract amounted to intransparent drafting. The Court explains that none of its previous decisions are directly relevant to this case. In the present case, according to the court, it would go beyond what can reasonably expected of the professional to require them to reconstruct the general rules of civil procedures and the allocation of the burden of proof - and related jurisprudence - in order to clarify the meaning of a term. (see para 69)
The problem with this answer, it seems to me, is the utter lack of reasoning leading to the statement - making the outcome very difficult to turn in guidance or a semblance of a legal rule. We now know that this would be unreasonable - but what would be reasonable? The previous case law could be made sense of by inferring a principle that, wherever possible, the consumer should be able to infer what a certain term meant for their interests. Do we need to take this as a case which still falls under this rule of thumb, but represents a situation where achieving clarity was not reasonably possible? Or should we take the court literally and interpret the decisions in Invitel, Andriciuc and Amazon to be entirely separate and each limited to a specific type of term and rule? 
The first interpretation makes more sense as a matter or legal logic, but the second is easier to square with the extremely casuistic language used by the Court throughout paras 61-68. I would still like to suggest that the quite sensible interpretation of transparency which transpired from the court's previous case-law should be maintained, and the case-by-case language put down to bad arguing on the side of a Court that had to make do of the absence of a sensible AG opinion (the very intense plead by AG Hogan may well have influenced the results in this case, but is not once quoted in the decision).
The fourth and last preliminary question concerned again the content of the annex: the referring court wanted to know whether item m), concerning terms giving the seller or supplier the right to determine whether the goods or services supplied are in conformity with the contract,, could also be interpreted to cover terms enabling the seller to unilaterally appreciate the appropriateness of the consumer's performance. According to the Court, it doesn't. It seems quite reasonable to claim, as the court does (at para 74), that the consumer's performance is clearly not what the provision is aimed at. A different interpretation, albeit possibly very welcome in terms of consumer protection, would have required a significant manipulation of the text's plain meaning and intentions.
To conclude, reading the decision feels a bit like one of those football matches where both teams have another game in a couple of days and little stakes in the night's result. A few nice passes, some questionable moves and in the end it's a draw and it's time to go to bed. Let's see whether there will be more games to come.