Sunday, 7 February 2010

ECJ - Plus Warenhandelsgesellschaft

14 January 2010: ECJ case C-304/08 Plus Warenhandelsgesellschaft

The reference to the ECJ has been made by a German association founded to combat unfair competition against a German retail undertaking Plus Warenhandelsgesellschaft (further called 'Plus').

In 2004 Plus launched the promotional campaign 'Ihre Millionenchance' ('Your chance to win millions') in which the public was invited to purchase goods sold in its shops in order to collect points. By collecting 20 points, customers could take part free of charge in the draws held by the Deutscher Lottoblock (national association of 16 lottery undertakings).

German law (Paragraph 4 of the Law on unfair competition - Gesetz gegen den unlauteren Wettbewerb) prohibits participation of consumers in a lottery being made conditional on the purchase of goods. Therefore, proceedings had been started against Plus to make it put an end to this practice.

The German Supreme Court made a reference to the ECJ to ask whether that national provision is in accordance with the new Directive 2005/29 on unfair commercial practices:
‘Is Article 5(2) of Directive 2005/29 … to be interpreted as meaning that that provision precludes a national provision which states that a commercial practice whereby the participation of consumers in a prize competition or lottery is made conditional on the purchase of goods or the use of services is in principle unlawful, irrespective of whether, in any particular case, the advertising in question affects consumers’ interests?’ (par. 19)

The ECJ adjudicated as to the substance that 'promotional campagins which enable consumers to take part free of charge in a lottery subject to their purchasing a certain quantity of goods or services, clearly form part of an operator's commercial strategy and relate directly to the promotion thereof and its sales development'. (par. 37) This means that these practices fall under the definition of commercial practices within the meaning of Article 2(d) of the Directive. It does not matter that the practices used by Plus harmed not only interests of the consumers but also those of other competitors. 'Only national legislation relating to unfair commercial practices which harm ‘only’ competitors’ economic interests or which relate to a transaction between traders is thus excluded from that scope'. (par. 39)

Taking into account the fact that the Directive provides for maximum harmonization, which means that the Member States may not introduce stricter measures to protect the consumers, the ECJ made a point that a commercial practice is unfair only if it fulfills the requirements of Article 5(2): 'if it is contrary to the requirements of professional diligence and materially distorts, or is likely materially to distort, the economic behaviour of the average consumer with regard to the product'. (par. 43) Only commercial practices (black)listed in the Annex I are seen as unfair in any circumstances (exhaustive list). Other commercial practices need to fulfill the test of Article 5 of the Directive in order to be seen as unfair.

The German law: 'prohibits any commercial transaction which couples the purchase of goods or use of services to the participation of consumers in a prize competition or lottery, with the sole exception of those relating to a lottery or prize competition which is inherently linked to the goods or services in question. In other words, that type of practice is prohibited generally, without it being necessary to determine, having regard to the facts of each particular case, whether the commercial transaction at issue is ‘unfair’ in the light of the criteria set out in Articles 5 to 9 of Directive 2005/29'. (par. 48) Such a practice is not listed in the Annex I which means that according to the Directive it could be seen as fair in case the test of Article 5 was not fulfilled. '(...) such an exception cannot take the place of the analysis, which must of necessity be undertaken having regard to the facts of each particular case, of the ‘unfairness’ of a commercial practice in the light of the criteria set out in Articles 5 to 9 of the directive, where, as here in the main proceedings, that practice is not listed in Annex I thereto (see VTB-VAB and Galatea , paragraphs 64 and 65)'. (par. 53)

This case follows closely the reasoning the ECJ presented in VTB-VAB case.

The Advocate General in its opinion considered an interesting question that has been left out of deliberation of ECJ completely: whether the fact that these type of practices had been seen as immoral in Germany and therefore were prohibited could influence the decision of the ECJ. 'The Court’s decisions in the so-called games-of-chance cases also demonstrate that games of chance may harbour a potential risk to the societies of the Member States, which must therefore be in a position to take appropriate measures to control the risks arising from addiction to gambling. The central issue in those cases was to strike a balance between the freedom to provide services and the freedom of establishment, on the one hand, and, on the other, the safeguarding of imperative requirements in the general interest such as consumer protection, the prevention of fraud, preventing citizens from being tempted to spend excessively on gaming, as well as defending the social order in general. The Court acknowledged that the Member States ‘are free to set the objectives of their policy on betting and gaming and, where appropriate, to define in detail the level of protection sought’. In the Court’s opinion, ‘moral, religious and cultural factors, and the morally and financially harmful consequences for the individual and society associated with gaming and betting, could serve to justify the existence on the part of the national authorities of a margin of appreciation sufficient to enable them to determine what consumer protection and the preservation of public order require’, on condition that the measures adopted are proportionate. In my view it is necessary, for the sake of consistent case-law, to apply the abovementioned principles to the interpretation of Article 5(2)(a) of the Directive, in particular to the element of ‘honest market practice’, and to allow the Member States a sufficient margin of discretion – within the limits laid down by Community law – when adopting measures for controlling the risks arising from addiction to gambling. The German Government’s general doubts concerning a commercial practice that uses the enticement effect of games of chance can be categorised as moral reservations. As the German Government correctly observes, the use of games of chance in advertising is very likely to arouse the human pleasure in gambling. Not least because of the prospect of (sometimes) very large winnings, such games exercise a certain attraction. They can arouse the attention of prospective customers and direct them to certain ends by means of the chosen advertising strategy. For that reason, the argument that a commercial practice of this kind has manipulatory elements and may consequently, in certain circumstances, amount to a breach of professional diligence cannot, in general, be rejected out of hand.' (par. 91-93 of the Advocate General's opinion) It seems, however, that the ECJ rightly did not even consider this matter since the Directive clearly aims only at protecting economic interests of the consumers. This means that if the Member States plan on protecting other interests of the consumers, e.g. moral ones, they should do it outside the scope of the Directive.

No comments:

Post a Comment