Naughty Member States

Last week the European Commission again let us know which countries infringe existing European consumer protection rules and what it was going to do about this. The relevant infringements concerned:

• Poland: hindering EU consumers in participating in judicial proceedings taking place in Poland, infringing the Regulation on the service of documents (1393/2007) in cross-border cases. Namely, Polish law requires EU citizens to appoint a representative in Poland for the service of documents in civil and commercial proceedings in Poland. If a representative is not appointed, the documents are deposited at court and deemed as having been served. This means that EU citizens may even not known that documents have been deposited at court against them. EU sees it as an indirect discrimination on the grounds of nationality and gives Poland two months to adjust its law.
•  Denmark: endangering consumer health by allowing the sale of snus (oral tobacco, consumed without chewing or smoking by placing between the gum and the lip) in loose portions. The sale of snus is banned in Europe with exception of Sweden. Denmark has two months to ban this sort of sale.
• Poland (again): not adhering to the European common framework regulating the way airport charges are set. Poland failed to implement common rules on airport charges, which brings economic harm not only to airlines who may be asked to pay more for taking-off and landing in Poland but also passengers, who would ultimately be charged with these costs. EC referred Poland to the CJEU for missing the implementation deadline of 15 March 2011. Daily penalty may be imposed on Poland until the EU rules are adopted.
• Slovenia and Poland (again): not fully transposing the EU internal energy market rules (Electricity Directive and Gas Directive). A proper implementation of these EU rules was supposed to guarantee a secure energy supply at affordable prices to consumers. Both countries are referred to the CJEU at the moment and face daily penalties until they adjust their legislation.

Microsoft could lose up to 10% of annual turnover

Another update concerns the previously mentioned European procedure against Microsoft (Microsoft under investigation for limiting consumers' options). To briefly remind the readers: the European Commission is convinced that Microsoft failed to comply with the requirement to offer its users a choice screen enabling them to easily choose their preferred web browser (instead of just providing them with a pre-installed default of Internet Explorer). The European Commission sent a Statement of Objections to Microsoft on non-compliance with its preliminary view. This does not necessarily mean that the Microsoft will be found as having breached its obligations since it has a right to defend itself. Only then a final decision will be made by the European Commission. If, however, the European Commission will determine that Microsoft breached its legal commitments, it may fine the company up to 10% of its total annual turnover. (Commission sends Statement of Objections to Microsoft on non-compliance with browser choice commitments)

Towards removing hurdles to single market

The European Parliament adopted yesterday a non-binding resolution addressing consumers' concerns with regards to the single market. In the resolution the Members of the European Parliament point out specific cases in which the lack of sufficient, uniform protection given to consumers throughout Europe is especially visible (banking services, vehicle registration, recognition of qualifications etc.). See our earlier post on this subject: Addressing consumers' concerns.

European online marketplace

The European Consumer Centre Network (ECC-Net) published a new report on cross-border e-commerce and consumers' experiences with it. The report refers to years 2010-2011 and shows that consumers are still not fully comfortable with concluding transactions online even if the number of transactions gradually increases. This could be evidenced by the fact that more than half consumers' complaints that ECC-Net receives concerns online purchases, e.g., defective goods, non-conformity, non-delivery, no right of withdrawal. The most cases are reported in the Netherlands, Germany, France and Luxembourg. The report contains a checklist both for consumers and traders that they should follow in order to make sure that the transaction will be successful. (Consumers still face obstacles when shopping online)

Getting ahead of themselves?

Yesterday the European Parliament decided to make year 2013 the European Year of Citizens. The goal is to raise awareness of rights that are linked to the EU citizenship.The coming year should be, therefore, rich in events and activities that would focus on explaining and spreading knowledge of such rights like e.g., passenger and consumer rights. (European Year of Citizens: raising awareness of EU citizens' rights)

It is a bit ironic that on the same day, the European Parliament adopted also a non-legislative resolution in which it argues for better protection of passenger rights. It demands from the European Commission to improve complaint procedures and fight more actively unfair pricing conditions, as well as to define 'extraordinary circumstances' under which passengers may not claim compensation from their carriers. (Passenger rights: MEPs want loopholes closed) This is the second resolution this year on this subject. (Towards no stress flying) If you are interested in what such a resolution can achieve - see the reply giving to the March resolution by the European Commission here.

On the one hand the European Parliament wants to educate consumers about their rights, on the other hand it admits that these rights are often not clear or easily understandable. It would make more sense to first clarify the vague provisions on a European level before introducing them (and their current loopholes) to the EU citizens.

Easy money

In other news the European Commission communicated today its two-year plan to tackle online gambling (sports betting, poker, casino, lotteries, etc.). Apparently, online gambling is one of the fastest growing services in the EU (annual growth rate of almost 15%, estimated 6.8 million consumers participating). There is a definite lack of specific regulation that would protect consumers from unregulated gambling websites, carrying risks of fraud and money laundering. Since online gambling often takes place cross-border, the national legislators cannot effectively guarantee protection to their citizens and European rules are needed. The European Commission does not intend to introduce a regulation. Instead, specific actions and common principles on protection are to be set, e.g. three recommendations are to be adopted on: common protection of consumers; responsible gambling advertising; prevention and fight against betting-related match-fixing.(Commission sets out an action plan for online gambling)

See also FAQ.

Compensation for delayed flights - CJEU C-581/10 (Nelson and Others) and C-629/10 (TUI Travel and Others)

23 October 2012: CJEU judgment in joined cases C-581/10 (Nelson and Others) and C-629/10 (TUI Travel and Others) (see: press release)

The CJEU has confirmed with this ruling his previous decision (Sturgeon and Others) that passengers whose flights have been delayed for a long time may be compensated, on the basis of the provisions of the Regulation No 261/2004. (see our post on the AG's opinion: Airlines need to compensate passengers of delayed flights...)

The Regulation does not specifically give a right to a compensation for passengers whose flights have been delayed, just to these whose flights have been cancelled. In the Sturgeon judgment the CJEU compared the situation of passengers whose flights have been delayed (as long as they arrive more than 3 hours later at their destination) to those whose flights have been cancelled and gave them the same right to monetary compensation.

In today's decision the CJEU once again mentioned the principle of equal treatment, pursuant to which the same rights should be granted to passengers who are suffering the same inconvenience - the loss of time (more than 3 hours), regardless whether as a result of cancellation or a long delay. The airlines are protected from having to pay this compensation only in case when the delay was caused by extraordinary circumstances.

What is especially important in this ruling is that the CJEU states that there is no need to limit the temporal effects of the present judgment. The CJEU refused the airlines' request to confirm that the passengers whose flights were delayed could only apply for this compensation if their flight has been delayed after the date of the delivery of the judgment.

Life after the rehab

The European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) has published last week a new 'insights' study on the social reintegration of drug users. Since the 90s the new, better policies that promote treatment increased the chances of overcoming a drug addiction, but the study shows that more needs to be done with regards to social reintegration and, specifically, employment of ex-drug users. Without improved social reintegration policies the long-term success of treatments is endangered, e.g., over half of drug users entering treatment is unemployed. The report includes 'conclusions for practice and policy' which could be used by policymakers in developing new, European strategies to promote social reintegration of drug users.

Photo by Rotorhead

EMCDDA Director Wolfgang Götz says: ‘Drug use often exacerbates the already difficult life conditions of excluded individuals, making integration efforts a real challenge for the person concerned and for those providing support. This aspect is particularly relevant during the current period of economic difficulties in Europe, with high levels of unemployment among young European citizens’. (Neglecting the social needs of drug users can undermine chances of long-term recovery)

Global recall

A new OECD internet portal that was launched in Brussels today allows consumers to check information on products that have been taken off the market because of safety problems. The portal will be fed by the input of consumer authorities worldwide, who can insert details on consumer product recalls into the database.

For more information, please refer to the European Commission's press release and the OECD 'Global Recalls' portal.

CJEU in Purely Creative on Unfair Commercial Practices and the Directive's Black List

Today the CJEU published its judgment in the Purely Creative case, giving explanation as to the interpretation of the Unfair Commercial Practices Directive. In particular, the case pays attention to Paragraph 31 of the Directive’s “Black List”, on aggressive the trade practice of creating the false impression that the consumer has won a prize.

The facts of the case offer an interesting read, also for getting an insight into the traders’ ingenious way to make money. The case deals with a number of promotions throughout the year 2008 which in different ways promised the addressees of the promotions that they had won prizes. This was done by sending letters and distributing scratch cards. How did the Purely Creative make its money? In essence by charging costs exceeding the costs involved with the prize which was allocated to almost all addressees, such as, in one of the promotions, a Zurich watch (which was, despite its name, made in Japan).

In its judgment the CJEU deals with two issues related to paragraph 31 of the Directive’s Black List, which prohibits:

“Creating the false impression that the consumer has already won, will win, or will on doing a particular act win, a prize or other equivalent benefit, when in fact either,

– there is no prize or other equivalent benefit,

– taking any action in relation to claiming the prize or other equivalent benefit is subject to the consumer paying money or incurring a cost.”

The first issue is whether the words “false impression” constitute a separate requirement within the provision. Purely Creative argued that, even if consumers had to pay money or incur a cost, this would not be prohibited as long as they were rightly informed about this, and thus that there would not be a “false impression”.

The CJEU does not agree on this. As soon as consumers are made to believe that they have won or will win a prize while there is no prize or while they have to pay money or incur costs to claim the prize, this is in itself an aggressive practice and thus prohibited. As the court states: “the term ‘false’ is not vital to an understanding of paragraph 31 of Annex I to the Unfair Commercial Practices Directive but merely reinforces the sentence in question.”

This makes sense if we look at the function of the Black List: the idea is to be able to easily identify factual circumstances as a specific aggressive (or misleading) black listed practice, without having to weigh in detail whether or not the information given is unfair.

The second issue concerns the second indent of paragraph 31, more specifically the question whether “paying money or incurring a cost” must be interpreted as meaning any payment or cost, or whether it only applies if it e.g. amounts to a certain proportion of the value of the prize.

Again, the CJEU is strict on this issue, arguing that any payment or cost leads to application of paragraph 31:

“[The] wording [of paragraph 31] does not allow for any exception, meaning that it is evident that the expression ‘incur a cost’ does not allow the consumer to bear the slightest cost, even if it is de minimis compared with the value of the prize or a cost which would not procure any advantage for the trader, such as the cost of a stamp.”

The CJEU therefore sticks to the literal interpretation of the Directive, again while this is necessary for courts and enforcement authorities to easily be able to identify the Black List practices and enforce prohibitions. That is exactly what the Black List is for, and that is also why the Black Listed practices are defined in such detail.

Seduction by Contract

NYU Professor Oren Bar-Gill just published a book on the legal, economic and psychological aspects of consumer contracts. The introduction to the book, entitled 'Seduction by Contract', is available on SSRN and may be summarised as follows:

'Consumers routinely enter into contracts with providers of goods and services. These contracts are designed by sophisticated sellers to exploit the psychological biases of consumers. They provide short-term benefits, while imposing long-term costs – because consumers are myopic and optimistic. They are excessively complex – because complexity allows sellers to hide the true cost of the product or service from the imperfectly rational consumer. Using both general theory and detailed case studies, this book explains the costs – to consumers and society at large – imposed by seductive contracts, and outlines a promising legal policy solution: Disclosure mandates. Simple, aggregate disclosures can help consumers make better choice. Comprehensive disclosures can facilitate the work of intermediaries, enabling them to better advise consumers. Effective disclosure would expose the seductive nature of consumer contracts and, as a result, reduce sellers’ incentives to write inefficient contracts.'

The transcript of a recent interview with Professor Bar-Gill on the subject matter of this book can be found here.

European Parliament & the CESL

Exactly one year after the Commission launched its proposal for a Regulation establishing a Common European Sales Law (CESL), yesterday the Economic Affairs committee of the European Parliament decided to support it. 

Meanwhile, the Parliament's Legal Affairs (JURI) and Internal Market (IMCO) Committees are also preparing reports due to be finalised in the coming months. 

This is thus only a first step towards a common EP position on the topic. 

However, the CESL proposal might be consistent with the direction indicated by the Internal Market committee through a non-binding resolution which was also adopted yesterday, urging the Commission to take action in the field of online cross-border trade in order to remove the (material and legal) obstacles which hinder exchanges and growth. Does this make a good auspice for the CESL's destiny? Don't miss the next episodes...

Boosting confidence and growth

Today the Council of the EU adopted a resolution: "A European Consumer Agenda - Boosting confidence and growth" in reply to earlier Communication of the European Commission of 22 May 2012. (The New Consumer Agenda) The Council welcomes the initiative of the Commission that singles out initiatives to be performed in the next years in order to empower consumers and boost their trust. The Council recognized:

"That the fragmentation among national parts of the Single Market and the growing complexity of the markets, characterised by globalisation of the production and supply chains, increasing digitalisation and an overload of information targeting consumers, is rapidly changing consumers' needs and expectations. Ensuring a high level of consumer protection in this context and empowering consumers by providing them with sufficient tools, knowledge, skills and competences to make conscious and informed choices, as well as facilitating sustainable consumption, is vital, taking also into account the particular needs of the more vulnerable consumer groups."

"That the Special Empowerment survey published in 2011-12 showed that one in four European consumers does not feel confident and more than one in three does not feel knowledgeable, and that the 2012 Spring Consumer conditions Scoreboard13 identified important gaps in the enforcement of consumer and product safety legislation in the Union"

"That, therefore, reaching the overall objectives of the European consumer strategy 2007-2013 - to allow citizens to shop from anywhere in the Union, from corner-shop to website, confident they are equally effectively protected, and to enable retailers to sell anywhere on the basis of a single simple set of rules - have not yet been fully attained"

Privacy on everyone's mind

KillR-B

This week has been rich in European news concerning data protection. I had a pleasure to participate in a three-day long, interdisciplinary Amsterdam Privacy Conference, participants of which focused on identifying various problems with the current definition and measures adopted to protect privacy (on- and offline). It is fascinating to hear views on privacy from not only lawyers, but also communication officers, IT specialists, etc. If we ever manage to design an effective system to protect privacy that could only happen due to cooperation of all these specialists. Unless of course we decide to abandon all hopes of ever reaching that effective level of privacy protection and stop treating it as a fundamental right, but instead see it as a commercial good - to be bought and sold to the highest bidder. Such ideas were also being discussed during the conference.

Aside the academics and practitioners, the European Parliament has also been debating the current data protection rules (Directive 95/46) together with members of national parliaments. The video of the meeting is available online. Interestingly, one of the issues discussed, namely the need to obtain the data holder's explicit consent before processing personal data, has been also the key topic of many presentations at the APC 2012 and almost everyone agreed that this requirement did not fulfil its function of offering effective data protection yardstick.

The Committee on Culture and Education adopted a resolution this Tuesday focusing on the protection of children online. The MEPs are worried that current rules are not compatible with the extensive use of modern technologies influencing children (through smart phones, software etc.). One of the recommendations is to improve the European coordination of hotlines and other contact points where anyone could report illegal content or harmful behaviour. Further development of parental controls as well as age verification systems is needed.

Denial is not the right way to avoid troubles...

... at least not for airlines.

On October 4, the CJEU issued two decisions which help clarify the scope of Regulation 261/04 on Denied Boarding, also in relation to its predecessor Regulation 295/91 (repealed).While Regulation  295/91 was explicitly limited by its Article 1 to cases "where passengers are denied access to an overbooked scheduled flight", no mention to overbooking is made in the new text- the CJEU was therefore requested by two national courts to clarify the implications of this novelty, resulting in the decisions Finnair v Lassooy (C-22/2011, from now on Finnair) and Rodríguez Cachafeiro and de los Reyes Martínez-Reboredo Varela-Villamor v Iberia (C-321/11, Iberia).

In very short terms, the Court seems to indicate that the Regulation is- generally speaking- intended to grant compensation to all passengers who are denied boarding on grounds which are "in no way attributable to the passenger to whom boarding is denied (Finnair par 33,  Iberia par 32). 

The concept of "denied boarding" is defined by the Regulation as "a refusal to carry passengers on a flight, although they have presented themselves for boarding under the conditions laid down in Article 3(2), except where there are reasonable grounds to deny them boarding, such as reasons of health, safety or security, or inadequate travel documentation". 

Therefore in principle 

"the concept of denied boarding [...] must be interpreted as relating not only to cases where boarding is denied because of overbooking but also to those where boarding is denied on other grounds[...]." (Finnair par 26)

Thus, provided that the passengers have showed up for check-in on time and with the appropriate travel documents, "reasonable grounds" are required to deny them boarding. Even though the CJEU acknowledges that "the EU legislature intended to provide a non-exhaustive list of the situations in which there are reasonable grounds for denying boarding." (Finnair par 30, Iberia par 29), but these reasonable grounds cannot be taken to encompass events such as those involved in the cases decided. Rescheduling due to a strike or the decision to cancel a reservation in the erroneous belief that the passengers would have missed the connection because of a previous delayed flight (operated by the same company!) cannot be considered as "reasonable grounds". The Court observes that 

"it cannot be accepted that an air carrier may increase considerably the situations in which it would have reasonable grounds for denying a passenger boarding. That would necessarily have the consequence of depriving such a passenger of all protection, which would be contrary to the objective of Regulation No 261/2004 which seeks to ensure a high level of protection for passengers by means of a broad interpretation of the rights granted to them." (Iberia par 33, but see Finnair par 34 for an almost identical consideration).

It seems, then, that the "reasonable grounds" clause has to be interpreted strictly in view of the Regulation's objective of offering travellers a high degree of protection.

In the Finnair decision, the CJEU also clarified that, different than in the case of cancellation, the regulation does not exempt airlines from their obligation to compensate passengers to whom they deny boarding on a confirmed flight on grounds of "extraordinary circumstances". (Finnair par 36) A fortiori, no exemption can thus be foreseen when the denied boarding is only, such as in the case at stake in Finnair, only an indirect consequence of those circumstances (par 37).

Nanomaterials - what you can't see, still can harm you

European Commission published this week a Communication on the Second Regulatory Review of Nanomaterials, which announces among others its plans to change EU law so that it assures the safety of the use of nanomaterials.

Nanomaterials have a very small particle size (1 nanometer is 10.000x smaller than the diameter of a human hair), which often influences their various properties. Nowadays, many nanomaterials are used in consumer products, e.g., UV-filters in sun creams or anti-odour textiles and consumers and their representatives would like to have more information on the possible influence of the use of these materials on consumers' safety and health. Often more research is needed to estimate such an influence. However, currently products containing nanomaterials are already on the market, which bodes a question whether consumer safety against their use is properly guaranteed. While the EU underlines the breakthrough possibility of the use of nanomaterials (Nanomaterials: case by case safety approach for breakthrough technology), consumer organisations like BEUC worry that consumers' safety is being compromised (EU nanotechnology plan: tiny focus on consumer protection). BEUC calls upon the European institutions to increase the transparency of information about the use of nanomaterials in consumer products and to improve pre-market testing.

"As with any other chemical, the ‘no data, no market’ rule should also apply to nanomaterials. It is a cause for concern that manufacturers can continue to put a product on the market whose safety has not been properly proven. It seems that once again consumers and the environment have lost out against innovation and economic growth." said Monique Goyens, Director General of the European Consumer Organisation.

It remains to be seen what obligations will the European institutions place on businesses using nanomaterials. So far, it has been mentioned that case-by-case approach to risk assessment should be applied, since nanomaterials and their use differ greatly. The Commission is working on how to formulate rules on the detection, measurement and monitoring methods for nanomaterials. Some of the plans involve setting up a web platform with references to information sources, as well as conducting an impact assessment. See more on nanotechnology here.

Orphan works will find home

Just a short update: the Orphan Works Directive was adopted yesterday by the Council. Upon a publication in the Official Journal of the EU it will enter into force. See more on this in our previous post: EU-wide online access to orphan works soon possible.

Objectivity of financial advice to consumers still not a given

Last week BEUC issued a press release in which it expressed its concerns about the European Parliament's plans to update the MiFID (Markets in Financial Instruments Directive). (Consumers left stranded: self-serving financial commissions survive EU vote) The draft of the EP's Economic Affairs committee apparently permits financial intermediaries to keep all their commissions and incentives received from the parties they are representing, as long as they disclose to consumers that they have received them. This system of disclosure is not seen as guaranteeing sufficient protection to consumers, taking into account the often aggressive practices that intermediaries use to sell the product from which they are themselves earning the most, and not the one that would be the most suitable for the consumer. Another proposal that may endanger consumers is the qualification of certain investment products as 'non-complex' at a European level (e.g. Undertakings for Collective Investment in Transferable Securities - UCITS), which would reduce the level of advice and warning about their risks that needs to be provided to consumers.

Pick out your cloud

In response to the 'cloud computing' strategy that the European Commission presented last week (Unleashing the potential of cloud computing), concerns are raised about the protection of users in the cloud. The Commission's strategy follows up on the proposal for new data protection rules and aims at clarifying standards for 'cloud computing', meaning the storage of data (such as text files, pictures and video) and software on remote computers, which users access over the internet on the device of their choice. While the key actions proposed by the Commission are mostly aimed at creating a seamless digital space for cloud providers, various sources point out that the protection of users should also be high on the agenda. As a Finnish newspaper writes (summarised on eurotopics):

'Clouds are already here, and they're here to stay in Europe. … It's crucial for the EU apparatus to protect the rights of consumers and company customers as regards the use of cloud services. Contract models for clarifying the main disputed issues are already in the pipeline. Customers must know in which countries their data is stored. Regulations also need to be established for the transfer of data, its destruction and data protection. Nonetheless Cloud services should not just be seen as a risk. People should also participate in the development of such services, because otherwise the branch will evolve without any input from Europe or Finland.'

The experience of some Dutch journalists whose data were mixed in the cloud also illustrates that user protection is a necessary feature of successful extension of the remote digital space (their story is available here, in Dutch).

Finally, privacy and cloud computing were among the topics discussed at last week's conference of the European Law Institute and may result in new projects of the institute.

Green motorbikes

Is the EU planning to have all motorcycles painted green? No worries, it's not.

The European Parliament last week agreed with the European Council on new rules for safer and greener motorbikes. While the responsibility of safe driving is up to consumers using motorcycles, mopeds, scooters, etc., the European institutions make sure that at least technical issues are regulated at a safe, European level. After all, ca 16% of accident deaths on Europe's roads occurs with involvement of motorbikes. Some of the new rules toughen the market surveillance, while others are more specific: e.g., all bigger motorbikes (over 125cc) will need to have an anti-lock braking system (ABS). Additionally, the level of emissions has been adjusted to make motorcycles more green.The vote on the proposal is scheduled for November in the plenary. (MEPs close deal with Council on safer, greener motorbikes)

Maintaining the flavour

The European Commission adopted today two new regulations (No 872/2012 and No 873/2012) concerning the use of flavouring substances in the EU. Various flavouring substances are added to food to improve or alter the taste, odour and other attributes of food. The new regulations aim at increasing the transparency of information about the use of these substances as well as increasing consumers' safety. Only these flavouring substances that are mentioned in the Regulation (over 2100 authorised substances) will be allowed to be used in food the end of 2014 (with an 18 months period of phasing out the use of prohibited substances). The use of flavouring substances is, in general, allowed if it does not endanger consumers' health at the level of the proposed use and if it does not mislead consumers (ethical, environmental etc. factors can also contribute to the assessment). Consumers and industry will be able to easily control whether the used substances are among the authorised ones since an online database will be created. The authorised uses of flavouring substances will be listed according to the category of food to which they may be added. (Enhancing Food Safety: EU adopts list of approved flavouring substances) More on flavourings here.