Thursday, 18 October 2012

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.

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