Friday, 20 December 2013

Interview with CJEU judge Sacha Prechal

Since this blog regularly reports on preliminary rulings of the Court of Justice of the EU, some of our followers may be interested in learning more about the daily practice at the Court and a judge's view on the interaction between the CJEU and national courts. 

If you are among those readers, you will find some nice literature for the holidays on the European Law Blog, where our colleagues have posted an interview that they recently held with Judge Sacha Prechal. Part I is about what it is like to be working at the Court, Part II concerns the cooperation with national judges, and embedding the internal market and transparency at the CJEU.

Thursday, 19 December 2013

Pyramid schemes - AG Sharpston in 4finance (C-515/12)

19 December 2013: Opinion AG Sharpston in 4finance case (C-515/12)

AG Sharpston delivered a very interesting opinion today in a Lithuanian case concerning potential pyramid schemes. Have you ever been asked to recommend a certain product or a service to a friend by providing their email address or a phone number on a website, having been promised that if they register for the same service/ product you would get a certain benefit? The CJEU has to assess whether such practices could be considered to constitute a pyramid scheme that is prohibited as an unfair commercial practice in the EU.

UAB "4finance" concludes distance contracts with consumers the purpose of which is to grant consumers small loans. From October 2010 to February 2011 it advertised its services by stating that anyone who registers on its website would receive a credit to his bank account for each 'friend' introduced by them who then registered on this website. The initial registration fee was very low - LTL 0.01, while if a friend registered on the same website consumers could get a credit to their account ('a bonus') of either LTL 10 or LTL 20. While registering every consumer was asked to provide a phone number or an email address of his friends, who would then be invited to register by 4finance. After registration you could apply for a small loan with 4finance.

The Lithuanian State Consumer Rights Protection Authority considered this to be a pyramid selling scheme, where consumers received a right to payment primarily for the introduction of new entrants to the scheme rather than for the sale or consumption of products, and, therefore, it fined 4finance. Since 4finance questioned this decision the case arrived at the CJEU.

AG Sharpston decided in its opinion that a national court to establish that there was a pyramid promotional scheme needs to take into consideration: 1) whether a consumer gave consideration in order to join such a scheme; 2) whether the scheme had a pyramid structure - that is it consisted of different levels with the operator at the apex and there was a cumulative recruitment of new members increasing exponentially; 3) whether the compensation paid to existing scheme members was derived primarily from the consideration given by new recruits, and it should not matter how small the consideration was.

This opinion was based on the cumulative and exhaustive list of elements that must be established in order to recognize a pyramid scheme as mentioned in Point 14 of Annex I to the Directive. The pyramid scheme does not have to be fraudulent, since fraud is not one of the requirements. Nor is there a requirement there for the consideration to be of (at least) a certain value. (Par. 21) It also does not matter whether a high amount of the return in comparison to the entry fee is promised or a speedy gain, since these requirements are not listed either as defining pyramid schemes (Par. 22). 

There is an interesting issue of conflicting language versions of the Directive that the AG Sharpston interprets, so for anyone interested in language & law debate, you should read the text of the whole opinion.

CJEU on the scope of unfair commercial practices - Case C‑281/12 (Trento Sviluppo en Centrale Adriatica)

Can incorrect advertising with the only effect of making consumers visit a certain shop be sanctioned as an unfair commercial practice?

Today, the Court of Justice decided that this is actually the case under European law.

The decision was rendered in the case Trento Sviluppo srl, Centrale Adriatica Soc. coop. arl v Autorità Garante della Concorrenza e del Mercato, case C‑281/12. An Italian consumer had complained to the local consumer autority (Autorità Garante per la Concorrenza e il Mercato, AGCOM) about a folder spread by a supermarket. The folder showcased an attractive offer concerning a laptop; when the consumer went to the shop and tried to by the product, however, it was not available. AGCOM opened an investigation and decided to fine the supermarket for attracting customers on its premises through an enticing yet bogus offer.The defendant challenged the fine and brought an action which finally ended up in front of the CJEU.

The Court in this context had to assess whether the relevant European instrument, ie the Unfair Commercial Practices Directive, allows national authorities to include a similar advertising technique within the scope of forbidden commercial practices. 

The Directive (article 5) prohibits practices which are likely ‘to materially distort the economic behaviour of consumers’. Two main categories of practices are forbidden, namely aggressive and misleading practices. According to article 6 of the Directive, a practice is misleading 

"if it contains false information and is therefore untruthful or in any way, including overall presentation, deceives or is likely to deceive the average consumer, even if the information is factually correct, in relation to one or more of the following elements, and in either case causes or is likely to cause him to take a transactional decision that he would not have taken otherwise:
(b)      the main characteristics of the product, such as its availability …

The core question before the CJEU was, accordingly, whether  the decision to visit a shop can be considered as a "transactional decision" which the concerned advertisement was likely to affect. This requires to interpret the wording in a rather extensive way: the definition of transactional decision contained in the directive's art 2(k), however, is quite broad, covering ‘any decision taken by a consumer concerning whether, how and on what terms to purchase’

Interpreting the Directive, the Court esteemed that the definition "covers not only the decision whether or not to purchase a product, but also the decision directly related to that decision, in particular the decision to enter the shop."

The practice of enticing consumers by advertising attractive offers with (very limited) availability is hardly rare in many sectors. Therefore, it is likely that the impact of this decision will mostly depend on national authorities and their willingness to sanction similar cases every time they come under their attention.

Friday, 13 December 2013

Consumers are citizens (and human beings) too

And just one more news item for today: strengthened consumer rights can of course not diminish the reality of the economic crisis and an honest evaluation of the state of EU citizenship is, therefore, needed. The European Ombudsman, Emily O'Reilly, gave a speech on this topic at the closing conference of the 'European Year of Citizens 2013', which highlights the importance of bringing Europe closer to its citizens:

'This is a time therefore when we need to keep foremost in our minds those values and principles on which the EU was founded, not just the economic ones but also, and more importantly, respect for fundamental rights, for the notion of freedom, solidarity the protection of minorities and respect for cultural and language diversity.

The Irish President Michael D. Higgins has referred to “Human Europe” and when people struggle to describe what is felt to be missing from the current make up of our Union perhaps this precisely is it, the sense of the heartbeat pulsating away and not just the sterile and silent ebbs and flows of the stock market.'

A summary of the Ombudsman's speech can be found here.

Europe's holiday gift to consumers

More consumer news today, as the European Commission reminds us of the passing of the deadline for the introduction of the Consumer Rights Directive. The press release reads:

'Just in time for the holiday period, shoppers across Europe can as of today count on a new set of consumer rights: today marks the deadline for Member States to introduce the European Union’s Consumer Rights Directive into national law. The EU legislation will strengthen consumers' rights in all 28 EU countries, particularly when shopping online. The new rules will for example ensure an EU-wide withdrawal period of 14 days meaning that consumers can return goods for whatever reason if they change their minds.'

Basic bank accounts for all

Yesterday, the European Parliament voted in favour of draft legislation giving anyone legally residing within the EU a right to open a bank account. I quote from the Parliament's press release:

'"In today's world, consumers as well as the retail sector depend upon access to modern payment services. Providing electronic payment services is not very costly, and they can make consumers' lives easier, boost business efficiency and help to modernize our economies. Parliament therefore considers it urgently necessary to require banks to provide these services and empower consumers to make informed choices. Parliament has dealt promptly with this file, and it is now up to EU member states to do likewise, so that we can conclude work on this file in spring next year", said lead MEP Jürgen Klute (GUE/NGL, DE), after the vote.'

Forms matter: informing consumers effectively

Yesterday, European consumer organisation BEUC published a study that our colleague Natali Helberger (Institute for Information Law) prepared on consumer information. Her paper, which is also available on SSRN, may be summarised as follows:

'This study examines what lessons can be learned from behavioural research for the form in which consumer information is being presented. The argument that this study makes is that the form in which information is presented and the effective communication of such information is at least as important as its content, and that this is an aspect that is still generally neglected in information and consumer law. The study is particularly interested in the potential of digital technologies in making consumer information more effective, and new approaches to form requirements in areas in which the importance of effective communication has already been acknowledged, such as in communications law. The study concludes with concrete suggestions for the future design of transparency requirements in information law and policy.'

Thursday, 12 December 2013

Challenging the Data Retention Directive - Opinion of AG Cruz Villalón in Case C-293/12 Digital Rights Ireland

Whilst the case mentioned in my previous post concerned a question that according to AG Wahl is beyond the reach of EU law, AG Cruz Villalón today presented his opinion on a topic that is certainly within its scope and, if the CJEU follows the AG's reasoning, could have a paramount effect on it. In Digital Rights Ireland, the AG submits that the EU's Data Retention Directive is incompatible with the right to privacy laid down in the Charter of Fundamental Rights.

AG Cruz observes:

'72. [T]he collection and, above all, the retention, in huge databases, of the large quantities of data generated or processed in connection with most of the everyday electronic communications of citizens of the Union constitute a serious interference with the privacy of those individuals, even if they only establish the conditions allowing retrospective scrutiny of their personal and professional activities. The collection of such data establishes the conditions for surveillance which, although carried out only retrospectively when the data are used, none the less constitutes a permanent threat throughout the data retention period to the right of citizens of the Union to confidentiality in their private lives. The vague feeling of surveillance created raises very acutely the question of the data retention period. (...)

77. It is true that Directive 2006/24 requires the Member States to ensure that data are retained in accordance with that directive. It is interesting to note though that it is required to carry this out only in such a way that those data and any other necessary information relating to them ‘can be transmitted upon request to the competent authorities without undue delay’. Directive 2006/24 provides, moreover, that the Member States must ensure that providers of electronic communications services observe minimum principles concerning the protection and security of the data retained.

78. However, no provision of Directive 2006/24 lays down the requirement for those service providers themselves to store the data to be retained in the territory of a Member State, under the jurisdiction of a Member State, a fact which considerably increases the risk that such data may be accessible or disclosed in infringement of that legislation.

79. That ‘outsourcing’ of data retention admittedly allows the retained data to be distanced from the public authorities of the Member States and thus to be placed beyond their direct grip and any control, but by that very fact it simultaneously increases the risk of use which is incompatible with the requirements resulting from the right to privacy.

80. Directive 2006/24 therefore constitutes, as is clear from the foregoing reasoning, a particularly serious interference with the right to privacy and it is in the light of the requirements resulting from that fundamental right that its validity, and in particular its proportionality, must primarily be examined. (...)

102. The serious interference with the right to privacy which, as a consequence of the "creating" effect of Directive 2006/24, the Member States are meant to incorporate into their own legal systems thus appears to be disproportionate to the need solely to ensure the functioning of the internal market, even if that collection and retention must also be considered an appropriate and even necessary means of achieving the ultimate objective pursued by the directive of ensuring that the data are available for the purpose of the investigation and prosecution of serious crime. In summary, Directive 2006/24 would fail the proportionality test for the very reasons which justified its legal basis. The reasons for its legitimacy in terms of its legal basis would, paradoxically, be the reasons for its illegitimacy in terms of proportionality.'

On the division of tasks between EU and Member States, AG Cruz remarks:

'120. The European Union legislature cannot, when adopting an act imposing obligations which constitute serious interference with the fundamental rights of citizens of the Union, entirely leave to the Member States the task of defining the guarantees capable of justifying that interference. It cannot content itself either with assigning the task of defining and establishing those guarantees to the competent legislative and/or administrative authorities of the Member States called upon, where appropriate, to adopt national measures implementing such an act or with relying entirely on the judicial authorities responsible for reviewing its practical application. It must, if it is not to render the provisions of Article 51(1) of the Charter meaningless, fully assume its share of responsibility by defining at the very least the principles which must govern the definition, establishment, application and review of observance of those guarantees.'

Accordingly, 'it was for the European Union legislature to define the fundamental principles which were to govern the determination of the minimum guarantees for access to the data collected and retained and their use' (para. 121).

See the CJEU's press release for further details.

Who decides who decides - Opinion of AG Wahl in Case C-470/12 Pohotovost'

What position do consumer organisations hold under EU law when it comes to assisting consumers in pursuing their claims in court? While the Court of Justice of the EU (CJEU) recently clarified the conditions under which a consumer organisation may bring an independent claim regarding unfair contract terms (ACICL v. ASE), a case that is currently pending concerns the possibilities for an organisation to join in a procedure regarding the enforcement of an arbitration award. Today, Advocate-General Wahl handed down his Opinion in this case, C-470/12 Pohotovost'.

The case concerns a Slovak credit supplier, Pohotovost', who had concluded a consumer credit contract with a certain client. Subsequently, as a result of arbitration proceedings concerning this contract, an arbitration tribunal ordered the consumer/client to pay the credit company a certain amount of money. The arbitration award became final and execution proceedings followed. At this stage, consumer organisation HOOS asked to be added to the proceedings, in particular in order to challenge the impartiality of the bailiff involved in the case, who earlier had been employed by Pohotovost'. 

Slovak procedural law prevents the consumer organisation from joining the proceedings. The referring court is in doubt as to the validity of this national rule of procedure in light of the consumer protection offered by EU Directive 93/13 jo. Articles 38 and 47 of the EU Charter of Fundamental Rights (consumer protection and the right to an effective remedy).

According to AG Wahl, EU law does not preclude a provision of national law that prevents a consumer organisation from joining in enforcement proceedings. At the same time, the relevant provisions of EU law do not stand in the way of a judge allowing a consumer organisation to join such proceedings. In other words, in the AG's opinion the question referred to the CJEU is neither directly nor indirectly governed by EU law: Directive 93/13 does not address the role of consumer organisations joining in individual proceedings, nor does it prohibit Member States from adopting a higher level of consumer protection by allowing judges to accept consumer organisations being added to such proceedings. Articles 38 and 47 of the Charter do not lead to a different conclusion, since they do not support an interpretation of the Directive in the sense that it would lay down a right for consumer organisations to join in individual enforcement proceedings.

In sum, whereas this opinion does not promote a further extension of EU legislative competences (and thus respects the procedural autonomy of the Member States), it does offer a clear illustration of the process of constitutionalisation of EU consumer law (visible in the growing number of references to the Charter in preliminary reference procedures).

Fees for transcripts of personal data? CJEU in "X", C‑486/12

Today, the CJEU released a decision whose potential impact on Member States' administrative practice will have to be carefully weighed in the coming months.
The main question before the Court was the following: (how much) can citizens be required to pay in order to get a transcript of their data being processed by an administration?
Access to personal data is a very important component of European data protection, last but not least because it is instrumental to other pillars thereof (such as the right to have one's data deleted). In the case at hand, Ms X wanted to get a transcript of her residence information over a number of years from her municipality, in order to claim that the notice concerning a certain fine had been sent to the wrong address. Her municipality provided her a certified transcript of her past and present addresses levying a charge of ca 12 euros. X consteted the payment request before a local court, which denied her claim. The Court of Appeal of 's Hertogenbosch issued a preliminary ruling request.

Dutch law does not leave authorities free to charge any price for the transmission of certificates. The sum levyed must be such that "the income from that fee does not exceed the related expenditure". It is not guaranteed, however, that the "related expenditure" considered only concerns the transmission costs. Besides, from the wording of Directive 95/46 which sets European principles in the matter, it is not clear whether authorities can claim a fee at all.

From the English and Dutch versions of the Directive, it could seem that the data should be communicated without excessive delay and free of charge. Other language versions, however, inter alia the German, Spanish, Italian and French ones, do not seem to grant a similar interpretation. All in all, the Court considers there is no prohibition for MS to levy a fee on this "service" [par 21].

If a sum can be charged, is there a limit to it? The Court considers that such limit should be carefully considered in order to make sure that the need to pay a charge is not likely to prevent anyone from accessing her of his personal data [par 29]. It is in principle up to national courts to ascertain whether the fee levied respects this condition. However, just after having stated this principle, the Court gives a much more precise criterion: the fee should not exceed the costs which the authority has to incur in order to transmit the information. National courts have to "carry out any verifications necessary" to ascertain whether such requirement has been respected [par 31].  

What will this imply for national burocracies? There's quite something to be curious about.

Wednesday, 11 December 2013

Mortgage Credit Directive, the ball is now in the Council's court

Earlier this year, we had reported that the European Parliament, both through its Economic and Monetary Affairs Committee and in a plenary vote, had manifested its support for the Commission's proposal on a Morgage Credit Directive. On Tuesday, the Directive has been approved in first reading, which means that now the word is to the Council, that might decide to approve the directive or to send it back to the Parliament with amendments.

Some key features of the proposed directive are:
  • the introduction of a standardised information sheet, which should make comparing different offers easier and also include "worst case scenario" information;
  • the establishment of a series of business conduct rules aimed at preventing malpractice and conflicts of interests;
  • esuring that consumers are given the chance to repay the debt earlier than originally agreed;
  • a "passport" regime aimed at making it easier for credit providers to do business cross-borders;
  • european-wide standards for the credit-worthiness assessment of mortgage applicants.
  • rules facilitating the "smooth" handling of arrears and other repayment difficulties.
The impact of the rules would vary greatly from country to country. For instance, the Commission's impact assessment reports that in 2006/2007, a stunning 45% of UK mortgages were granted without the consumer's income being verified, a figure which is unlikely to represent the EU's average. An interesting collection of fact and figures has been put together in a rich Commission memo.

The text of the proposed directive can be dowloaded here (part II).

Not quite painless results of delaying entry of a generic painkiller to Dutch market

As we mentioned in February, the European Commission was examining the practices of pharmaceutics companies with regards to their delay in introducing cheaper, generic versions of a painkiller 'fentanyl' on the Dutch market (Consumer health update). Since the Commission could establish from the internal documents of the pharma companies that they agreed to delay the introduction of the generic meds for 'a part of [the] cake', the Commission had no doubts that the so-called 'co-promotion agreement' was really an anticompetition agreement and infringed the EU law. The US company Johnson & Johnson was fined with almost 11 million USD, while the Swiss company Novartis has to pay almost 5,5 million Euro in fines (Commission fines Johnson & Johnson and Novartis Euro 16 million for delaying market entry of generic pain-killer fentanyl).

Sweeteners remain sweet

You may have heard previously that sugar is bad for consumers, but the artificial sweeteners are often mentioned as being even more detrimental for consumer health (see e.g.: Coca-Cola 'under pressure' from consumers over Diet Coke aspartame use). The European Food Safety Authority (EFSA) announced yesterday its opinion on one of the most commonly used sweeteners - aspartame. It conducted a full risk assessment thereof and concluded that this substance is safe at current levels of exposure (current acceptable daily intake is estimated at 40mg/kg bw/day). In their studies experts have ruled out a possibility of aspartame causing damage to genes and inducing cancer, harming the brain, the nervous system or affecting behaviour or cognitive functions of its users. The breakdown products of aspartame appear naturally in other foods and therefore should not be seen as posing additional risks, either.

Combating illicit tobacco trade

The European Council's meetings take place this week and the Council published yesterday its conclusions among others with regards to stepping up the fight against illicit trade in tobacco products (Economic and Financial Affairs). Since the business of smuggling cigarettes into the EU seems to be growing, the Council deems it necessary that stricter rules are applied to prevent it. The negative financial impact of illicit trade in tobacco products is estimated at over 10 billion euro on the budget of the EU and the Member States. More importantly for consumer protection, such practices have a negative impact on health protection, especially of young people. The Council points out to the Member States and the Commission areas in which some improvements could be made to more effectively combat illicit trade, e.g., easier and faster detection of smuggled tobacco products, cooperation with source and transit countries, awareness raising campaigns (Cigarette smuggling threatens financial, social and health security of the EU and must be tackled effectively).

Tuesday, 10 December 2013

Air travel, uninterrupted

As we reported last month ("Sir, please, leave your mobile ON"), and as timely as promised, the European Aviation Safety Agency (EASA) updated its guidelines on the use of portable electronic devices on board (PED). Pursuant to the new rules air passengers will be allowed to use their smartphones, e-readers, tablets provided these remain in the "Flight Mode" throughout the whole journey, which includes take-off, taxiing and landing. No more having to switch off and on your devices for these few annoying minutes. The guidelines should be published in the beginning of 2014 and hopefully the airlines will start applying them ASAP. (EU extends the use of electronic devices on planes) More information about these rules may be found here.

Thursday, 5 December 2013

European Enforcement Orders in disputes between "consumers", C-508/12

Today, the CJEU delivered also a judgement concerning enforcement of uncontested cross-border claims: Case C‑508/12 Vapenik v Thurner

European Enforcement Orders are a mechanism allowing judgements on uncontested claims to be enforced in a country different than the one where they have been issued without incurring the hurdles of exequatur or validation procedures. 

The dispute concerned repayment of a loan concluded between two parties none of whom was acting in a professional capacity. They were, this, both consumers.The creditor sued in his home country Austria, the procedure ran in accordance with Austrian law and the duly notified debtor decided not to appear before the court. The judgement, which found in favour of the creditor, remained unchallenged and thus became final and enforceable. The creditor then asked the same Austrian court to grant him a European Enforcement order to have the judgement more easily enforced in Belgium, where the debtor lives. The court refused, holding that one of the requirements for issuing such an order against a "consumer" debtor is that the judgement has been given in the state where he has his domicile (see Regulation 805/2004, art 6(1)(d)).

In short, the CJEU found in favour of the claimant, the creditor, who submitted [par 20] that the rule is intended to protect consumers when the other party is a professional and does not apply to "peer to peer" contracts as the one at hand. 
In particular, the court observed [par 33] that "there is also no imbalance between the parties in a contractual relationship such as that at issue in the main proceedings, namely that between two persons not engaged in commercial or professional activities. Therefore, that relationship cannot be subject to the system of special protection applicable to consumers contracting with persons engaged in commercial or professional activities."

P.S.: More curious readers might also want to take a look directly at the Court's reasoning in the case, which provides an interesting outlook on (the Court's view on) consumer protection as a system. 

Consumer protection associations require less protection than consumers - CJEU in C-413/12 (ACICL v. ASE)

5 December 2013: CJEU judgment in C-413/12 (Asociación de Consumidores Independientes de Castilla y León v. Anuntis Segundamano España SL)

Unfair Contract Terms Directive enables not only consumers to claim unfairness of contractual provisions included in their specific contracts, but it also gives a possibility to consumer protection organisations to represent consumers in claiming unfairness of certain contractual provisions in abstracto. In the case adjudicated today the CJEU was asked to assess on what conditions consumer protection organisations may start such proceedings.

A Spanisch consumer protection association - ACICL - has its registered office in Salamanca, 110 members and limits its activity to the territory of the province Castilla y León. It asked for an injunction before the court in Salamanca against ASE - a commercial company registered in Barcelona. ASE manages a website on which various parties, both professional and non-professional, may publish advertisements concerning real estate and second-hand goods, but also employment. Standard contract terms of ASE contained two provisions (limiting liability and guarantees), pursuant to ACICL, which should be seen as unfair and ASE should be prohibited from using them in the future. The court in Salamanca refused, however, to preside over the case finding that it did not have jursidiction in the matter, since Spanish law obligates consumer protection association to start injunction proceedings before the court of the defendant's residence. 

CJEU was asked whether the high level of consumer protection argued for in the Directive should not preclude such national procedural provisions that force a consumer protection association to ask for an injunction before the court where the defendant has its residence. Moreover, the inability to appeal from a court's decision to refuse jurisdiction was questioned. After all, contractual clauses that force consumers to start proceedings before the courts other than of his domicile are often recognized as unfair. However, the CJEU does not consider consumer protection associations to be in the same inferior position with regards to the seller or a service provider, as a consumer would be in. (Par. 48)

The CJEU decided today that national law may require consumer protection associations to bring injunction proceedings before the court where the defendant has its residence and there is no need for appeal proceedings to be granted in case jursidiction is denied. While Art. 7 of the Directive obligates Member States to enable consumer protection associations to represent consumers interests by asking for an injunction against the continued use of injunctions, the Directive does not contain any provisions that would regulate which national court should have a jurisdiction or how many instances of jurisidiction are given. (Par. 28) This issue has also not been regulated in the Injunctions Directive. (Par. 29) There is, therefore, no harmonized procedure on the matter. The principles of effectiveness and equivalence are also not seen as having been infringed. The CJEU does not consider the fact that the ACICL may not have financial means to start an injunction procedure at a court that is far away from its own offices an obstacle that results from the existence of the national procedural rules, but rather from the assciation's financial situation. (Par. 37) The general procedural rules aim at protecting justice and foreseeability and are given priority here over individual interests, that is, specific financial situation of a party. (Par. 38) The answer of the CJEU could be different if the procedure was a cross-border one, since then it may not be expected of the organisation to have to start a case only before the court's of the trader's country of residence (see Henkel - par. 47).

Tuesday, 3 December 2013

What do consumers complain about? Prices' and services' differentiation.

The ECC-Net published a report "Enhanced Consumer Protection - the Services Directive 2006/123/EC. Analysis of Article 20.2 and Article 21 related consumer complaints reported to ECC-Net between 2010 and 2012". This network gives consumers free professional advice related to their problems with cross-border transactions within the EU (incl. Norway and Iceland). As the name suggests this report analyses two years worth of reports on consumer complaints submitted with regards to the cross-border transactions they concluded. While the aim of the EU is to create a more uniform European internal market where consumers would be able to benefit from deals not only in their own home countries but also in other European Member States, in order to achieve this objective the same level playing field needs to be created for consumers. This means that consumers should not be discriminated based on their nationality or place of residence (e.g., if you want to buy a good in Poland, you should be offered it under the same price whether you reside in Poland or in Greece). That being said, 74% of the received complaints concerning services showed that consumers were offered different prices (based mostly on their residence ) while buying goods online (167 cases of different treatment out of 222 reported to ECC-Net), 21% complaints were related to services in the tourism industry and 5% in the rental and leasing services. The service providers mostly introduce differences in providing their services and in their prices by either redirecting consumers to national websites for limited access to retail goods, or by tailoring offered services to the consumer's country of residence. Consumers mostly complained about the refusal to supply, price differentiation and difference in other conditions of access (e.g. requirement to have a bank account in a given country). 72 cases out of 222 (32%) required active intervention on behalf of consumers with a nearly 50% rate of success. Only 12 cases were reported to relevant enforcement authorities with only one decision having been made by these authorities. More data can be found in the report, but the ECC-Network signalises that more should be done to make the Services Directive effective for consumer protection.

Thursday, 28 November 2013

Vehicles should be quieter but not silent

The newest trend among my friends is to invest some money into buying noise-cancelling headphones. You use them not only in public spaces where on the one hand you may want to block out noise made by traffic and strangers and on the other hand you could try to limit the noise you are making. No, you use them also at work, at home, to improve your concentration by eliminating any external noise. Surrounding yourself with silence seems to be a goal nowadays. In similar spirit, the European Parliament´s Environment Committee endorsed on Wednesday new proposals for regulating traffic noise in order to protect pedestrians´ health (noise made by standard cars would need to be limited from 74db to 68db in 12 years).  Consumers would be better informed as to the noise level their vehicles make due to an introduction of a new labeling system. Interestingly, the soundless electric and hybrid cars raise worries among the MEPs, since they are seen as potential threat to pedestrians who won’t expect their approach and therefore, a cause for more accidents. The proposal would be to add some acoustic to these vehicles in order to increase road safety. (Environment MEPs back law to turn down harmful traffic noise)  It seems then that the goal is to limit the noise but not to cancel it.
Additionally, on Tuesday MEPs and member states’ negotiators reached an informal deal regarding new rules on CO2 emissions that should be achieved by 2020 (95g/km as mandatory target applicable to 95% of new cars). (Car CO2 emissions: MEPs reach a deal with Lithuanian Presidency of the Council)

Back to the future vehicles

In January 2013 the European Commission proposed a new Directive pursuant to which the Member States would be required to set up a specific minimum of alternative fuels stations (electricity, hydrogen and natural gas) across the EU, with common standards. This would enable European consumers to easier choose for alternative fuels vehicles, since they would be assured they could use them with ease traveling in the EU. Currently, the problem is that not many refueling stations are built since not enough consumers purchase such vehicles, while consumers do not choose for these vehicles due to lack of support system. On Tuesday the European Parliament´s Transport Committee voted in these measures. The MEPs proposal strengthened Commission’s, e.g., by requiring that consumers were better informed about the different prices of fuels offered, so that they could easily compare them; that the colors of hoses and nuzzles were harmonized across the EU facilitating consumer use thereof; that electricity was made available at airports and that consumers could recharge electric vehicles during off-peak times, when prices are lower. The Commission criticizes, however, the lack of provisions on recharging points not accessible to the public, as potentially reducing the consumers’ confidence in the electric cars market. (Alternative fuels for transport: Parliament committee vote supportsroll-out of refueling infrastructure)

Online music services

On Tuesday the Legal Affairs MEPs endorsed the new rules on copyrights that make it easier for online providers to obtain copyright licenses to stream music cross-border. This could be achieved by allowing online providers to obtain these licenses from a small number of authors’ collective management organizations  that operate across EU borders, instead of forcing them to obtain separate licenses from national organizations in every Member State they provide services to. The aim is that EU-wide online music services are made available to consumers, while at the same time music authors rights and their royalties are protected. 

Money, money, money – BEUC on recent EU proposals related to consumer payments

On 18 November the Economic and Monetary Affairs Committee of the European Parliament voted on the Commission’s proposal regarding bank accounts. The new rules aim to increase bank fees´ transparency, facilitate switching between bank accounts and make opening of a basic bank account simpler and affordable for anyone (currently 10% Europeans do not have a bank account). BEUC in its press releases criticizes certain developments with regard to the proposal: suspension of a rule that would create a system for automatic redirection  of payments from the former to the new account; Member States will need to harmonize terminology for only 10 services linked to a bank account and not all of them, which will not serve the aim of assuring full transparency. (Bank account plans: Timid steps towards more transparency)
This week BEUC evaluated two new Commission’s proposals that intend to increase consumer protection on the financial services market. First, the proposal for a Regulation on interchange fees for card-based payment transactions was positively evaluated by BEUC, even if they argue that it should remain a minimum harmonization area, so that the Member States are allowed to protect consumers more (by reducing the interchange fee caps, e.g., below the suggested 0,2% or 0,3% level). BEUC expresses also its preference for an EU-wide ban on surcharges. It argues also for the choice to be left to consumers as to what payment brand they want to use at the point of sale. The consumer should also be able to decide freely whether or not he needs two or more different payment brands on his card, telecommunication or IT device, etc. In general, the new framework would be a positive development for consumers potentially limiting the monopoly of two credit card companies that dominate the payments market in the EU (Mastercard and Visa), often prevailing over national debit cards that are cheaper to use for consumers and merchants in comparison to international cards.
Second, the proposal for the new Payment Services Directive was assessed by BEUC. BEUC again argues here for these rules to have a minimum harmonization standard, so that the Member States could maintain stricter rules they already have in favor of consumer protection. Electronic money should fall within the scope of payment services regulated by the Directive. The EU-wide ban on surcharges is required by BEUC also with respect to these rules, since surcharges are perceived as having failed in steering consumers towards more efficient and cheaper means of payment. The payment service providers should refund any unauthorized transactions from the consumers’ accounts on the same day they have become aware thereof (currently the obligation of ‘immediate’ refund is interpreted differently across the EU) and consumers should be granted an unconditional refund right for direct debit transactions. This would give consumers control over his direct debit payments and provide easy redress instruments in case of fraudulent payments or undelivered goods/services. In order to protect consumers against payment frauds and incidents thereof should be reported regularly to national and European authorities.
See BEUC's website for more detailed assessment.

Wednesday, 27 November 2013

Scope of required disclosure when buying securities - AG Sharpston in Timmel (C-359/12)

26 November 2013: AG Sharpston opinion in case Timmel (C-359/12)

It's a cliche but financial services are often complex and consumers often require more strict protection measures with respect to such services. Currently, many consumer protection measures rely on information duties (despite raising criticism of this instrument it is still predominant) and what kind of information is to be disclosed and in what form often is subject to lengthy disputes. In the Timmel case AG Sharpston gave its opinion on the mandatory information that needs to be revealed in a 'prospectus' to the public interested in purchasing securities. 

The Prospectus Directive requires such information to be conveyed that enables investors to make an informed assessment of the financial position of the issuer and of the rights attaching to the securities in question. Regulation No 809/2004 sets detailed requirements for the content and format in which information should be presented in a prospectus. Interestingly, while the Directive mentions certain information as mandatory, the Regulation allows the issuer of a prospectus to omit such 'required' information if it is not known at the time when a base prospectus is approved and can only be determined at the time of issue (Par. 38). Mr Timmel subscribed for Dragon FX Grant securities (drawn up by Lehman Brothers Treasury Co.), for which certain required information was omitted from the base prospectus and from a supplement to it. He argued that he had a right to withdraw from the contract due to not valid publication of the securities in question, which right of withdrawal is granted to consumer-investors (private persons acting on their own account, not on behalf of a company). The AG Sharpston considers the supplement to the prospectus as having a function of correcting any material mistakes or inaccuracies as well as revealing significant new factors (Par. 41). If the required information became known to the issuer after the prospectus has been published but would not materially influence the assessment of securities, it does not have to be revealed in the supplement but may be added to the final terms instead (Par. 51).

Not only the base prospectus or its supplements did not contain required information, but they were also not made publicly available. The documents could only be found and retrieved for awhile on the homepage of the Luxembourg Stock Exchange, following a lengthy and complicated registration process, upon which only two documents per month could be consulted free of charge. This contradicts according to the AG Sharpston the requirements of Art. 29 Regulation, pursuant to which a base prospectus should be easily accessible to an investor when entering the website (Par. 68).

Additionally, the AG clarifies the issue as to where the base prospectus must be made available: at the registered office of the issuer and at the offices of the financial intermediaries (Par. 84).

Tuesday, 26 November 2013

Belgian improper implementation of Unfair Commercial Practices Directive - AG Cruz Villalón in Commission v. Belgium (C-421/12)

26 November 2013: AG Cruz Villalón opinion in case Commission v. Belgium (C-421/12)

AG Cruz Villalón was busy in the last couple of days since he also issued an opinion today in the EU case against Belgium, in which it was claimed that Belgium did not properly implement Unfair Commercial Practices Directive. In general, the AG supports all three claims made by the Commission against Belgium. 

First, while the UCP Directive is applicable to all traders, regardless of their legal status or the sphere of their commercial activity, Belgium decided to exclude certain professions from the application scope of its national law implementing the Directive, namely: representatives of liberal professions, dentists and physiotherapists (only misleading and comparative advertisement is prohibited in Belgium with respect to these professions).

Second, while the UCP Directive intends to fully harmonize unfair commercial practices in Europe, Belgium sets consumer protection level higher with respect to informing consumers about discounted prices. Namely, prices may be marked as discounted only if their price is lower than the lowest price that has been set by the same trader on them in the given month. Since the Directive does not blacklist a commercial practice that would inform consumers about discounted prices in other circumstances than mentioned in the national law, the national law may not do that either.

Third, the UCP Directive does not prohibit certain commercial practices as unfair that have been declared as unfair and prohibited in Belgian law: many forms of off-premises sales and travelling trading (the value of the off-premises sale may not be higher than 250 euro per consumer; health products, health plants or products made thereof, medical devices, lenses, metals, jewels, pearls, weapons and ammunition may not be sold off-premises). Since these prohibitions have not existed in Belgian law prior to the adoption of the Directive they should not fall within the scope of national provisions that could remain upheld in the transitional period by national legislators.

Ius est ars boni et aequi - Opinion of AG Cruz Villalón in Case C-314/12 UPC Telekabel Wien

What responsibilities do digital service providers have towards copyright holders? Can an internet provider be required to block access to a website on which movies are made available without the consent of the film industry?

Case C-314/12 UPC Telekabel Wien v Constantin Film Verleih & Wega Filmproduktionsgesellschaft, which is currently pending before the Court of Justice of the EU, gives a clear illustration of the problem. The case concerns the access to a website on which more than 130,000 (!) movies were made available for streaming and downloading without permission of copyright holders. The owners of the website, which was taken offline after criminal investigation, were prosecuted in Germany. The present case regards the legal responsibility of an internet service provider whose services allowed Austrian users to access the illegal website. The question at issue is whether the internet provider, who had no (contractual) relation at all to the makers of the website, was under a legal duty to prohibit users from accessing the website.

In a nuanced Opinion in this case, Advocate General Cruz Villalón submits that it is not compatible with EU law to impose a general prohibition on an internet provider to allow its users to view a website that violates copyright law, without giving any specific guidance as to concrete measures that should be taken so as to prevent access to the site. According to the AG, moreover, this is not different in case a provider may avoid sanctions by demonstrating to have taken all reasonable measures to uphold the prohibition.

Still, in AG Cruz's opinion, a national measure specifically requiring a certain provider to block access to a designated website is not as a matter of principle disproportionate for the sole fact that it requires the service provider to incur not inconsiderable costs, while users may easily circumvent the technical measures taken by the service provider. It remains the task of national judges to strike the delicate balance of parties' rights in specific cases.

The AG bases his conclusions on the balancing of fundamental rights within the ambit of what is 'fair and equitable' and 'proportionate' in the sense of Article 3 of Directive 2004/48 on the enforcement of intellectual property rights. The balance involves the right to protection of intellectual property (Article 17(2) of the EU Charter of Fundamental Rights) and, on the service provider's side, freedom of information (Article 11 of the Charter) and freedom to conduct a business (Article 16 of the Charter). As AG Cruz points out, imposing a general obligation de résultat on the service provider to prevent access to websites that violate copyright law does not reflect a fair balance of these rights. Giving a service provider the possibility to avoid sanctions by showing to have taken all reasonable measures does not restore the balance, as it pushes back the consideration of relevant fundamental rights argumentation to the second stage of the assessment. Moreover, while a copyright holder has strong claims in hand, a digital service provider who is not infringing copyright himself would hardly have any defence against the imposition of a burdensome general measure aimed at preventing the abuse of intellectual property rights by third parties to which the provider has no contractual relationship.

In sum, the complex task of balancing the interests and rights involved in cases of massive copyright infringements through the internet would remain a task of national judges in specific cases.

See also the CJEU's press release (which, interestingly, leaves out most of these nuances of its heading).

Monday, 25 November 2013

Are you watching your tv or is your tv watching you?

Smart TVs are devices which combine the features of a traditional TV screens with interactive media. Basically, they allow their owners to not only watch content, but also to store it and browse among different sources, using local networks as well as- most importantly for our story- accessing the internet.

A few days ago, the reputed website Ars technica first reported that a blogger had "offered evidence that his Internet-connected television has been transmitting detailed information about his family's viewing habits, including the times and channels they watch and even the names of computer video files stored on connected USB drives." 

Soon, a second user provided similar evidence. The revelations apparently prompted a reaction from the producer, LG, which released a statement whose most important passage goes as follows:

"Information such as channel, TV platform, broadcast source, etc. that is collected by certain LG Smart TVs is not personal but viewing information. This information is collected as part of the Smart TV platform to deliver more relevant advertisements and to offer recommendations to viewers based on what other LG Smart TV owners are watching. We have verified that even when this function is turned off by the viewers, it continues to transmit viewing information although the data is not retained by the server. A firmware update is being prepared for immediate rollout that will correct this problem on all affected LG Smart TVs so when this feature is disabled, no data will be transmitted."

The issue might remain slightly controversial even once the disabling function is brought to work: should the consumer actually be expected to know that, unless she actively prevents it, her TV will send information about her habits to its producer (not only LG)? Or should the default be that the no information can be collected, unless the consumer explicitly allows it? Also, the distinction between "viewing" and "personal" information does not mean automatically that companies should feel free to collect it without further ado.

In the lengthy discussion which has so far accompanied the political process of revising the EU privacy rules, much of the attention has been concentrated on websites, e-commerce and so on. What about this? It is not easy to find the right approach when dealing with a dimension which evolves so rapidly as that of technology & privacy, but this is no reason to simply give up...

Thursday, 21 November 2013

Compliance required

Italy was asked to comply with EU rules granting certain rights to rail passengers. At the moment, there are no enforcement authorities nor sanctions for violations of passengers rights established in Italian law, which means that whoever travels by train in Italy may not be able to claim their rights when things get... derailed.

Luxembourg was given two months to take measures to comply with the requirement to deliver proper market analyses to European Commission. Such analyses allow to see whether the given market sector (offering products and services to consumers within the electronic communications sector) is competitive enough, etc.

See more: November infringements package

Restrictions on hazard

Online gambling is quite a controversial service in Europe. In general, European countries are allowed to put restrictions on provision of online gambling within their borders, due to public interest objectives (such as consumer protection, fraud prevention etc.). However, the justification for applying such restrictions needs to be real and concrete, and applied consistently, since otherwise freedom of provision of services within EU should prevail (see e.g. out post on recent AG's opinion in the CJEU case Pfleger). During the last year, the European Commission was evaluating current national provisions restricting online gambling. Yesterday, it was announced that at the moment Sweden does not apply its national restrictions systematically. While national rules give exclusive rights to certain service providers for providing online betting services and online poker services, the compliance with these restrictions is questionable (at the same time, Finland was seen as properly having enforced compliance). Some other countries were asked to provide more information on possible restrictions and licensing procedures with regards to online gambling services. (see more: Commission requests Member States to comply with EU law when regulating gambling services)

Small Claims, big relief for consumers and SMEs

Over a year ago we mentioned on this blog the importance of a small claims procedure and European plans to reform it (Making the Small Claims Procedure effective). After many months, the European Commission finally published its proposal on how the existing procedure (in force as of 2009) should be adapted to better suit the internal market needs. Consumer and SMEs protection will increase due to the extension of the application scope of this procedure: today only claims below 2.000 Euro may be submitted, but this limit will be raised to 10.000 Euro. This should be especially relevant for SMEs, who often suffer more damage in cross-border trade than consumers (this should cover ca. 50% of business claims). Moreover, it will be easier to claim this procedure due to new, broader definition of what 'cross-border transaction' is and due to lower court fees (not exceeding 10% of the claim's value, with minimum fee not exceeding 35 Euro). Additionally, it will be possible to start this procedure online and to pay court fees online, as well, while email and tele- or videoconferencing will be part of the procedure. (Shopped online and want your money back? Commission Proposal on Small Claims helps consumers and SMEs)

Tuesday, 19 November 2013

Assuring informed choice in life assurance contracts - EFTA court (E-11/12)

On 13 June this year the EFTA court gave a judgment in the case Koch, Hummel and Müller v. Swiss Life (E-11/12) which concerned the duty to inform and the duty to advice in life assurance contracts, as regulated by the Consolidated Life Assurance Directive 2002/83/EC and the Insurance Mediation Directive 2002/92/EC

The case was referred to the EFTA court from the Principality of Liechtenstein where the defendant, a life assurance company Swiss Life was registered. The plaintiffs were German and Austrian national residents who independently concluded unit-linked life assurances with Swiss Life. In all cases, the parties agreed on a type of investment "as per the attached investment strategy". The plaintiffs paid assurance premiums which were then invested by Swiss Life as cover funds, in accordance with investment strategies. Unfortunately, these investments have not been successful which led the plaintiffs to claim damages from Swiss Life, mainly on the grounds that they were not able to estimate the level of risk involved in the investment, and that there was no transparency in the products' structure. It was established that Swiss Life did not inform the plaintiffs about the relevant investment products, but it claimed that it were the plaintiffs who put a request for these particular investment strategies to be included in their contract (Par. 36).

The relevant legal questions were: whether Swiss Life had a duty to advice the plaintiffs on investment strategies and whether there was a duty to inform about the unit-linked assurance products and their risks?

The EFTA court considers that Life Assurance Directive intends to protect consumers by granting them a right to informed choice (Par. 62). Life assurance contracts are perceived by the court as generally complex and detailed, which may make them difficult to understand for the average consumer (reasonably well informed and reasonably observant and circumspect). Additionally, such contracts often bring about serious financial consequences for consumers over a long period of time. Both these factors convince the court that transparent information on these contracts is crucial to consumers (Par. 63). The consumer must, therefore, "be provided with whatever information is necessary to enable him to choose the contract which best meets his requirements" and the Directive's information requirements should only be seen as a minimum standard that needs to be fulfilled (Par. 64-65). However, the Directive does not impose a duty to advice on the assurance company (Par. 69, 72) and instead trusts in the ability of an average consumer to compare essential elements of the contract as long as he is provided with clear and sufficient information (Par. 70). Notwithstanding the above-mentioned, national legislators could impose such a duty to advice on assurance companies (Par. 75).

Since the performance of the duty to inform is seen as crucial to guarantee consumer protection, it does not surprise that consumers do not need to look themselves for information and instead may await this information being given to them by service providers. The EFTA court states that the relevant information on the units to which benefits are linked should be given to consumers in writing prior to contract's conclusion, and it may not be required of them to use a search engine to find and access the necessary information (in compliance with the Content Services, CJEU case) (Par. 96). The information should be clear, complete and accurate and allow consumers to define the units to which the benefits are linked, and to describe the nature of the underlying assets (Par. 102). At the same time, it does not matter who provides the consumer with the relevant information - the assurance company or an insurance intermediary (Par. 110). What is important is that the consumer gets necessary information and not who he gets it from.

Friday, 15 November 2013

Taking a chance on a game of chance - AG Sharpston in Pfleger (C-390/12)

14 November 2013: AG Sharpston in Pfleger (C-390/12)

Another opinion issued yesterday and related to consumer protection concerned authorisation of gaming machines in Austria. Currently, only a limited number of licence holders may organise games of chance in Austria, and other operators who are prohibited from offering such services may object against it by claiming unjustified restriction on the freedom to provide services as guaranteed by art. 56 TFEU. (Par. 51) By the way, questioning the national policy under art. 56 TFEU seems more reasonable than what parties in these proceedings have done - operating gaming machines without a licence, getting caught, being held criminally liable for it, and then trying to get out of it under the TFEU provisions.

The CJEU considered earlier that certain justifications are allowed to restrict provisions of gambling services, e.g., consumer protection (incl. protecting players from gambling addiction) and crime prevention, as long as they are proportionate, while some other reasons don't suffice, e.g., increasing tax revenue. The Austrian court will need to determine what the objective was in the given case and to adjudicate accordingly. (Par. 54-55) In general, however, the AG Sharpston reminds the national court that a limitation of number of licence holders automatically limits opportunities for gambling, and therefore seems proportionate to achieve the objectives of consumer protection and crime prevention.(Par. 57) There are, however, many factors that only a national court may take into account in trying to establish Austrian authorities' objective, like, scope of a gambling problem in Austria, intensity of controls applied to licensed establishments etc. At the same time, it may be an argument against Austrian government's claim that they pursue consumer protection, the fact that license holders are currently engaging in aggressive advertising campaigns to promote positive image of games of chance and encourage active participation.

"While the Court has recognised that moderate advertising may be consistent with a policy to protect consumers, that is only where the advertising is strictly limited to what is necessary to channel consumers towards controlled gaming networks. Advertising that encourages gambling by trivialising it, giving it a positive image or increasing its attractiveness aims to expand the overall market for gaming activities rather than channelling the existing market to certain providers. Such an expansionist commercial policy is plainly inconsistent with an aim of achieving a high level of protection for consumers. As the Court stated in Dickinger and Ömer: ‘A Member State is not … entitled to rely on reasons of public policy related to the need to reduce opportunities for gambling in so far as the public authorities of that State incite and encourage consumers to participate in games of chance so that the public purse can benefit’." (Par. 60)

Silence is golden - AG Sharpston in OSA (C-351/12)

14 November 2013: AG Sharpston in case OSA (C-351/12)

This case may concern copyrights but its effects will impact consumers in some Member States that is why we will briefly mention here recent opinion of AG Sharpston in it. 

Imagine you are in a health spa, trying to relax while bathing in medicinal springs and enjoying spending days in the provided by the spa accommodation, which includes TV and radio sets in your room. Obviously, in order to relax you may want to listen to your favourite bands on the radio or watch a nice movie, TV show, etc. What may stand in the way of that luxury are, however, high fees that the organisations who protect copyright in the given Member State claim from the health spa for transmitting their works. In Czech Republic OSA has a right to collect such fees and the health spa was obliged to obtain a licence from them. Czech law excludes from the need to pay such fees transmission that take place in patients' rooms when providing health care in health establishments, which could encompass a health spa. OSA claims that this exception is contrary to the Copyright Directive 2001/29 and AG Sharpston agrees therewith (classifying it as communication to the public - par.28). 

What may follow the judgement of the CJEU in this matter is either an increase in prices of health spa establishments or an increase of health spa meditation establishments, where silence is golden.