Legal-economic reflections on CESL

The European Commission's proposal for a Regulation on an optional Common European Sales Law is slowly but steadily making its way through the legislative process. At this time, it is being discussed in different committees of the European Parliament.

Summaries of the discussions that have so far taken place within these committees can be found on the Edinburgh European Private Law News blog. Most recently, Eric Clive reported on the discussion within the Parliament's Internal Market and Consumer Protection committee ('IMCO on CESL briefly'). As becomes clear from this summary, the proposed CESL continues to divide opinions. While some commentators give constructive comments for the amendment of the proposal, others doubt its added value for the facilitation of transactions concluded on the European internal market.

The legal-economic merits of both points of view were discussed at a conference that was organised by Omri Ben-Shahar in Chicago last year (on which we reported earlier). The final versions of the conference papers have now been published in a special issue of the Common Market Law Review and may provide the European Parliament, as well as other interested parties, with insights into the costs and benefits of introducing a CESL and into the dynamics of regulatory competition in European contract law.

Mandatory statutory or regulatory rules on what? (RWE Vertrieb AG v Verbraucherzentrale Nordrhein-Westfalen e.V.,)

Yesterday, the Court of Justice delivered an important and complex judgement on (unfair) general terms and conditions in a very special sector, namely that of gas supply. 

The post which this decision originated is *very* long, so for less adventurous readers here is a synthesis of the decision's two main points:

1) providers which choose to supply gas under a "free market" regime can not automatically adopt the same contract terms that they are authorised to use under regulated tariff regime, since different market conditions demand (or can demand) different balancing exercised; even provisions of law, taken out of their original context, can lose their immunity under Directive 93/13;

2) in long-term services, it is normal that prices will be amended over time and that the provider reserves to do so; however,

a) to comply with European law in the field of gas supply, the conditions under which changes will take place need to be made clear in the contract;

b) customers must be given an effective right to terminate the contract if they do not want to accept price variations; in particular, the fact that they are contractually entitled to do so is not sufficient when factual conditions (not idiosyncratic to the consumer) make the termination impossible.

 For hard core fans of unfair terms control, however, here is the unabriged version

As many will know, energy is very often (or used to be) supplied outside a pure freedom-of-contract regime, with universal service obligations and other special rules. In the case considered by the Court in

RWE Vertrieb AG v Verbraucherzentrale Nordrhein-Westfalen e.V., however, the parties had concluded a "special contract", exempt from administrative tariff regulation. The provider, nonetheless, had chosen to reproduce in the contracts which it supplied to its customers some terms used in its regulated contracts- in particular, those on price increases. 

The incorporated terms referred to the applicable (to non-special contracts) legislation, which "allowed the supplier to vary gas prices unilaterally without stating the grounds, conditions or scope of the variation, while ensuring, however, that customers would be informed of the variation and would if appropriate be free to terminate the contract." (par. 18)

In other words, from a formal point of view the contract made legal rules on standard tariff contracts applicable to non-standard tariff ones. From a substantive point of view, the terms allowed the provider to increase its prices with no restrictions, provided that the customers would be duly notified and authorised to terminate their subscription. 

After a consumer organisation brought before German courts a request that the concerned consumers be reimbursed of the amounts paid as a consequence of four price increases implemented within 26 months, the terms just mentioned came to be investigated by the German Supreme Court in civil matters, the Bundesgerichtshof, which raised two questions:

1) whether the terms are subject to scrutiny under the Unfair Terms Directive (93/13 EEC);

2) whether, were the Directive applicable, terms which allow a supplier to change the price of the good/service without determining "the grounds, conditions and scope of a change"can still be considered fair if the customers are duly informed of the variation when it takes place and given a right to terminate the contract.

Both questions are extremely interesting in the context of unfair terms control. 

As concerns question number one, Directive 93/13 excludes from its scope (art. 1(2)) all terms "which reflect mandatory statutory or regulatory provisions". We have seen that the terms included in the contract reproduced legal provisions, though not directly applicable to the contracts concerned. Should this operation guarantee immunity from control? According to the court, the answer is no. 

The rule's underlying assumption is that "it may legitimately be supposed that the national legislature struck a balance between all the rights and obligations of the parties to certain contracts." (par 28); on the other hand, when certain rules have been made applicable to one group of contracts, "[a]n intention of the parties to extend the application of those rules to a different contract cannot be equated to the establishment by the national legislature of a balance between all the rights and obligations of the parties to the contract" (par. 29), and does not deserve the same deference. Affirming this principle is necessary to avoid providing suppliers a "safe heaven" made of patchwork application of rules conceived for different domains than the one concerned (par. 31).

In this case, it was clear that German law had deliberately subjected "special" contracts to a different regime compared to standard tariffs, so the equilibria found in the latter context could not be simply transposed to the former (par. 37)

Coming to the second question, the Court first reaffirms that it is not within its competence to decide on the unfairness of specific terms.What it can do, though, is provide the referring court with guidelines to evaluate the terms in light of the concrete circumstances. In the context of gas supply, the evaluation has to take into account the high standards set by Directive 2003/55, which requires Member States to "adopt measures to ensure that those terms and conditions are fair and transparent, are stated in clear and comprehensible language and are notified to consumers before the contract is concluded, and that consumers receive transparent information on applicable prices and tariffs and on standard terms and conditions." (par. 45)

In particular, while the suppliers are not required by any legal rule to justify the adoption of a price increase, courts should ascertain two elements. The first concerns the agreement itself; concerned courts should check "whether the contract sets out in transparent fashion the reason for and method of the variation of the charges for the service to be provided, so that the consumer can foresee, on the basis of clear, intelligible criteria, the alterations that may be made to those charges" (par. 49). 

The obligation to give notice in due time of the change (and the related termination right) is additional to the duty to correctly inform the consumer about the terms and conditions under which the service is provided and can in principle not compensate deficiencies in the transparency of the original agreement (par 51-52). 

The other fundamental component of the evaluation is that "consumers [must] have the right to terminate the contract if the charges are in fact altered". In particular, "it is of fundamental importance [...] that the right of termination given to the consumer is not purely formal but can actually be exercised" (par. 54). This requires courts to take into account market conditions, termination costs and other possible factors which may hinder the realisation of the consumer's right to terminate. 

... in other words, it seems to this author that the Court is implying that the terms might, indeed, be unfair. What do you, esteemed readers, think?

What seems sure is that the German Government (and, indeed, the gas company) will not be enthusiastic about this judgement. To this respect, it might not help that they both had asked the Court, should the terms be found not to "satisfy the requirements of European Union law" (par 56), postpone the effects of the judgement by 20 months to avoid the financial costs of a "retroactive" unfairness declaration. The Court denied the request by considering that the terms unfairness will not descend of its decision, but of the national court's findings. The hot potato is thus in the hands of the Bundesgerichtshof, but the impact of the case might go well beyond the German boundaries.

P.S. meanwhile, BEUC's twitter account announced the decision as a "milestone".

Consumer's definition refined

14 March 2013: CJEU judgment in case Česká Spořitelna (C-419/11)

The CJEU confirmed the view of AG Sharpston (see previous post discussing the opinion in this case) that if a natural personal has close professional links to a company, e.g., is its managing director or majority shareholder, such a person may not be regarded as a consumer when his activity is linked to that of the company, as well. In the given case the natural person was giving a promissory note to guarantee obligation of that company, so that the company could get a credit but still wanted to claim that he acted as a consumer (not in the name of the company). The CJEU did not accept that reasoning that if a person acts as a natural person it is automatically a consumer.

"The Court drew the conclusion from this that only contracts concluded outside and independently of any trade or professional activity or purpose, solely for the purpose of satisfying an individual’s own needs in terms of private consumption, are covered by the special rules laid down by the Convention to protect the consumer. Such protection is unwarranted in the case of contracts for the purpose of a trade or professional activity" (Par. 34)

If in such a situation the natural person is not a consumer, the special recognition and enforcement rules of Regulation No 44/2001 (Brussels I) do not apply to him.

European Commission plans on better enforcement of the Unfair Commercial Practices Directive

Yesterday, the European Commission announced an action plan to improve the enforcement of the Unfair Commercial Practices Directive (2005/29/EC). By doing so, the Commission aims to improve consumers' confidence to shop abroad.

The action plan is as follows:

• Strengthening the efficiency of the European consumer protection network and further promoting coordinated enforcement actions ("sweeps");

• Assisting Member States in effectively applying the Directive with guidance and sharing best practices;

• Developing enforcement indicators to detect shortcomings and failures that require further investigative and/or corrective action;

• Establishing regular thematic workshops between national enforcers and organising training for enforcers and the judiciary.

The European Commission also announced that particular attention will be paid to certain markets which are seen as particularly problematic. It concerns travel and transport, digital services, financial services and property markets. Moreover, stronger enforcement is promised in the field of environmental claims.

The action plan comes together with the Commission's report on the application of the Unfair Commercial Practices Directive.

101 on air passengers' rights proposal

For a better overview of proposed changes to the air passengers'  rights we have decided to give you a short summary of the main points.

Main improvements of air passengers'  rights:

•  clarification that passengers with reduced mobility will be entitled to care (without limitations)
• clarification that if the checked-in mobility equipment is lost or damages its value would be fully compensated
• more transparency in information duties (e.g., information about the nature of the disruption to the flight not later than 30 minutes after the scheduled departure time - which means that consumers should hear more than just 'your flight has been delayed/cancelled)
• the airline needs to reimburse the full price of the ticket if passenger decides to renounce the delayed flight (this cannot be denied by the airlines if at least 5 hours have passed from the scheduled departure time - if passengers are then at the tarmac - boarded the plane - already, they have a right to disembark)
• the airline needs to provide care and assistance if the delay is longer than 2 hours - regardless the flight distance (if passengers are on the tarmac already - they have a right to the use of toilets, air conditioning, drinking water if the delay is longer than an hour)
• rerouting needs to be offered with other carriers or other transportation mode within 12 hours
• definition of 'extraordinary circumstances' as circumstances which are not inherent in the normal exercise of the activity of the air carrier and are beyond his control
• if the flight is rescheduled less than 2 weeks in advance, the passengers will have the same rights as if their flight was delayed or cancelled
• passenger may request correction (free of charge) of spelling mistakes in his name up to 48 hours before departure
• the passenger may not be denied boarding on the return flight if he had not showed for his outbound flight
• better rules on enforcement of air passengers' rights (passengers need to submit complaint within 3 months of departure date, airlines need to acknowledge receipt within a week and reply formally within 2 months)
• contingency plans need to be prepared for situations of mass disruptions

Main negative changes of air passengers'  rights:

• if the flight is within the EU or for a distance of less than 3500 km the passengers will only be able to claim compensation if it is delayed for more than 5 hours (incl. if delay at arrival is due to one of the connecting flights being late)
• if the international flight is for a distance of 3500-6000km - the delay needs to be 9 hours
• if the international flight is for a distance of more than 6000km - the delay needs to be 12 hours
• in case of extraordinary circumstances the right to assistance will be limited to providing accommodation only for three nights unless the passenger is pregnant, a child, has specific medical needs, has reduced mobility
• if a flight is for distance of less than 250 km and with aircraft of less than 80 seats there is no obligation to provide accommodation

Happy world consumer rights day!

Even though it is this author's very personal view that certain misuses of humour of Twitter should be sanctioned with immediate account deactivation...

So, today it is World Consumer Rights Day, the anniversary of John F. Kennedy's famous Congress speech,  in which he stated  that "Consumers, by definitions, includes us all."

Not only the European Parliament celebrates. 

To mention some, the UK association Which? has launched a new consumer rights website, while at a global level the consumer international has given the date a theme: Consumer justice now!, which reminds us that consumer rights are an issue not only- and actually not mainly- in our beloved continent.

Did you know that the UN also have guidelines on consumer protection? Those guidelines are currently undergoing a revision process which should be completed by July 2014.
(the EU Consumer Summit 2013, on the other hand, will also come soon -next week- and bring together ministers stakeholders and concerned agencies to discuss the enforcement of consumer rights... but we will discuss that in due time)

Passenger rights, work in progress

Many entries on this blog concern air passengers. Our readers are acquainted with the dense "safety net" provided by EU legislation and reinforced by the CJEU. However, most of those who have experienced flight delays will also have found out how tiring and- potentially- frustrating it can be to claim all those rights in concrete situations, when the airline is not so keen on complying spontaneously. 

In particular, statistics consulted by the Commission seem to confirm that, whereas re-routing in case of cancelled flights is usually not a problem, obtaining compensation is often beyond reach, and "assistance" duties are also interpreted very differently by different companies. 

In order to make passenger rights more effective, a new package of measures has thus been proposed which, while revising Regulation 261/2004, addresses four identified problematic issues:

1. Legal grey areas: lacking definitions and unclear provisions;

2. Complaint handling: airlines' complaint-handling procedures are sometimes ill-defined or there is no complaint handling body to turn to;

3. Sanctioning: inconsistent or insufficiently effective sanctioning policies by national authorities; 

4. Disproportionate financial costs imposed on the airlines.

The proposal will both clarify (specify) existing rights and introduce additional ones, by complementing the existing 10 "basic rights"- for instance, the right to immediate care is "proceduralised" to impose clear obligations on the carrier. On the other hand, the proposal aims at reducing the burden on airlines, inter alia by facilitating redress on third parties when these are responsible for the delay- which will require the approximation of national rules on the matter. We will see how MS will react to this...

Unfair terms and mortgage enforcement - CJEU judgment in Case C-415/11 Aziz

Today, the Court of Justice of the EU handed down its judgment in Case C-415/11 Aziz v. Catalunyacaixa, concerning the assessment of standard terms in a loan agreement in the context of mortgage foreclosure proceedings, a very topical matter in Spain. For a summary of the facts of the case, the preliminary questions raised by the referring Spanish court, and the opinion of Advocate General Kokott, I refer to an earlier post on this blog. Given the legal and social significance of the judgment, a relatively extensive summary follows here:

The first preliminary question concerned the compliance of the Spanish system of levying execution on mortgaged property with the Unfair Terms Directive. In reply to this question, the CJEU holds:

'Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, which, while not providing in mortgage enforcement proceedings for grounds of objection based on the unfairness of a contractual term on which the right to seek enforcement is based, does not allow the court before which declaratory proceedings have been brought, which does have jurisdiction to assess whether such a term is unfair, to grant interim relief, including, in particular, the staying of those enforcement proceedings, where the grant of such relief is necessary to guarantee the full effectiveness of its final decision.'

Spanish law is, thus, considered to infringe the Directive, in particular because it precludes the court that has jurisdiction to declare unfair a term of a loan agreement relating to immovable property from staying the mortgage enforcement proceedings initiated separately. The Court observes:

'59 It must therefore be held that such procedural rules impair the protection sought by the directive, in so far as they render it impossible for the court hearing the declaratory proceedings – before which the consumer has brought proceedings claiming that the contractual term on which the right to seek enforcement is based is unfair – to grant interim relief capable of staying or terminating the mortgage enforcement proceedings, where such relief is necessary to ensure the full effectiveness of its final decision (see, to that effect, Case C-432/05 Unibet 2007 ECR I-2271, paragraph 77). 

60 As also observed by the Advocate General in point 50 of her Opinion, without that possibility, where, as in the main proceedings, enforcement in respect of the mortgaged immovable property took place before the judgment of the court in the declaratory proceedings declaring unfair the contractual term on which the mortgage is based and annulling the enforcement proceedings, that judgment would enable that consumer to obtain only subsequent protection of a purely compensatory nature, which would be incomplete and insufficient and would not constitute either an adequate or effective means of preventing the continued use of that term, contrary to Article 7(1) of Directive 93/13.'

The second preliminary question concerned the legal framework provided by the Directive for the assessment of specific terms in mortgage contracts. In reply to this question, the Court holds:

'Article 3(1) of Directive 93/13 must be interpreted as meaning that: 

- the concept of "significant imbalance" to the detriment of the consumer must be assessed in the light of an analysis of the rules of national law applicable in the absence of any agreement between the parties, in order to determine whether, and if so to what extent, the contract places the consumer in a less favourable legal situation than that provided for by the national law in force. To that end, an assessment of the legal situation of that consumer having regard to the means at his disposal, under national law, to prevent continued use of unfair terms, should also be carried out;

- in order to assess whether the imbalance arises "contrary to the requirement of good faith", it must be determined whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to the term concerned in individual contract negotiations.

Article 3(3) of Directive 93/13 must be interpreted as meaning that the Annex to which that provision refers contains only an indicative and non-exhaustive list of terms which may be regarded as unfair.'

Concerning the assessment of the specific terms at stake in the Aziz case, the CJEU followed the Advocate General in giving specific guidelines to national courts regarding the factors that should be taken into account:

'73 In particular, with regard, first, to the term concerning acceleration, in long-term contracts, on account of events of default occurring within a limited specific period, it is for the referring court to assess in particular, as stated by the Advocate General in points 77 and 78 of her Opinion, whether the right of the seller or supplier to call in the totality of the loan is conditional upon the non-compliance by the consumer with an obligation which is of essential importance in the context of the contractual relationship in question, whether that right is provided for in cases in which such non-compliance is sufficiently serious in the light of the term and amount of the loan, whether that right derogates from the relevant applicable rules and whether national law provides for adequate and effective means enabling the consumer subject to such a term to remedy the effects of the loan being called in.

74 Second, regarding the term concerning the fixing of default interest, it should be recalled that, in the light of paragraph 1(e) of the Annex to the Directive, read in conjunction with Articles 3(1) and 4(1) of the directive, the national court must assess in particular, as stated by the Advocate General in points 85 to 87 of her Opinion, first, the rules of national law which would apply to the relationship between the parties, in the event of no agreement having been reached in the contract in question or in other consumer contracts of that type and, second, the rate of default interest laid down, compared with the statutory interest rate, in order to determine whether it is appropriate for securing the attainment of the objectives pursued by it in the Member State concerned and does not go beyond what is necessary to achieve them.

 

75 With regard, finally, to the term concerning the unilateral determination by the lender of the amount of the unpaid debt, linked to the possibility of initiating mortgage enforcement proceedings, it must be held that, taking into account paragraph 1(q) of the Annex to the directive and the criteria contained in Articles 3(1) and 4(1) thereof, the referring court must in particular assess whether and, if appropriate, to what extent, the term in question derogates from the rules applicable in the absence of agreement between the parties, so as to make it more difficult for the consumer, given the procedural means at his disposal, to take legal action and exercise rights of the defence.'

New ADR rules finally approved

As we had anticipated at the end of 2012, last Tuesday the Parliament approved the proposed ADR directive and ODR regulation. The instruments, whose negotiation took almost one and a half year, will enter into force 20 days after their publication in the OJ. After that, their implementation will be partially left to the Member States, who have to ensure the availability of ADR bodies for every business sector, at no or nominal cost to the consumer. 

In the meantime, a EU-wide platform for the on-line resolution of disputes arising from internet transactions will be set up, which should be available to consumers in their mother language and "direct" their claims to the appropriate ADR body. 

The proposals received wide support in the Parliament, where they were approved with over 600 favourable votes. This mirrors the Commission's high expectations with regard to the potential of a fully operational, EU-wide ADR network, which will now have a chance to be put to a test.

CJEU to decide on transparency of clinical-trial data

As our readers know the European Medicines Agency has been trying to convince pharmaceutical sector as well as regulators that there is a need for more clinical-trial data transparency (see Publishing clinical-trial data). The business sector so far thoroughly opposed any suggestions as to how to improve transparency, fearing supposedly for losing their competitive edge if clinical-trial data (which is seen as confidential and commercially-sensitive information) is pre-maturely (or so they see it) released (it claimed also e.g. violation of privacy of a company). While EMA is trying to convince the pharma companies of the need for transparency and get them involved in drafting new regulations, the pharmaceutical companies went for the more cut-throat approach and approached the CJEU for injunctions. The injunctions are to stop EMA from releasing certain clinical-trial data, which were to happen due to EMA receiving freedom of information requests about 'raw data' on certain drugs. Two major companies filed for these injunctions: AbbVie (case T-44/13, T-29/13) and InterMune (T-73/13), but they have immediately been supported in their claims by various other EU and US pharma bodies. (Pharma group sues European regulator over data) EMA on the other hand has support of some leading medical journals (which fear for biased decisions on drugs approval with only selected information being analysed) and hopefully more organisations will get involved and intervene on the side of the patients. These cases may be groundbreaking at the moment and determine the balance between the need for transparency of clinical research in order to improve patients' safety/healthcare and business' commercial interests (the majority of requests for clinical-trial data comes not from researchers who could use the data to further improve drugs etc. but from competitors of the pharma companies releasing the drug). It could determine whether EMA and other agencies will be able to release publicly data on drugs that have been approved or rejected for use in the EU.

IATA recommends the use of unfair contract terms to airlines?

In the fascinating world of regulating air travel we have some more news with respect to consumer protection on the EU level. In February BEUC (European Consumers' Organisation) sent a letter to Mr. Tony Tyler, CEO of IATA (International Air Transport Association), in which it points out that IATA recommends the use of certain contract terms to its members that have been declared as unfair by various national courts in the EU. Some of these terms were also used by non-members of IATA who modelled their standard terms on those of IATA. The following contract terms are mentioned:

• code share agreements without the consent of the passenger - where an airline sells tickets for a flight that will be operated by another carrier without informing consumers in advance => This has happened to me once when I booked a flight with the KLM to NYC and it was operated by Delta - as a result I ended up in an old plane without the individual TVs on each seat. Belgian and Spanish courts declared such clauses as unfair (in cases against Brussels Airlines and Iberia) since consumers may not receive the same guarantees from another operator as what they expected when concluding the contract.
• use of 'no show' clause - in case a consumer booked several flights and he doesn't take one on his flight itinerary, the airlines are free to automatically (unilaterally) cancel the remaining flights and rescind the contract => this clause has been declared as unfair by courts of, among others, Germany, Austria, Spain (in cases against: Lufthansa, British Airways, Iberia). This situation would happen if a consumer, e.g., booked a flight from Amsterdam to Houston, and another flight a week later from Houston to Austin, and then another week later from Austin through Houston to Amsterdam. Imagine the consumer decides to travel by road from Houston to Austin and forgoes the already booked flight, and then the airline on his 'no-show' automatically cancels his flight back to Amsterdam.
• obligation to reconfirm bookings - when airlines may deny boarding and cancel a reservation if the consumer doesn't confirm the flight in advance => Belgian courts consider this term unfair (against Brussels Airlines)
• no right to refund in case of force majeure - when airlines refuse to refund the ticket to passengers in case of force majeure preventing passengers from taking the flight (e.g., illness), only offering another ticket at a later date as a remedy => Belgian and Spanish courts (against Easyjet and Vueling) declared these terms as unfair
• exclusion of carrier liability for non-compliance with timetabling - Belgian and French courts declared these terms as unfair since timetable was not seen as a part of the contract
• exclusion of liability in case of death or disease - when airlines exclude responsibility and liability for injury or disability attributable to passenger's physical condition or for aggravation thereof => Belgian courts declared this clause as unfair and contrary to provisions of Montreal Convention
• prohibition to check-in certain items and exclusion of liability of the airline - when airlines prohibit check in items such as money, jewellery, precious metals, computers, PED, business documents, etc. and exclude their liability for loss or damage thereof => Spanish court declared it unfair since there were no valid legal or safety reasons to justify prohibition of transporting such items
• non-automatic refund of (undue) taxes - if paid taxes, fees or charges are reduced the passenger is only entitled to claim a refund of those, does not get it automatically => French courts declared this unfair
• price increase charged after the booking - when the increase is disproportionate and passenger is not given a possibility to cancel the contract => French and Spanish courts declared it unfair
• the lack of transparency, accessibility and clarity of contract terms - Belgian, French and Spanish courts consider it unfair if terms: overlap; there are abundant cross-references; they are not accessible offline; are imprecise and unclear (e.g. extra fees for excess baggage, supplementary charges)
• non-transferability of tickets - even in case of force majeure passengers may not transfer tickets - BEUC considers this unfair since the airline may transfer the contractual obligation to another party (code share) as well as package travellers are allowed to transfer the package in some situations

That's quite a list, isn't it? Let's see whether IATA will respond to it publicly. 

Freedom from cosmetic products tested on animals in the EU

As of this week no cosmetic products that have been tested on animals may be marketed in the EU. This was the last of the three deadlines set by the EU institutions (as of 2004 testing on animals was prohibited for cosmetic products, as of 2009 for cosmetic ingredients as well as marketing of most products with cosmetic ingredients tested on animals). The business sector had a few years (since 2003) to phase out such products from the market, therefore, the European Commission announced yesterday that they plan to strictly adhere to the deadline set in 2003. (Full EU ban on animal testing for cosmetics enters into force) The works continue on finding alternative methods that could fully replace animal testing.(see: communication)

Fair compensation for copying - A-G Mengozzi's opinion in case C-521/11 Amazon v Austro-Mechana

The implementation of EU Directive 2001/29 (Copyright Directive) in the laws of the Member States continues to raise many questions, in particular regarding the 'fair compensation' to authors of copyright-protected work for private or non-commercial copies made of their work. A case currently pending before the Court of Justice of the EU, Case C-521/11 Amazon, concerns legal proceedings against the international company by that name which sells, among other things, books, CDs and information storage devices online. Austro-Mechana, an Austrian copyright association, has sued Amazon to pay a 'fair compensation' for the data storage devices (i.e. empty CDs and DVDs, memory cards and MP3 players) that Amazon brought to the Austrian market between 2002 and 2004. The Austrian Supreme Court has raised a number of preliminary questions concerning the extent to which the Austrian implementation of Directive 2001/29 can be regarded as establishing 'fair compensation' in the sense of Article 5(2)(b) of the Directive. This provision determines the following:

'2. Member States may provide for exceptions or limitations to the reproduction right provided for in Article 2 in the following cases: (...)

(b) in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation which takes account of the application or non-application of technological measures referred to in Article 6 to the work or subject-matter concerned;'

Today, Advocate-General Mengozzi delivered his opinion in the case (which is not yet available in English, so I refer to the original Italian text). He concludes that 'fair compensation' in the sense of the Directive is given in case national legislation guarantees that:

(a) the legal subjects indicated in Article 2 of the Directive without distinction have a right to fair compensation, which can only be relied upon by a collective copyright organisation, representative of the various rightholders, against the one who is the first to bring to a national market, for commercial purposes and for consideration, data storage devices meant to reproduce their works;

(b) the national legislative scheme, on the one hand, provides the possibility of a preceding exemption to pay fair compensation for natural and legal persons who may reasonably be considered, on the basis of objective data, to obtain the information carriers for clearly different purposes than those for which fair compensation needs to be paid and, on the other hand, the possibility to retrospectively claim restitution of fair compensation in all cases in which it is demonstrated that the use of the carrier could not have disadvantaged the author of the work.

The Advocate-General, furthermore, holds that it cannot be derived from Directive 2001/29 that there is no right to fair compensation in case a national legislative scheme determines that all revenues are meant to be paid to the authors, half as direct compensation and the other half indirectly. However, the referring national court should assess whether the application of the national measure in fact entails indirect compensation and without discrimination among categories of authors.

Finally, A-G Mengozzi is of the opinion that in case the circumstances entailing a right to fair compensation arise within the territory of a Member State, the Directive does not preclude the payment of compensation in case a similar compensation for bringing the information carriers on the market has already been paid in another Member State. The Member State in which fair compensation has unduly been paid should, however, provide a possibility for restitution.

Eurotravel

Recently published data of the Flash Eurobarometer 370 presents current attitudes of Europeans towards tourism. The main findings were as follows (see also: Tourism's robust and resilient performance expected to continue in 2013):

• 71% of Europeans travelled for work or private reasons in 2012. (...) a majority of respondents who travelled are aged 15-39, or have a high level of education, or live in a large town.
• Europeans who did not travel in 2012 mostly cited financial reasons for not taking a holiday (46%). (...) Respondents who did not travel in 2012 are more likely to be aged 55+, are manual workers, unemployed, or live in a single person household.
• 88% of EU respondents who travelled for a personal holiday of at least four nights went somewhere within the EU.
• Spending time in the sunshine or at the beach was the main reason for a holiday of at least four consecutive nights in 2012 (40%), closely followed by visiting family, friends or relatives (36%).
• Spain was the most popular destination for EU holiday makers in 2012 (10%), followed by Italy and France (both 8%). Croatia was also among the preferred destinations in 2012 (3%).
• A large proportion of EU respondents (58%) spent their holidays in their own country, a similar result to that of the 2011 survey (56%). Domestic holidays were most common in Greece (87%), Italy (80%), Bulgaria (79%) Spain (73%), and Croatia (74%).
• Staying in paid accommodation or staying with friends or relatives also increased in popularity compared to 2011.
• 92% of EU respondents were satisfied with the quality of accommodation in 2012. 31% of respondents consider the quality of accommodation as main factor for a decision to return to the same holiday destination.
• Most EU citizens were satisfied with the general level of prices (83%), which represents another key reason to go back to the same holiday destination.

Inverted black triangle

Tonio Borg, European Commissioner for Health and Consumer Policy, announced that as of September 2013 on the inside leaflet of certain medicinal products an inverted, black triangle will appear. This will be the result of the adoption of the regulation implementing further EU pharmacovigilance legislation (pharmacovigiliance system allows for the monitoring of the medicine's safety throughout its lifespan). If consumers see such a symbol:

they should realize that this particular medication is subject to additional monitoring. The text of the leaflet will encourage consumers to report unexpected adverse reactions and direct them to the national reporting system. (Q&A)

Flash: Commission fines Microsoft, again

Today, the European Commission has issued a €561 million fine to Microsoft. Why this time? In 2009, the company had committed to improve consumers' autonomy by adding a browser choice screen enabling them to easily choose a program different than the default one. According to the Commission, Microsoft failed to roll out the browser choice screen with its Windows 7 Service Pack 1 from May 2011 until July 2012.
The fine is therefore inflicted on the basis of Microsoft's abuse of dominant position, taking into account the necessity to ensure a deterring effect. Is that appropriate? The CJEU will probably have to decide this, if the company decides to appeal the decision.

Closer EU-US trade partnership? A consumer group outlook

Last February, agreements were made concerning the initiation of talks for a Transatlantic Trade and Investments Partnership, an EU-US agreement which should enhance the trade cooperation between the two partners. 

Since the cooperation is already tight and tariffs already very low, the main objective of the renewed agreement should be to tackle "non-tariff" barriers, namely regulatory hindrances. This means in particular "diverging regulatory systems (standards definitions notably), but also other non-tariff measures, such as those related to certain aspects of security or consumer protection."

This is with no surprise the main point of interest- and possibly concern- for consumer organisations: what kind of convergence can be reached between the two systems in terms of security regulations? Is a race to the bottom to be expected?

A joint EU-US consumer group, the "TransAtlantic Consumer Dialogue" (TACD) group, released yesterday a reaction which individuates some fundamental issues which should not be too much affected by the treaty (which, in principle, would cover all subjects not explicitly excluded from negotiations):

- Safe Food;

- Emerging Technologies

- Financial Protections

- (limitations to) Intellectual Property Rights

- Privacy Rights

- Drugs and medical devices

- Energy and Climate Change

- Investor-State Dispute Resolution

- Competition Policy.

From a methodological point of view, the TACD expresses its hope that the negotiation process will be truly open to stakeholders. Will that happen? More moves are to be expected over the summer.

Smoke-free EU?

Last week the Members of the European Parliament's Environment, Public Health and Food Safety Committee discussed a possibility to change the EU rules on labelling and advertising tobacco products as well as a possibility to ban or strictly regulate tobacco additives. Some MEPs brought up arguments that certain tobacco additives may be highly toxic, others argued for elimination of such additives that make tobacco products more attractive to young people (e.g., adding flavours, like vanilla), and therefore make it more likely that young people would start smoking tobacco. EP rapporteur Linda McAvan from the UK is preparing a report that would be voted on in July. (MEPs debate proposals to make smoking to tobacco less attractive) As a result thereof the 2001 Tobacco Products Directive is likely to change. 

This week in Dublin the Ministers are discussing the European Commission's report on the implementation of the Council Recommendation of 2009 to introduce smoke-free environments. (EU Health Ministers to tackle childhood obesity and smoke-free environments) The report points out that in 2002 among people who died in the EU due to exposure to tobacco smoke at home and at their workplace there were at least 19000 non-smokers. As a result of these data the subsequent changes in EU policy, incl the recommendation of 2009, aimed at protecting EU citizens from exposure to smoke in indoor workplaces, indoor public places, public transport and other public places. Member States were encouraged by the Recommendation to introduce smoke-free environments by November 2012 (in a non-binding way). The overview on smoke-free legislation in the Member States that has been introduced in the past few years, mainly, may be found in this table:

The overview of how exposure to smoke has changed:

EU & mobile consumers

Have you ever wondered in what ways the European Commission benefited consumers? The recent memo mentions many ways through which the EU consumers are enriched in the mobile data sector. 

EU:

• "Made consumers happy: roaming price caps have delivered €15 billion in savings
• Made the market work more efficiently: forcing mobile “termination rates” to reflect costs has helped retail mobile prices to fall by 31-42% since 2006 and companies to focus on real value-added revenue streams.
• Delivered the standards on which the industry is built: the GSM standard and most of the 3G standards that have enabled a 250 billion a year industry were funded by EU research grants
• Delivered extra spectrum for new industry: 1000Mhz allocated so far, with plans for 1200 Mhz; facilitating spectrum sharing to maximise value of this scarce resource
• More flexibility: with contracts now limited to a maximum length of 24 months, an obligation to offer 12 month contracts, and the right to move your number to a new network with 24 hours' notice, consumers have better choices and companies have a better chance to compete for unhappy customers.
• Higher quality: Consumer contracts must give information about minimum service quality levels, driving up expectations and performance.
• Helped save lives with 112: a single (free) European emergency number, in partnership with the mobile industry, to call from your mobile.
• New funding in 2013 to develop 5G technology: another 50 million euros.
• Privacy protected: whether via new choices on accepting cookies, supporting the Do Not Track standard or reform of the EU’s overall data protection rules, the European Commission supports trust and privacy through informed consent.
• Mobile at the heart of the Digital Agenda: mobile is the future of the internet and the European Commission is its policy champion; mobile is a key factor in every element of the overall Digital Agenda effort from mHealth to Connected TV through to the European Commission’s plans for a Telecoms Single Market"
  
  

Do you agree with these statements? I happened to be teaching a class last week on, among others, roaming and mobile services and none of my students has even heard about 112. Not to mention that the privacy measures that were adopted on a European level are far from providing a harmonised, standardised protection of consumers' data online.

On the road

As of today, EU Regulation No 181/2011 applies to bus and coach travellers across the EU. The Regulation is meant to complete an integrated area of passengers rights, providing passengers in Europe a high level of consumer protection independent of the means of travel. In line with existing rights for travelling by air, rail or boat, bus and coach travellers may now rely on the following passenger rights (as enumerated in the European Commission's press release):

• 'Non-discrimination based on nationality regarding tariffs and other contract conditions;non-discriminatory treatment for disabled persons and persons with reduced mobility. Specifically, free-of-charge assistance both at designated bus terminals and on board buses and coaches, as well as financial compensation for loss of or damage to their mobility equipment;
• adequate and accessible information for all passengers before and during their journey, as well as general information in bus terminals and on the internet about their rights;
• reimbursement of the full ticket price or rerouting in case of overbooking, cancellation or delay of more than 2 hours from the estimated time of departure (only applicable for journeys of more than 250 km distance);
• compensation of 50% of the ticket price in addition to the reimbursement of the full price in case of overbooking, cancellation or a delay of more than 2 hours from the estimated time of departure, when the bus and coach company fails to offer the passenger the right to choose between reimbursement and rerouting (only applicable for journeys of more than 250 km distance);
• adequate assistance (snacks, meals, refreshments, as well as, if necessary, accommodation) in case of cancellation or delay of more than 90 minutes for journeys longer than 3 hours (only applicable for journeys of more than 250 km distance);
• compensation for death, injury, loss or damage to luggage caused by road accidents;
• a complaint handling mechanism established by the bus and coach companies and available to all passengers;
• setting-up of independent bodies in each EU Member State with the mandate to enforce the regulation and, where appropriate, to impose penalties.'