The effects of contracts beyond frontiers

Should consumers in Europe care about deplorable labour conditions under which clothing and other products they bought in the EU were manufactured somewhere else in the world? In the PhD thesis that she defended at the University of Amsterdam today, Lyn Tjon Soei Len makes a case for the invalidity under rules of contract law in Europe of economic transactions for goods made in sweatshops. She takes inspiration from the capabilities approach developed by Martha Nussbaum to argue that a society aiming to be minimally just should not support market activities that have adverse effects on the central capabilities of others elsewhere. A summary of the main lines of her research can be found in a previous publication on 'European Contract Law and the Capabilities Approach: On Distributive Responsibility for Contract Law'.

Cutting the pear in two?

While spending some research time in Paris this Spring, I had the opportunity to not only explore the legal-theoretical differences between France and the Netherlands, but also to do some comparative empirical research on consumer issues. As you might guess, this latter part mostly involved enjoying French cuisine. Anyone having had similar possibilities to visit EU Member States will have noticed that there are some quite considerable differences in respect to the quantity of food a euro will buy you from one country to another.

Data on consumer price levels for food, which were published by Eurostat today, confirm that last year 'the price level of a comparable basket of food and non-alcoholic beverages was more than twice as high in the most expensive EU27 Member State than in the cheapest one'. Price levels for alcoholic beverages and tobacco show even greater price disparities.

For a full overview, please consult the press release and Eurostat website. For more on French food (and an explanation of the title of this post), click here.

Simplifying property law for international couples

A year and a half ago we mentioned the plans of the European Commission to simplify rules on matrimonial property for international couples (No more hiding money while filing for a divorce?). This would allow international couples to avoid excessive costs and uncertainty in case of a divorce, since they would know up front what to expect with regards to splitting their estate - which court would have jurisdiction, what laws would apply etc. Today, the European Parliament's Committee on Legal Affairs voted fully in favour of this regulation, but it still needs approval by the Council to become law. (Commission welcomes progress on proposals to clarify property rights for international couples)

Traffic lights on food products

In other news, today the UK authorities introduced the 'voluntary traffic light scheme' for food products. This measure introduces colour coding for food products and is based on studies, which showed that consumers understand information presented on the front of processed food packaging the best. This scheme shows which of the key nutrients of fat, saturated fats, sugars, salt are high (red colour), medium (yellow colour) or low (green colour). The BEUC applauds this initiative and encourages other European markets to join it. (Good news: Pepsi, Mars and Nestlé throw their weight behind new food labelling scheme) However, while certain big food producers like PepsiCo, Mars and Nestlé participate in this scheme (more than 60% of the food market participates in the measure), others like Coca-Cola, Kellogg and Dairy Crest reject the idea. (Major brands shun Gov't traffic light labelling scheme) While this system appears to appeal to consumers by giving them both visual information about food ingredients, as well as nutritional data, some companies worry that it may 'demonise' certain natural products by giving them a red light, e.g., fruit juices which are rich in sugar. Additionally, companies complain about the need to adjust their labelling specifically for the UK market (which could be easily remedied by introducing this measure Europe-wide). Another argument raised by companies such as Coca-Cola is that they are in compliant with the European norms of how to inform consumers about nutrients. Again, this could be solved by introducing such traffic lights on food products across Europe. It remains to be seen how effective this scheme will be, if major food producers refuse to comply with it.

Disappointing collective redress measures

Last week we have mentioned that the European Commission prepared a Recommendation on collective redress options for consumers. The European Consumer Organisation (BEUC) published its disappointment with the Commission's choice of this weak form or regulation of collective redress within Europe. (EU takes baby steps towards collective consumer court actions) The let down is not only due to the non-binding character of the measure, which will allow European countries to offer different levels of consumer protection and create an obstacle for cross-border collective claims, but also as a result of choosing an opt-in system for bringing in a claim - consumers would need to sign up to be included in the collective action's scope.

We want it all: privacy + customization

While the European institutions debate over the need for a new reform of the ePrivacy and Data Protection Directives, national authorities take on a more hand on approach to protecting internet users' data. For example, the UK's Internet Advertising Bureau (IAB) has started a campaign last week that aims to better inform consumers when their data is being gathered online and for what purposes. The campaign is called 'Unzipped' and will last 10 weeks, during which ads will be run online with statements like: 'How do websites know which ads suit your interests?', 'Find out what goes on behind the ads you see online'. If a consumer's attention would be drawn to the ad, he would then notice the zip opening what reveals the AdChoices icon. AdChoices icon has been now used for over a year in the EU markets to try to signal to internet users the targeted online advertisements. Again, an interested and curious internet users could then click through the ad to a website with information on how online advertising works. He would be also given an option to adjust his privacy settings on that website, upon seeing what of his data has already been collected and for what purposes. (IAB UK leads pan-European campaign to give consumers "more control" over targeted online ads)

While this campaign has started in the UK, it is supposed to further follow in other European countries. One problem that I see with it is that it is a short time, one shot action. This means that many consumers would be able to miss it (especially in the holiday period when we should spend last time online). Additionally, the scope of this information is limited - it focuses only on data collected for the purpose of using it in online advertising. Still, it's a step in the right direction of enabling users to better control their privacy online - by informing them more properly about their options and what is happening to their data online.

Interestingly, this news coincide with the publication of a new study on consumers approach to online advertising. Apparently, many consumers don't believe in effectiveness of online advertising (32% - as to online advertising, 50% as to banner advertising). (Study shows consumers believe online marketing to be ineffective) Maybe due to this belief, European consumers seem not to mind when an online advertisement is targeted at them, that is when it is based on their online behaviour - that's a claim of 71% of European consumers (!). (see video below) European consumers apparently want to have their cake (privacy) and eat it to (by getting more customized products and services). 

Opinion AG Wahl in CHS Tour Services on Unfair Commercial Practices

Yesterday, the Opinion of Advocate General Wahl was published in the CHS Tour Services case. The question addressed in this case is whether the requirements of Article 5 of the Unfair Commercial Practices Directive on professional diligence also have to be met in applying the clause on misleading practices (Article 6).

The case was referred to by the Austrian Oberste Gerichtshof. The original case is between two tour operators, Team4 Travel and CHS Tour services. Team4 Travel complains that CHS is misleading consumers by promising in its advertising materials that it offers accomodation that is exclusively available for CHS. CHS has indeed agreed with accomodations that they will be excusively available for CHS, but in practice some of the accomodations still offer accomodation to others, including Team4 Travel. Team4 Travel is therefore arguing that the advertising materials of CHS are misleading, as the promises made are not lived up to.

According to Article 6 of the Unfair Commercial Practices 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.'

The lower Austrian courts were of the opinion that although this provision may be satisfied, the practice is still not misleading because it was thought not to breach the requirement of professional diligence of the general clause of Article 5 of the Directive. The question referred to the CJEU is whether Article 5 indeed plays an independent role, in the sense that in the application of Article 6 it should still be tested whether the trader has acted contrary to professional diligence.

Advocate General Wahl argues that this is not the case: as soon as the requirements of the clause on misleading practices are met, the practice is unfair, and the practice does not also have to be tested against the requirements of Article 5.

AG Wahl comes to this decision based on the wording and structure of the Directive:

19. As regards the structure of the Directive, it is clear from the Court’s case-law that the notion of ‘unfair commercial practices’, which are prohibited under Article 5(1), covers three categories: (i) practices which fulfil the two cumulative requirements laid down in Article 5(2); (ii) pursuant to Article 5(4), misleading or aggressive practices as set out in Articles 6 to 9; and (iii) pursuant to Article 5(5), the practices referred to in Annex I to the Directive (‘the blacklist’). (3) Unlike the first two categories, however, the commercial practices on the blacklist are automatically to be considered unfair, without any need for an individual appraisal of all the relevant circumstances. (4)

20. Article 5(4) of the Directive, by its very wording, elaborates on and clarifies that structure. In accordance with that provision, commercial practices which are misleading (Articles 6 and 7) or aggressive (Articles 8 and 9) are, ‘in particular’, unfair. The phrase ‘in particular’ shows not only that misleading and aggressive practices are specific sub-types (‘precise categories’) of unfair commercial practices (5) but, more importantly, that they also constitute, in themselves, unfair commercial practices. (6)

21. Thus, on the basis of a structural as well as a literal analysis, I do not share the view that Articles 6 and 7 (or Articles 8 and 9) of the Directive merely provide specific examples of the element referred to in Article 5(2)(b) of distortion of a consumer’s economic behaviour, with the effect that Article 5(2)(a) remains applicable, as would follow from the second interpretation put forward by the national court.

22. Next, on examining the background and objective of the Directive, it appears that firm support for the above analysis of its structure and wording is to be found, furthermore, in the legislative history leading to its adoption. Indeed, the observations contained in the Commission proposal (7) regarding misleading and aggressive commercial practices unequivocally spell out that the criterion relating to professional diligence under Article 5(2)(a) of the Directive does not play a separate role. This is in stark contrast to the inferences that the Polish Government seems to draw from that very same document. (8)

23. On a more basic level, however, the fulfilment of additional criteria in order to trigger the operation of Article 6 would be at odds with the very terms of that latter provision. Indeed, Article 6 appears – at least in certain circumstances – to embrace a no-fault approach as regards the trader. (9) It would be contrary to that approach if, in the absence of any reference to Article 5(2)(a), traders were entitled to rely on the defence that they had acted in compliance with their duty of professional diligence. (10) As mentioned in the travaux préparatoires, infringement of Article 6 constitutes, per se, a breach of the duty of professional diligence.

24. By the same token, to allow additional requirements to be taken into account under Article 6 would be difficult to reconcile with the spirit and objective of the Directive itself. Indeed, it would lower rather than raise the high level of consumer protection which the Directive aims to achieve; (11) a level which, it must be recalled, is subject to full harmonisation across the European Union. (12)

25. In the light of the foregoing considerations, the fact that a trader may have complied with the duty of professional diligence under Article 5(2)(a) of the Directive is of no significance in the presence of misleading (or aggressive) commercial practices. CHS and the Austrian, German, Hungarian, Swedish and UK Governments all share this view, as does the Commission; moreover, that view is also consistent with the first interpretation proffered by the national court. (13)

How much are your data worth? (from FT)

Sometimes in this blog we discuss issues of online privacy, data collection and subsequent commercial use by companies that we might not even know we were ever in touch with, and so forth. We know that information concerning "us", our habits and lifestyle has a value. But how much is it worth, actually?

Not much, according to the Financial Times, who published

(image from Twitter)

today a series of figures after consulting a few companies' "menus" and interviewing people in the business. The article is centred on the US market, but it is interesting to get an insight since, with adjustments, the European situation is likely to be comparable.

Examples? "General" information (age, sex, location) is on sale for the bargain price of half a dollar (half a dollar!) for a thousand names; on the other side of the spectrum, getting a list of people suffering from cancer is possible but a bit pricey at 0.26 $ each- unless you buy in massive amounts, which will get you a discount. Specialisation is also important, so certain companies concentrate on e.g. credit records, which can then be sold to lending institutes.

Want to know how much your data is worth? The article is accompanied by an interactive calculator- first question: are you a millionaire?  

Collective justice

In recent years, the European Commission has imposed high fines on companies that violated EU competition law, for example those that created cartels in the beer and television markets (see, for instance, our post on the Record fine for TV cartels of last December). However, since consumers are highly unlikely to go to court for a claim concerning a slightly overpriced glass of beer, many forms of damage resulting from the breach of antitrust rules remained uncompensated in individual cases.

Today, the European Commission presented two measures that seek to facilitate damages actions and, thus, enhance the enforcement of antitrust law.

First off all, the Commission introduced a proposal for a Directive aimed at helping citizens and companies to claim damages when they are victims of infringements of the EU antitrust rules, such as cartels and abuses of a dominant market position.

Furthermore, a Recommendation to the EU Member States was published, which sets out common, non-binding principles aimed at developing effective collective redress mechanisms at the national level. While a single consumer or business whose rights under EU law have been infringed may often not seek to enforce these rights (for instance, because of the costs related to legal proceedings), a collective action makes it possible for a group of equally affected parties to bring a claim. The Recommendation, thus, seeks to improve access to justice.

As stated in the Commission's press release:

'By recommending to Member States to put in place national collective redress mechanisms the Commission wants to improve access to justice, while ensuring appropriate procedural guarantees to avoid abusive litigation. The Recommendation complements the proposal for a Directive on antitrust damages which will help the victims of violations of antitrust rules to obtain compensation through the legal actions available in Member States. While the Recommendation calls on Member States to put in place collective redress mechanisms, the Directive leaves it to Member States whether or not to introduce collective redress actions in the context of private enforcement of competition law.'

The FAQ concerning the proposed Antitrust Directive further clarify the Commission's agenda.

What's up with the CESL?

Yesterday, the BEUC- whose critical stance was already known- and Ecommerce Europe, an association of businesses, have sent an open letter to the Legal Affairs (JURI) and Internal Market and Consumer protection (IMCO) committees of the European Parliament inviting them to reject the Commission's proposal for a Common European Sales Law.

The main arguments put forward are that the instrument would increase-rather than reduce- legal complexity, thus confusing consumers, and impose compliance costs on businesses.

The two associations also claim that the Commission should rather address some issues which remained left-out of the Consumer Rights Directive, "namely, legal and commercial guarantees" and "real problems" associated to the concrete operation of e-commerce. 

We will see in the future whether the addressed MEPs will take the direction indicated in the letter and oppose adoption of the CESL.

Safety measures

After the adoption of new rules regarding safety of pyrotechnic articles (Fireworks control), the European Parliament has reached agreement with the Council on other product safety directives (concerning, as we have mentioned previously: non-automatic weighing instruments, measuring instruments, simple pressure vessels, lifts, explosives for civil uses, electrical equipments, equipments intended for use in explosive atmospheres and apparatus with electromagnetic compatibility requirements. The safety of such products should raise partially due to better mandated disclosure rules - since producers would need to simplify labels and instructions coming with these products, as well as inform their clients not only on their postal but also online address for any contact. Even the language used in these disclosures is supposed to be 'easily understood' (what exactly this would mean - remains to be seen). These provisions still need to be formally adopted. (Internal Market MEPs strike a deal on a set of Product directives)

Olive branch needed

Last week the European Commission made an interesting U-turn in their plans to further regulate how olive oil was being served to consumers in European restaurants. So far non-regulated market meant that restaurants could re-fill their olive oil bottles, use dipping bowls, purchase locally produced olive oils (especially important in the Mediterraneans) etc. Over a week ago the Commission announced its plan to prohibit such use of olive oil in favour of using only labelled, one use only bottles (produced usually by larger olive oil producers). (New rules for olive oil in Europe) The reasoning: it would help to protect consumers from mislabelled olive oil and would better inform them on the quality and characteristics of the used olive oil, as well as keep them safe from any disease that could come from multiple use of oil bottles. This proposal met, however, with so much outrage that the Commission announced already that they would put this proposal on a shelf and look for better alternatives to protect consumers. (EU Corks its plan to limit olive oil)

Europe - no hiding place for debtors

Last week the European Parliament was busy with many draft EU laws that could affect consumers in Europe. One of the not-mentioned here yet issues was the matter of cross-border debt recovery. At the moment, both small businesses and consumers may resign themselves to losing some money instead of pursuing often costly (hiring foreign lawyers), timely (translating documents) and complex (understanding different legal system) debt recovery procedures in another Member State (approx. 600 million euro a year in debt is due to such reasons written off). The European Commission proposed already in 2011 a Europe-wide preservation order to ease this debt recovery process (which we have in depth discussed: Cross-border debt recovery to be made easier for consumers and SMEs). Last week (finally) the European Parliament voted on it, and in June the proposal will be discussed in the Council. (European Commission welcomes progress on proposal to help recover cross-border debts)