15th conference of the International Association of Consumer Law

Dear readers, the first draft of the program for the 15th conference of the International Association of Consumer Law has been published on the conference website. As you can see, we will have a very interesting (and a very busy!) schedule. The program may still change since some scheduled speakers may give up their places to people on the waiting list (yes, there is a waiting list of speakers). For now, it can already give you an idea of what sessions to expect and encourage you to register. Registration is available on this website. If you want to sponsor a conference session, a conference event or the whole conference (why not?) - let us know!

Press digest

Consumer Products & Sustainability

Some of the recent press articles express concerns that some of popular consumer products will be soon disappearing from the market if they do not meet new European requirements on efficiency and sustainability set by the Ecodesign Directive. (Europe's ban on 'wasteful' gadgets - doest it cost or save?) 

Another article points out to the decreased life span of consumer electronic products, where wasteful consumption of goods may result from the consumer's need to update their products to newer, better versions more often (Lifespan of consumer electronics is getting shorter, study finds). 

You may also read in recent press more about the problems of marketing of sustainable products. While some researchers discovered that consumer care about e.g. environmental impact of their purchases, this often still doesn't influence their purchasing behaviour. Could this be explained by the fact that consumers don't see what's in it for them to change their decision-making to reflect sustainability trends? (The problem with sustainability marketing? Not enough me, me, me)

Customer service & consumer information

Interesting findings of two studies on customer service in the UK have been discussed in Forbes by Adrian Swinscoe (Is Customer Service Going to Get Worse Before It Gets Better?). Tentative conclusions that could be drawn from this article are that while customer services seems to be improving, the improvement may be too slow for the dramatic raise in consumer expectations as to what level of customer service they should be receiving.

Speaking of customer services, some banks are considering to start texting their customers that it may be in their interest to switch a financial service provider, lower balance levels, avoid overdraft charges, etc. This may be the result of the reported inefficiency of bank statements that consumers currently receive. (British watchdog tells banks to text time-poor customers)

Are the European institutions looking for a way out from the promises they have made to deliver roaming-free phone services to Europeans in 2015? This is the subject of an article discussed in Deutsche Welle (Europeans free to 'roam if you want to' - but without phones, without data).

Strict product liability for recall of medicinal devices - CJEU in Boston Scientific Medizintechnik GmbH (C-503/13 and C-504/13)

5 March 2015: CJEU judgment in Boston Scientific Medizintechnik GmbH (C-503/13 and C-504/13)

Previously, we discussed the opinion of AG Bot in this case (see Medicinal product recall allows to claim damages for surgical removal thereof? - AG Bot in case Boston Scientific Medizintechnik GmbH (C-503/13 & C-504/13)). Briefly, the case brought up interesting issues of whether the special product liability regime introdued by the Product Liability Directive could apply in cases of product recall. That is to say, when a specific product has not (yet) proven to be defective (but the group of products to which it belongs showed a tendency of particular defect appearing) nor did it cause any damage due to its defect (but certain damage was caused as a result of this product's recall). It may be important that this case pertained to a specific class of products, namely, medicinal devices that have been installed inside human body, and, therefore, their recall involved surgical procedures. 

The Court of Justice agrees with AG Bot that the notion of 'defect' should be broadly understood, in accordance with Recital 6 of the Directive that requires that not only expectations of the consumers as to the safety of the product would be taken into account, but also of the public at large (Par. 37). With regard to medicial devices, this safety threshold is quite high, since their defect may cause significant damage to consumers (Par. 38-40).

"Accordingly, where it is found that such products belonging to the same group or forming part of the same production series have a potential defect, it is possible to classify as defective all the products in that group or series, without there being any need to show that the product in question is defective." (Par. 41)

 Whether the patient could claim compensation for the costs of the surgery removing the malfunctioning device and installing a new one, would depend among other on whether such a surgery was "necessary to eliminate harmful consequences and to restore the level of safety which a person is entitled to expect" (Par. 49).

The CJEU had no doubt that the costs for the replacement of the defective pacemakers should be paid by its producers, but with regard to defribillators it left the decision to the national court - since pursuant to the producers these defective devices instead of being replaced could have also been just deactivated. The national court needs to determine whether that would be sufficient to "overcome the defect in that product, bearing in mind the abnormal risk of damage to which it subjects the patients concerned". (Par. 54)

More fee certainty for consumers upcoming

The European Parliament has approved a proposal for a Regulation on Interchange Fees for Card-based Payment Transactions. What is such an “interchange fee”? When a customer pays for a purchase in a store using a credit or debit card, the bank that serves the store (the "acquiring bank") pays a fee to the bank that issued the payment card to the consumer (the "issuing bank"). The interchange fee is then deducted from the final amount that the store merchant receives from the acquiring bank for the transaction. The aim of the regulation is to establish transparent fee-capping rules for cross-border and domestic retail purchases, thereby reducing the amount of hidden fees for consumers. As a general rule, the Regulation will cap interchange fees at 0.2% of the transaction value for consumer debit cards and at 0.3% for consumer credit cards. For domestic debit card transactions the 0.2% cap will only apply after a five-year transition period. For smaller domestic debit card transactions, Member States may also set a maximum fixed fee of €0.05 per transaction, after the five-year transition period. For credit card transactions, likewise, Member States may set a lower fee cap for domestic credit card transactions.

 

For now the new rules will not apply to so-called “three-party” card schemes such as Diners and American Express (involving only one bank) provided the card is both issued and processed within the same scheme. Commercial cards used only to pay business expenses will also be exempt.

The capping rules do not affect ATM cash withdrawals.

 

What is next? The document is to be endorsed by the Council of Ministers.

E-books possibly more expensive in the future for certain European consumers

Today, the ECJ decided that the rules in place in France and Luxemburg, that established a strongly reduced VAT for e-books, are in breach of EU law.

VAT rules are indeed harmonised in the EU by virtue of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and its implementing regulation. These rules explicitly prohibit levying a reduced VAT on services provided through electronic means, and the Court has considered that e-books are indeed services and not goods. 

Member States are however not prevented from keeping lower VAT in place as far as physical books are concerned. The latter are to be considered goods, as it is impossible to imagine their transmission without a physical support (ie paper). 

Italy has also recently lowered the VAT on e-books, after pressing campaigns focussing on the need to promote readership irrespective of the "infrastructure". The Kingdom of Belgium had intervened in both proceedings to support the "non-compliant" Member State's position.

The decision might entail a price increase for e-books, unless publishers decide, at least for some time, to give in part of their share in order not to discourage e-readers.

Advertising medicinal products

On 3 March 2015 Advocate General Szpunar delivered his opinion in joined cases C-544/13 and C-545/13 Abcur.

The Swedish case, which led to the preliminary questions assessed by Szpunar, deals with a dispute between Apoteket, a State-owned company which produces and markets two products without having obtained an authorisation for sale as a medicinal product pursuaent to Regulation (EC) No 726/2004 and Abcur, a pharmaceutical company which manufactures and markets two similar products and which has obtained an authorisation pursuant to Regulation (EC) No 726/2004. Abcur’s complaint against Apoteket concerns the fact that Apoteket manufactures the products without an authorisation and some measures employed by Apoteket to present the products. Among 7 complex questions referred to the Court, these of special interest for consumer law covers the question, whether Directive 2005/29/EC on unfair commercial practices advertising are also applicable for medicinal products for human use falling under Directive 2001/83/EC and whether Directive 2006/114/EC on misleading and comparative can apply to advertising falling outside the scope of Directive 2001/83.

According to Szupnar, Directive 2005/29 and Directive 2001/83 can apply, in principle, in parallel (para 58). Szpunar points out that the directive is without prejudice to Union or national rules relating to health and safety aspects of products (Article 3(3) of Directive 2005/29) and that Article 3(4) of the directive states that in the case of conflict between its provisions and other Community rules regulating specific aspects of unfair commercial practices, the latter shall prevail and apply to those specific aspects. Moreover, a combined reading of Article 7(5) of and Annex II to Directive 2005/29 demonstrates the complementary character of Directive 2005/29 and Directive 2001/83 – information required by EU law in relation to commercial communication including advertising or marketing is to be regarded as material information for the purposes of defining a misleading omission (paras 58–61).

The referring court does not relate to the substantive requirements of Directive 2005/29. Nevertheless, Szpunar underlines that the scope of the directive is limited to business-to-consumer commercial practices and it addresses commercial practices directly related to influencing consumers’ transactional decisions in relation to products. Consequently, only information accessible to consumers can be regarded as falling within the scope of the directive whereas the medicinal product in question can only be acquired through a prescription by a doctor (par. 65–68). In that case, the consumer is adequately protected by the doctor. However, Directive 2005/29 can be applied if a court finds that there is “a connection between the information provided and influence on the doctor to prescribe the product at the instigation of the consumer/patient” (para 69).

As regards Directive 2006/114 Szpunar recalled that the directive’s scope is confined with respect to misleading advertising to business-to-business relations. The directive applies to any particular sector of economic activity, unless there are specialised rules governing such a sector. In the absence of an explicit exclusion of Directive 2006/114, it should be applicable. Therefore, Directive 2006/114 is applicable also to medicinal products which fall outside the scope of Directive 2001/83 (paras 80–83).

Finally, Szpunar clarifies the term ‘advertising’ defined in Article 2(a) of Directive 2006/114 as making of a representation in any form in connection with a trade, business, craft or profession in order to promote the supply of goods or services. It has been confirmed by the Court that this is a particularly broad definition which covers various forms of advertising. However, Article 86(2) of Directive 2001/83 excludes from the application of Title VIII on Advertising a range of measures like labelling and accompanying package leaflets and factual, informative announcements, and reference material relating, for example, to pack changes, adverse-reaction warnings as part of general drug precautions, trade catalogues and price lists, provided that they include no product claims. These measures cannot constitute ‘advertising’ for the purpose of Article 2(a) of Directive 2006/114, because the general rule on advertising to which economic operators are subject should not be stricter than a special rule. Though, it has to be borne in mind that the crucial element is whether it can be objectively determined that the representation has been made with a view to promoting the supply of a good or service. The Court held in MSD Sharp & Dohme that Article 86(1) of Directive 2001/83 did not, in principle, preclude the possibility that published or distributed material which includes only objective information could be regarded as advertising and that ‘[i]f the message is designed to promote the prescription, supply, sale or consumption of medicinal products, it is advertising for the purposes of that directive. However, material which is purely informative, without promotional intent, is not covered by the provisions of that directive relating to advertising of medicinal products.’ (paras 86–90 and MSD Sharp & Dohme, para 35). It is therefore for the referring court to establish these factual matters so as to determine whether and to what extent the activities at issue in the main proceedings constitute advertising within the meaning of Directive 2006/114 (para 92).

To be confirmed by the Court of Justice of the European Union…

Matei (C-143/13), or Kásler explained: what's the core of a (mortgage) credit contract?

Last Thursday, the ECJ published its decision in Matei (C-143/13), a Romanian case on unfair terms concerning two different credit contracts in foreign currency.

The case builds on and clarifies the Court's view on one fundamental question concerning the interpretation of the Unfair Terms Directive, namely what terms have to be considered as exempted from unfair terms control under the Directive's "subject matter and price" exception?

The Court had a chance to reaffirm and clarify a series of points that had been already touched upon in previous decisions, and it made quite good use of such chance.

The case concerned two allegedly unfair terms:

- a so-called "risk charge", calculated as percentage of the outstanding loan and payable every month;

- a term allowing the lender to change the otherwise fixed interest rate in case of "significant changes in the money market". 

The question referred to the Court (para 44) was whether such terms should be exempted from control under the Directive as forming part of the contract's "main subject matter" and/or "price" within the meaning of article 4(2) of the Directive. 

In short, the Court answered that the final decision is for the national judges, but in principle the two terms should not be exempted from control.

Here is a more detailed account.

The question concerned the interpretation of the scope of the exemption as set out in the Directive, with the caveat that it is the national court who finally has to apply the principles articulated by the CJEU to the particular contract at hand "in accordance with the particular circumstances of the case" (para 53). 

According to the ECJ (para 54), the notion of "main subject matter" has to be interpreted distinguishing the terms that lay down the essential obligations in the contract and and clauses "ancillary" to the essential obligations. 

As to the second category (para 55), "the exclusion concerns only the adequacy of the price or remuneration as against the services or good supplied"- thus is excludes a reviewing standard rather then exempting certain terms en bloc. 

As to the terms allowing to change the interest rate (ie the price of credit), the Court had already established their suitability for control in Invitel. Here however the Court articulates its evaluation also with reference to the Directive's annex (para 59 and ff), their nature, and the nature of the challenge to which they are subject. 

As to the "risk charge", the Court observes that several elements point to its ancillary nature- first of all, the fact that its function is to secure the repayment of the debt, or the main obligation (para 67). 

Interestingly, the Court states that, taking into account the Directive's objective if protecting consumers, the mere fact that the "risk charge" materially represents an important part of the profit the lender derives from the contract is not in itself a reason to consider it as "main subject matter" of the contract from a legal point of view (para 68). 

Finally, the Court considers that the fact of the case do not suggest that the dispute concerns the adequacy of that commission vis à vis the services provided to the lender, since what is submitted is that the commission is not justified by any consideration. The court had already held in Kásler that the "price" exception can only apply when a service is being offered in return for the (alleged) price (para 70).

The main difference with Kásler is that here the Court is much more "activist" in suggesting that the information in its hands suggests that the terms should be considered as neither making part of the main subject matter, nor being exempted due to the "adequacy of the price" carve-out (see paras 64 and 70).

In any case, should the terms fall within the exception provided by article 4(2), the referring court would still need to test them if it considered them to be intransparent. The Court then recaps the requirements concerning transparency that it has itself articulated in previous decision- the "novelty", here, is that this is the first time that these requirements are related to transparency as a preliminary step possibly opening  to control instead of being used as a standard of assessment as to the term's fairness (see para 72 and ff).

Thus, again from this decision we can infer little as to the destiny of the terms attacked when the issue will be back in the hands of Romanian courts- but we are a step closer to giving shape to the many open concepts employed in Directive 93/13. To be continued!

 Edit 01.07.2015

I was listening to Kirstin Nemeth's presentation at the 15th IACL conference here in Amsterdam, when, thanks to her, I realised that this post did not address one important issue raised by Matei: what is the relationship between the "main object" exemption in directive 93/13 and the notion of "total cost of credit" contained in Directive 2008/48, so-called consumer credit Directive?

In other words, does the fact that such notion obviously implies that there is more to a credit exchange than loan and basic interests mean that additional fees should be shielded from control?

The ECJ answered this question rather swiftly in Matei on the basis of the two directives' different rationales:

      [The notion of total cost of credit] is in fact defined particularly broadly so that the total amount of all the costs or expenses to the consumer and relating to payments made by the latter both to the lender and to third parties must be clearly stated in consumer credit agreements, such a procedural obligation contributing to the main objective of transparency pursued by that directive.
However, Article 4(2) of Directive 93/13 laying down an exception to the mechanism for reviewing the substance of unfair terms, such as that provided for in the system of consumer protection put in place by that directive, that provision must be strictly interpreted

Thanks Kirstin for bringing the point up in your presentation!