Friday, 24 April 2015

Italian leather shoes not what they used to be - AG Sharpston in UNIC and UNI.CO.PEL (C-95/14)

23 April 2015: Opinion of AG Sharpston in UNIC and UNI.CO.PEL (C-95/14)

A lot of attention has been given recently in EU consumer law to proper labeling of consumer products. One of the issues that remains complex is the country of origin label, especially for products that are designed in one country, materials for which production come from another one, and which are then manufactured in the third country etc. Textiles and clothing industry may be used as an example of an industry sector where it may be hard to identify just one country of origin of a given product. Italy has introduced in 2013 additional labeling requirements for leather products, where the leather has been obtained through various processes in countries other than Italy, but then the leather goods that were made of it (e.g. shoes) were labelled with an Italian word for leather (cuoio, pelle, pelliccia etc.). On such goods, according to then adopted Italian law (it was repealed and replaced with a new law in November 2014), the country of origin label would need point to the country in which the leather was obtained (e.g. China).

UNIC is a trade association representing the tanning industry (one of the processes through which leather is obtained) and UNI.CO.PEL is a consumer organisation. These organisations joined forces to demand that defendants stop using Italian terms to describe the shoes' leather inner sole without indicating its origin, since this could mislead consumers in thinking that the entire product is Italian in origin (par. 17). Such a practice could not only misled consumers (placing a higher value on Italian leather shoes), but also constitute an unfair competition practice.

AG Sharpston agrees, however, with the defendants that the adopted Italian provisions setting a higher standard for labeling country of origin of leather products may be contradictory to EU law (Directive 98/34, Articles 34 to 36 TFEU, Footwear Labelling Directive). Directive 98/34 requires Member States to notify the Commission and other Member States when they intend to introduce measures (technical provisions) that could create barriers to trade. Italian rules are perceived by the AG Sharpston as such technical provisions (since they refer to the packaging, marketing or labelling of a product - footwear) and they became effective in Italian law before the standstill requirements set in Directive 98/34 run out, which would make them unenforceable (par. 44, 46-47). 

Additionally, the free movement of goods as regulated in the TFEU would suffer due to the quantitative restrictions on imports set by this Italian law, since they would raise production costs, discriminate against products distributed to many EU countries (where leather is labelled in various languages, incl. Italian), adversely influence consumer opinion about these goods with additional labeling requirements etc. (par. 51-53):
"An obligation to affix a label indicating the country of origin to leather goods obtained from working carried out in foreign countries which use the Italian terms ‘cuoio’, ‘pelle’ or ‘pelliccia’ (or their derivatives or synonyms) is a measure having equivalent effect to quantitative restrictions on imports, making the free circulation of such goods more difficult or more costly. It has long been recognised that the purpose of indicating the origin of products is to enable consumers to distinguish between domestic goods and imports and that this enables them, inter alia, to assert any prejudices which they may have against foreign products. Within the single market the origin-marking requirement not only makes the marketing in a Member State of goods produced in other Member States in the sectors in question more difficult; it also has the effect of slowing down economic interpenetration by handicapping the sale of goods produced as the result of a division of labour between Member States. " (par. 49)
Consumer protection may not justify the introduction of such a rule. (par. 54)

Finally, while the Footwear Labelling Directive does not exhaustively regulate the whole sphere of labeling of footwear, it does set an exhaustive list of requirements for labeling of the materials used in the main components of footwear. Therefore, the trader needs to indicate that the footwear in question is made of leather through the use of a relevant word or the hide pictogram - the country of origin requirement is not mentioned, and, therefore, prohibited. (par. 58-60)