How to get consumers to eat healthier?

As obesity is becoming a bigger health issue in Europe with every year, policymakers are paying more attention to consumers' shopping and eating habits. The ideal of an informed consumer making best possible (which should also mean the healthiest possible) choices is still alive. The discrepancy between this ideal and the reality could result from consumers' not being properly informed, e.g. from the nutritional information not reaching them or being too difficult for them to understand. To solve the first issue (hidden information), nutritional labels could be placed front-of-pack on food products. This is not a novel idea, as previously commissioned by European legislators' studies have already suggested an increased effectiveness of nutritional labelling if the position of the label is at the front of the packaging. The European legislator was not, however, ready to oblige traders to adjust their labelling policies to this extent. The second issue (too difficult labels) could be tackled by simplifying labelling - adopting colour-coding (traffic lights scheme) or other visual shortcuts to better inform consumers. 

The French government has just backed such a nutritional labelling system (Nutri-Score - read more here). The decree doesn't prescribe but rather leaves an option to the traders to adopt the recommended labelling system, which requires nutritional label to be placed on the front of the package and uses colours (green to orange) and letter symbols (A-E - like with washing machines) to inform consumers on 'better' food choices. This is not the first time such an experiment was undertaken by national policymakers, see e.g. the Dutch experience with Vinkje logo (see for an example of this logo on the picture on the left) (to read further on the Vinkje logo see here in Dutch). The Dutch abandoned this labelling system as it was seen to mislead consumers - the 'better' food choices could have been perceived for 'good' choices. It will be interesting to observe the impact that the French labelling change will have on marketing practices and consumer behaviour, as the French policymakers hope to encourage the European ones to further act on this issue.

The other option to help consumers take healthy food decisions is for the policymakers to regulate the food market. This week it was also reported that the Scottish government is considering restrictions on promotion of unhealthy food and drink (see here). For example, such promotions would be prohibited on routes leading to schools or around visitor attractions, where they could easily attract children attention or on TV before 9pm.

European Commission announces 'New Deal for Consumers'

Today, on 24 October 2017, the European Commission published its Work Programme 2018: an "agenda for a more united, stronger and more democratic Europe". The Commission announces that it will present a 'New Deal for Consumers' "to enhance judicial enforcement and out-of-court redress of consumer rights", as well as "to facilitate coordination and effective action by national consumer authorities". It aims at a "targeted revision" of the EU consumer directives following on the Fitness Check. No specific measures are proposed yet, but as we wrote last May: exciting times are ahead for EU consumer law. 

In the Results of the Fitness Check of consumer and marketing law, it has already been pointed out that there is no effective mechanism for collective action available at EU-level to compensate for a lack of incentive for individual enforcement (see e.g., Main report p. 246). BEUC and other consumer organisations have also asked for legislative measures in the aftermath of 'Dieselgate'. Last week, at a Politico Brussels Playbook Breakfast, Věra Jourová - European Commissioner for Justice, Consumers and Gender Equality - said that she would like to propose a EU-wide class action and collective redress. She also said a "package" of measures will be adopted in March 2018, presumably also in the field of consumer law (source: mLex market insight, 18 October 2017).

See also the editorial of Christian Twigg-Flesner in the latest issue of EuCML: 'From REFIT to a Rethink: Time for fundamental EU Consumer Law Reform?'

EU Commission announces measures for completing the Banking Union

As announced by President Juncker in his State of the Union Address the EU Commission issued a Communication on the measures it will take for the completion of the banking union. The banking union is seen by the Commission as essential for the good functioning of the Economic and Monetary Union (EMU) and its ambitious goal is for the banking union to be completed by 2019. For that purpose, a range of initiatives were announced. This post will focus on the two developments which are more relevant for consumer law which are: the measures on the European Deposit Insurance Scheme (EDIS) and on reducing the level of non-performing loans (NPLs). 

EDIS is a key component for the Banking Union as it will ensure that all depositors in the EU enjoy the same level of protection and the banking system will be more resilient against future crises. Unfortunately, though the Proposal for EDIS was brought in November 2015, the negotiations between the EU Parliament and the Council have been brought to a halt as there is limited political consensus. In order to address the concerns voiced during the negotiations, the EU Commission suggests that EDIS will be introduced more gradually, taking into account the progress made on risk reduction. In the first re-insurance phase, EDIS would provide only liquidity coverage and no loss coverage. Also, the move to the second phase of co-insurance would not be automatic but only when certain conditions, such as the level of Non-Performing Loans, would be satisfied. Furthermore, measures would be taken to enhance cooperation between national deposit guarantee schemes, national authorities, the Single Resolution Board and the European Banking Authority. The Commission is keen to achieve progress in negotiations aiming to adopt the proposal in 2018.

As for Non-Performing Loans (NPLs), while their level has fallen, they continue to present an important systemic risk and the EU Commission takes a holistic approach in tackling the problem of existing NPLs as well as taking steps to ensure they do not build up again in the future. Part of that is regulating Asset Management Companies, developing secondary markets for NPLs and enhancing the protection of secured creditors. Another measure that might prove interesting also for legal scientists is that of increased transparency on NPLs in Europe as more data will be available and comparable, making it possible to examine the NPLs market in different jurisdictions and on an EU level.

The completion of the Banking Union would be a positive development also for EU consumers and hopefully serve to avoid a repetition of the recent financial crisis. Do you think the new measures announced are a step in the right direction? Please share your view in the comments.

CJEU agrees with Advocate-General on the interpretation of UCPD in a B2B context

Today the Court of Justice ruled on the case C‑295/16 Europamur Alimentación SA which dealt with a highly interesting issue of whether and under what circumstances the CJEU has jurisdiction to interpret the Unfair Commercial Practices Directive 2005/29/EC with respect to a business-to-business practice. I have commented on the case in an earlier post, noting that the reasoning provided by the Advocate-General in support of the Court's jurisdiction was open to question. Nevertheless, the Court appeared to be conviced by the arguments put forward by its advisor and considered itself competent to rule on the case. Following this conclusion, the ruling on the substance - relating to a national rule imposing a per se prohibition of selling at a loss - did not come as a surprise.

Facts of the case

The request was made in the proceedings between Europamur Alimentación, a Spanish wholesaler, and a local authority for commerce and consumer protection, in which the former questioned the legality of an administrative penalty imposed upon it. Europamur argued, inter alia, that the sanction was contrary to EU law as it was based on a national provision which should have been amended in the process of UCPD implementation.

The provision prohibited the practice of "selling or offering to sell to the public at a loss" unless either of the two exceptional circumstances occurred: (i) the objective of the trader engaging in the practice was to match the prices of one or more competitors with the ability materially to affect that person's sales, or (ii) the sale involved perishable goods which would shortly be unfit for use. The act did not clarify if the said prohibition referred to B2B transactions only, or to B2C sales alike. A separate section clarified, however, that it also applied "to entities engaging in wholesaling, whatever their legal nature".

If applied in a business-to-consumer context (i.e. to a practice "directly connected with the promotion, sale or supply of a product to consumers") the provision would, without doubt, be in conflict with the full harmonisation approach of the UCPD, and particularly with its Article 5(5) according to which the black list of commercial practices regarded as unfair in all circumstances, contained in Annex I, should apply in all Member States and could only be modified by revision of that Directive. The CJEU had previously interpreted this framework as precluding national laws establishing a general prohibition on certain commercial practices, other than those included in the Annex, in so far as they were pursuing objectives relating to consumer protection (most recently in C-343/12 Euronics Belgium). 

Court's ruling

The CJEU began its analysis by reaffirming that the UCPD was applicable only to practices which directly harm consumers' economic interests and, therefore, did not apply to transactions between traders. It went on to argue, however, that this did not undermine its jurisdiction in the case at hand. 

Crucial from this point of view is para. 29 of the judgement which reads as follows:

29 The Court has repeatedly held that it has jurisdiction to give preliminary rulings on questions concerning provisions of EU law in situations where the facts in the main proceedings fell outside the scope of EU law, but where the provisions of EU law had been rendered applicable by national law, which, in dealing with situations outside the scope of EU law, followed the same approach as that provided for by the latter (see, to that effect, judgments of 18 October 2012, Nolan, C‑583/10, EU:C:2012:638, paragraph 45, and of 15 November 2016, Ullens de Schooten, C‑268/15, EU:C:2016:874, paragraph 53). In such a situation, it is clearly in the interest of the European Union that, in order to forestall future differences of interpretation, provisions taken from EU law should be interpreted uniformly (judgment of 18 October 2012, Nolan, C‑583/10, EU:C:2012:638, paragraph 46 and the case-law cited).

The Court subsequently agreed with the assessment of the AG that the contested Spanish provision should be regarded as a transposition of the UCPD. It observed, in particular, that the prohibition of selling at a loss applied in the same way to sales between wholesalers and retailers and to sales between retailers and consumers. Existence of a specific section extending the analysed prohibition to cover wholesalers, as well as the importance of consumer protection rationale in its application, were cited in support of this finding. As a result, the UCPD was interpreted as "precluding a national provision, such as that at issue in the main proceedings, which contains a general prohibition on offering for sale or selling goods at a loss and which lays down grounds of derogation from that prohibition that are based on criteria not appearing in that directive".

Concluding thought

It is indeed likely that the national provision at issue should have been amended in the process of UCPD implementation. It may be wondered, however, whether a failure to clean up a messy framework (the question of selling at a loss was also addressed in Law 3/1991 on unfair competition) should indeed be perceived as a an act of transposition beyond directive's material scope. Intertwinement of competition and consumer protection rationales is of course nothing new, hence the importance of the "direct link" criterion. Ironically enough, even the Advocate General, whose reasoning has largely been taken on board by the Court, observed that the transposition of the UCPD in the national law at issue occurred "mistakenly". As usual, the ruling is highly fact-specific. Broader consequences as regards the CJEU jurisdiction beyond the scope of the interpreted measure are therefore yet to be seen.

Take me home! Lessons from Monarch's closure

On Monday, 2 October 2017 Brexit claimed its first major victim! The UK based Monarch (Airlines and Holidays) went into administration. The bankruptcy of the company came for many as an unpleasant surprise,  leaving 110.000 passengers stranded abroad and many more disappointed with the cancellation of their holiday. According to the BBC, Brexit is in the heart of the company’s failure. Namely, following the Brexit vote the value of the Pound has sharply fallen compared to US Dollar, and many substantial costs for running the airline such as for fuel and handling charges were denominated in US Dollars. This means that following the Brexit vote Monarch paid more for these services and goods than before. Conversely, fierce competition from other low-cost airlines and tour operators, disabled the company to recover the additional costs generated by the Brexit vote.

Following Monarch’s administration the Civil Aviation Authority (CAA), took over Monarch's website and coordinated the biggest repatriation operation which concluded on October 15^th. However, the ordeal of Monarch’ passengers is far from over, as many still have to make alternative travel arrangements as well as claim refunds or expenses. While customers that booked holiday packages with Monarch are protected by Air Travel Organiser’s Licence (ATOL), a UK protection scheme for holidaymakers (see CAA’s website for more information on ATOL), the same is not true for flight-only customers who need to contact their card issuer to find out how to claim a refund (see the Guidance on Monarch's website). 

The case of Monarch in the UK reflects the state of consumer rights also on an EU level. There is a distinction between consumers that buy package holidays and those that buy only air tickets. The first are protected in case of insolvency, according to art 17 of Directive 2015/2302/EU (the New Package Travel Directive), while the second category falls under Regulation 261/2004 which does not provide for insolvency of the provider and the ensuing difficulties in fulfilling their obligations to compensate consumers and reroute flights as per art.7 of the Regulation.
 

While it is mandatory for air carriers to insure their passengers, as per art 6.1. of Regulation 785/2004, insolvency is not specified as a risk. Art.9 of Regulation 1008/2008 on common rules for the operation of air services in the Community (RECAST) provides for the suspension and revocation of the operating license of an air carrier facing financial problems, yet does not cover issues of compensation or repatriation of passengers. Thus, flight-only consumers are disadvantaged in the event of insolvency of the airline, compared to package travel consumers.

EU Commission has recognised the changing landscape as more consumers arrange their travel independently rather than book a package holiday, by bringing a Proposal for amending Regulation 261/2004 in 2013. The Proposal includes the obligation of large airport to have a contingency plan in place in case of a large number of cancelled flights, as well as inform passengers of said cancellations.( See art.4 and 14.4 of the Proposal).

Do you think that the current framework and especially Regulation 261/2004 ensures adequate protection of air passengers in the event of insolvency of the carrier or should Monarch be a warning sign that there is need for reform?

Note: This is the first joint post of the blog and I kindly aknowledge the contribution of Andrea Fejős, especially on the role of Brexit to the closure of Monarch.

Towards stricter standards for endocrine disruptors

On 4^th October, the European Parliament issued an objection to the Draft Commission regulation amending Annex II to Regulation (EC) No 1107/2009 by setting out scientific criteria for the determination of endocrine disrupting properties. The European Parliament took issue with the last paragraph of the Draft Regulation, which allowed for excluding a substance with an intended endocrine mode of action from being identified as an endocrine disrupter for non-target organisms. According to the European Parliament, this exception was not based on scientific criteria as required by the Court; instead, the EU Commission took into account other criteria such as economic ones, thereby exceeding its implementing powers.

Endocrine Disrupting Chemicals (EDCs) are an exogenous substance or mixture that alters function(s) of the endocrine system and consequently causes adverse health effects in an intact organism. They are widely used and can be found in food and in a variety of consumer products, including toys and cosmetics. Even though the study of the effects of EDCs is ongoing, there are numerous studies showing the association between EDCs and human diseases, ranging from reproductive and endocrine to autoimmune and cardiopulmonary (see e.g. on World Health Organisation's website). Children are particularly vulnerable and their exposure to EDCs is linked to increased incidences of reproductive diseases, endocrine-related cancers, behavioural and learning problems amongst others.

Given that EDCs pose a real threat to the health of consumers and especially children, it is imperative that they are effectively regulated. The EU is leading the way in regulating EDCs, as it is in the process of adopting legally binding criteria to determine what is an endocrine disruptor, something that no country has done so far (see Commission's communication).

When regulating endocrine disruptors consumers' health and protection of the environment are the priority rather than the internal market. This was the message sent by the European Parliament to the EU Commission which now has to modify and resubmit the Draft Regulation. This development was welcomed also by BEUC, which urged for higher standards in relation to EDCs.

In anticipation of the EU Commission’s revised Draft Regulation, it is reassuring that its new direction will be towards a stricter standard for regulation of endocrine disruptors to the benefit of consumers.

The UK enforcement action worked: Ryanair changed its practice

Following up on our last week's post on the enforcement action of the UK's Civil Aviation Authority (CAA) against Ryanair for failing to inform consumers of their rights, it looks like that the enforcement action was successful. Ryanair has changed its practice. It has emailed affected customers and published an announcement on its website, explaining passenger rights stemming from Regulation 261/2004 and what Ryanair is going to do about these rights.

Given that enforcement actions remain national, Ryanair seem to have done more that it was supposed to do. By its own account, it has emailed every affected customer. The published announcement is also accessible for all its customers. The UK based authority's action therefore seem to have gone beyond its territorial scope of authority, and helped every affected customer regardless of where they are domiciled, and regardless of where they were flaying to and from. Although (formal) enforcement actions for EU wide-infringements remain national, it seems that digital technology and a bit of a good will enabled a national enforcement action to have (informal) EU-wide effect closing thereby the current loophole in EU law.

Do you agree with the above analysis? Or would you consider that national authorities have scope to act beyond the borders of their Member State in situations like this where EU-wide compliance with the national enforcement action is possible? Share your views in comments below.

Flight cancellation saga continues: enforcement action against Ryanair in the UK

Following up on our previous blog post and on the ongoing Ryanair scandal, our readers may be interested that the Civil Aviation Authority (CAA), the UK's aviation regulator, started an enforcement action against Ryanair. The CAA alleges that Ryanair persistently mislead passengers by providing inaccurate information regarding their rights guaranteed by Regulation 261/2004 in respect of the cancelled flights, particularly their rights about re-routing, and reimbursement of expenses caused by the cancellation (for example, meals, hotels and transfer costs).  With these omissions Ryanair has breached the Consumer Protection from Unfair Trading Regulation 2008 (implementing Directive 2005/29/EC on Unfair Commercial Practices), the breach of which triggered the empowerment of the CAA to use enforcement actions for the protection of collective interest of consumers based on the Enterprise Act 2002. With the enforcement action the CAA now asks Ryanair to change its practice (voluntarily), should this not be the case, the CAA will then seek a court injunction against Ryanair (see for more here).

As we have discussed previously, enforcement matter of EU-wide infringements such as this (where a large number of EU consumers in various Member States are affected) essentially remain national (see our posts here and here). So the question that logically follows is, what have other countries do to make Ryanair to protect their customers? Has there been a similar action in your Member State? Please share this information with our readers in comments below.