Thursday, 19 October 2017

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.

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