Tuesday, 17 July 2018

Mis-selling of financial products: is there a need for a systematic approach?

As we are more and more expected to take control of our financial affairs e.g. to save for our retirement or to take up a mortgage loan to finance our house, financial decision-making is increasingly becoming part of our lives. Yet, at the same time, financial products are becoming overly complex, markets too diverse, and our financial decisions ever more important. Given the importance of these decisions, many of us would decide to get help from a financial adviser rather than to making an independent decision. We tend to trust financial advisers, trust that they are going to select the right product for us, the one that is the best fit for our needs and preferences. But are we really getting the right product? The financial mis-selling scandals suggest that we are not.
 
Unfortunately, mis-selling scandals because of bad advice are too common in Europe. Many of these scandals will be (too) familiar to our readers, such as the PPI scandal in the UK, the foreign currency loans in several Member States e.g. Spain, Greece, Hungary, Poland, or risky investment products in e.g. Belgium (see the map of major mis-selling scandals, including videos of testimonies here). More recently financial advice also got the attention of EU law-makers. In June 2018 the EU Parliament published a series of five studies on Mis-selling of Financial Products: 1) Marketing, Sale and Distribution, 2) Subordinated Debt and Self-Placement, 3) Consumer Credit, 4) Mortgage Credit, and 5) Compensation of Investors in Belgium. These studies pointed out the weaknesses in the current EU regulatory framework and its enforcement. In addition, in April 2018 the EU Commission published a study on the Distribution of retail investment products across the EU, concluding that consumers face significant challenges in making informed decisions (see our report here).
 
In the light of the above, BEUC launched a campaign for a real change in the financial advice sector. A change that needs to affect: sales incentives, regulatory framework and supervision and enforcement.
  • Mis-alignment of sales incentives is a real problem in the financial advice sector. Commissions create a conflict of interest, steering advisors in a direction of offering risky products instead of acting in the best interest of consumers.
  • According to BEUC, the current, patchy legal framework is not fit for purpose. As we know, the majority of legislative instruments, especially those adopted in the aftermath of the financial crisis, will regulate at least some aspect of financial advice. However, this approach creates inconsistency, for example, the regulation of issues like independence and qualifications are approached differently in various instruments, without even having common definitions of what they are referring to.
  • Finally, many of the current rules is difficult to enforce, for example, the requirement in MiFID2 that the investment meets the needs of the consumer.
To improve the financial advise sector, BEUC suggests to: 
  • ban commissions;
  • create common definitions and rules for advisors, rules that set standards of professionalism and that are easy to comply with;
  • better enforcement, enforcement coordinated by the EU supervisors (EBA, ESMA and EIOPA) and adequate powers of national supervisors.
Whilst it is not specially raised, it could be implied that that the above aims would be the best achieved by a separate, independent act such as a Directive on Financial Advice. What do you think?  Is there a need for a systematic approach? Is it viable to regulate financial advice independently from the underlying product that it relates to?

Friday, 13 July 2018

EU Parliament votes on dual quality products

On the 12th of July the EU Parliament’s Committee on the Internal Market and Consumer Protection (IMCO), voted on the report by Olga SEHNALOVÁ (S&D, CZ) on dual quality of products in the Single Market and endorsed it along with its suggestions for amendments. 

Dual quality of food products between eastern and western states in the EU has come to the attention of the EU Commission since 2009, following complaints from Member States, with President Juncker underlining the need to take action to combat this phenomenon in 2017. 

What exactly is the problem of dual quality of products? The Report which collected evidence from Slovakia, Hungary, Czech Republic and Croatia showed that there are differences in the composition of some products otherwise identical in packaging and brand between western and eastern Member States. While all products were found to be safe to consume, the products sold in Eastern Member States were of lower quality. For example, fish sticks with a lower percentage of fish, biscuits with a lower percentage of chocolate etc. This means that these products were also more unhealthy than their western counterparts. The issue was not unique to food products but similar incidents were reported for cosmetics, pet food and cleaning products.

The Rapporteur underlined that although it is not illegal for brands to customise their products from member state to member state, consumer should be made aware of that and provided with clear information. This phenomenon undermines the trust of consumers in the internal market and creates a divide between west and east and old and new Member States.

The measures suggested to tackle this issue are three-fold.  
  1. Improving cross border cooperation and data sharing between national authorities as well as consumer organisations.
  2.  Further clarifying the UCPD on ‘dual quality products’, as it is to be amended according to the New Deal for Consumers.
  3.  The creation of a new logo by manufacturers to show that their products are the same throughout the EU.
The report will also be put to a vote at the plenary session of the EU Parliament in September and may also have an impact on the reform of the UCPD. The EU needs to send a strong message that there are not two tiers of consumers within the EU.

Thursday, 12 July 2018

Product safety pledge by online marketplaces

The European Commission has recently liaised with four biggest online marketplaces (Alibaba, Amazon, eBay and Rakuten) to have them agree on taking faster action to remove dangerous products from among their listings. The commitment is to act within 2 working days upon a notification by authorities of the Member States, and within 5 working days - if the notification comes from customers (see further European Commission and four online marketplaces sign a Product Safety Pledge to remove dangerous products). This new arrangement specifies the general 'speedy' notion for removal of such dangerous products that was set in the e-Commerce Directive.

Monday, 9 July 2018

EU Commission on its way to place barriers to the ban of harmful substances from cosmetics

On 22nd June, the EU Standing Committee on Cosmetic Products met to discuss amendments on Regulation (EC) No 1223/2009 of the European Parliament and of the Council on cosmetic products. The Commission is required to submit its proposed measures to the Committee for scrutiny, as per art.32 of Regulation 1223/2009.

Regulation No 1223/2009 is designed to harmonise the rules as well as terminology on cosmetics in the EU with the double objective of promoting the internal market while ensuring a high level of protection of human health. The Regulation has been revised multiple times; what are the changes brought by this draft regulation and what dangers do they hide for consumers?

One of the proposed changes is on the use of carcinogenic, mutagenic or toxic for reproduction (CMR) substances. CMR substances are highly toxic and present lasting dangers for human health (for more info on CMR see OSH wiki). Relaxing the protection against CMR substances can have profoundly negative effects on the health of consumers, especially in the case of cosmetics which are everyday widely used products.

Art 15 of Regulation 1223/2009 prohibits the use of substances classified as CMR, as those are listed in ANNEX VI of the Regulation with some exceptions, as for example when there is no other suitable alternative or when the substance complies with food safety requirements. As stated in minutes of the Working Group on Cosmetic Products, the Commission now considers that adding a new substance to the CMR list requires amendment of the annex of the regulation via a new act. This presents a departure from the previous position where the ban was automatic as soon as the substance was placed on the list by the European Chemicals Agency.

The opinion of the Committee on the issue is not yet made available; yet BEUC in one of its press releases has drawn attention to the matter and the potential harm for consumers from such a reform. It is not an easy task to balance between innovation and protection of human health, hopefully the EU Commission will in this case demonstrate its commitment to maintaining a high level of protection by not allowing delays in the banning of harmful substances.

Thursday, 5 July 2018

EP against increasing sharing platforms obligations regarding copyright protection

The European Parliament rejected today the Legal Affairs Committee's proposal regarding new European copyright laws - Copyright Directive (Parliament to review copyright rules in September), which aimed at adjusting the current legislation to the digital market. The next vote will occur in September, likely after some amendments are introduced. 

The rejected proposal was a result of heavy lobbying by artists and journalists, as it aimed to ensure they receive fair pay for their work, by strengthening content protection against sharing platforms and news aggregators. For example, in order to motivate sharing platforms to block internet users from uploading and sharing copyright-protected content, such platforms would be required to pay fees to rightholders whose content would be found to be uploaded and shared on their platforms. This means that platforms would need to apply more sophisticated content-screening software, especially since the measures adopted by them would need to allow for uploading of non-infringing copyright content, as well as provide an opportunity to internet users for an appeal from a decision to block a particular upload. This way the freedom of expression could be preserved, but of course this further complicates online platforms' obligations and makes them more expensive (see more: MEPs update rules for the digital age).

Wednesday, 4 July 2018

Who is an operating air carrier? - CJEU in Wirth and Others (C-532/17)

CJEU issued a judgment today in the case Wirth and Others (C-532/17), which concerned interpretation of the notion of the 'operating air carrier' from Regulation 261/2004. It is the operating air carrier that has obligations towards the passengers, pursuant this Regulation, thus it is crucial to have clarity on who qualifies as such. 

The complexity in the given case arose due to the flight reservations being made by passengers with an air carrier TUIFly, but the aircraft and crew of the pertinent flight belonging to another air carrier - Thomson Airways. TUIFly used the resources of Thomson Airways under a 'wet lease' agreement and stated on the booking confirmation to the passengers that the flight is being 'operated' by Thomson Airways. When passengers proceeded to claim compensation for a delayed flight from Thomson Airways it refused to pay out on the grounds of TUIFly bearing the operational responsibility for the performance of the flight.

The CJEU agrees with Thomson Airways. An operating air carrier is therefore that air carrier which decides to perform a particular flight, fixes its itinerary and concludes contracts of air carriage with passengers, either himself or on behalf of another company (in casu TUIFly). The conditions of performing a flight and concluding a contract with passengers are cumulative in art. 2b) of the Regulation (para 18). As Thomson Airways only leased its aircraft and crew, and had no input on the operational decision regarding the flight, it could not be considered an operating air carrier. This means that the information provided to the passengers, as to who the operating air carrier is, is not decisive.

This decision could be beneficial to passengers, as it would not allow air carriers based in the EU to escape their liability by concluding wet lease agreements with air carriers registered in third countries in case of flights departing from airports located outside the EU (as pursuant art. 3 of the Regulation its provisions apply only to Community air carriers in such cases). However, in order to increase legal certainty of passengers this judgment should be followed by enforcement authorities finding that providing incorrect information to passengers on who the operating air carrier is qualifies as a misleading commercial practice.

Thursday, 28 June 2018

New study on the distribution of retail investment products in the EU

Today the EU Commission reminded us on a study conducted by Deloitte Luxembourg on Distribution system of retail investment products across the EU published in April 2018. The study investigated how well EU retail investment markets work for consumers, covering 15 Member States. Unsurprisingly, the study concluded that although consumers have choice, they face significant challenges in collecting and processing information for making good investment choices (see the summary of findings here and the full study here).

Wednesday, 27 June 2018

C-191/17 AG Tanchev on the notion of 'payment account'

Last week Advocate General Tanchev delivered a not very ‘consumer friendly’ opinion in case C-191/17 Budeskammer fur Arbeiter und Angestellt v ING-DiBa Direktbank Austria Nidererlassung der ING-DiBA AG. Referred by the Oberster Gerichtshof (Supreme Court of Austria) this case involves the the interpretation of Article 4 (14) of Directive 2007/64/EC on payment services in the internal market (PSD 1).

Representing consumer interests the Budeskammer fur Arbeiter und Angestellt brought an action against ING-DiBa Direktbank Austria alleging that the bank’s ‘Direkt-Sparen’  (‘direkt-savings’) product (referred to as online direct savings account) contains a large number of standard terms and conditions that are not compliant with the Austrian law transposing PSD1. Given the special nature of the financial product, the subject of the dispute became the scope of PSD1, i.e. whether this particular kind of account qualifies for a payment account within the meaning of PSD1.

Article 4 (14) PDS1 provides that a 'payment account' is an account held in the name of one or more payment service users which is used for the execution of payment transactions. The definition itself neither specially refers to nor specially excludes the particular product in question.

What is an online direkt savings account and how it works?

The online direct savings account is a particular kind of bank account. It is labelled as a savings account, i.e. that should be used for depositing money for saving purposes. however, access to this account is granted via online banking, enabling consumers to make deposits and withdrawals from the account. Any transfer however must be carried out  through another account called a reference account. The reference account must be a current account opened in Austria, but can be held by any Austrian bank, it does not have to be held with the same bank that holds the online direst savings account. A consumer is able to decide, without any restriction or notice when and in what amount the consumer transfers money between the online direct savings account and the reference account. 

Is the online savings account covered by PSD1?

Interpreting the provision in question in the context of other provisions of PSD1 (other definitions within Art. 4, Art. 2, and the Annex) and related EU legislation (Directive 2014/92/EU and Regulation 260/2012) AG Tanchev concluded that the particular product cannot be considered to be a payment account within the meaning of Article 4 (14) of PDS1, because this account does not involve ‘direct participation in payment transactions with third parties’. 

Our evaluation

Although AG Tanchev rightly said that the mere labeling of an account as a ‘savings account’ is not in itself an indication that the account does not constitutes a ‘payment account’ within the meaning of PSD1, what seems to have been determinative in his reasoning was that the online direct savings account is not intended to be used for transactions between the consumer (account holder) and third parties, essentially accepting the argument of the defendant bank. Whilst this may be true, if the account allows for  consumers to execute payment services consumers would surely deserve to have the same level of protection that belongs to users to payment accounts. According to AG Tanchev, this protection will be provided for consumers via the protection they enjoy buy the underlying, reference account. Whilst this may be correct, by the same token, applying a different regime for the two accounts creates uncertainty and opens a potential protection gap for consumers. In case of a future dispute, the bank  holding the online direct savings account would be able to  use the same argument as a shield against their liability; that the higher level of protection offered by PSD1 attached to the reference account does not apply the transaction executed though the online savings account, because the transaction was attached to that separate account and not to the reference account. The situation gets even more complicated leaving consumers with less access to redress when the two accounts are held by different banks.

At this instance we must agree with the EU Commission’s submission that argued against the restrictive approach in interpreting the scope of PSD1. The EU Commission stressed that the purpose of PDS1 is to confer protection on the users of payment services: as mentioned in recital 46 and in the articles of Title IV of PSD1. The accounts covered by PSD1 benefit from certain minimum regulatory requirements for the proper execution and processing of payment transactions, and such protection is denied to consumers in the event of a restrictive interpretation of the notion of a ‘payment account’ within the meaning of PSD1 (para 21).

Whilst the opinion involves the interpretation of PSD1, it remains relevant in the light of the current PSD2 that contains exactly the same provision in Article 4 (12) and seems to makes no special reference to the features of the product under scrutiny here.



Monday, 25 June 2018

BEUC position paper on artificial intelligence

Last week BEUC published a very interesting paper on Automated decision making and artificial intelligence: a consumer perspective. The paper highlights the main challenges raised by AI and suggest ways to tackle these. Importantly, the paper calls for an EU Action plan on AI that would set out new consumer protection concepts and a comprehensive plan to update the old consumer protection tools. The position paper is a must read for everyone interested in the impact of new technologies on consumer protection.

Representative actions in the Visegrád 4 countries – real improvement? by Rita Simon


This is a guest post by dr Rita Simon from the Institute of State and Law at the Czech Academy of Sciences that has been based on a report prepared by her for BEUC

Representative actions in the Visegrád 4 countries – real improvement?
Mass harms cause a mass of problems. In mass harm situations, collective claims constitute a better means of access to justice than individual ones, especially regarding bagatelle harms. Although certain collective redress mechanisms exist all over Europe, their effectiveness is questionable. Studies such as “Evaluation of the effectiveness and efficiency of collective redress mechanisms in the European Union” and the “Fitness check of consumer law” showed that the existing redresses are rarely used or they do not produce the desired results, in almost all Member States. We can also observe the ineffectiveness of injunction actions in the V4 countries. The New Deal for Consumers, which has been published in April this year, aims to strengthen the enforcement of consumer rights, which is the Alfa and Omega of consumer protection. The proposed way of improving enforcement by the European Commission follows the German, Austrian and French practice: the launch of representative actions by consumer organisations will be supported more strongly by the Commission. However, the question of whether such actions could be the best solution for enforcing consumer rights and access to justice in the V4 countries should be posed.

Injunctive reliefs
Depending on who has the right to file for an injunction and how effective the action is in practice, some key differences should be observed. In the Czech Republic, only consumer protection organisations can file for injunctive relief; in the other three countries some control authorities, such as the financial surveillance authority or office of consumer protection or consumer ombudsman can also initiate injunction actions. How often these authorities file an action often depends on the consumer policy of the government in power. An interesting fact is that in Hungary – similarly to in Spain - the state advocate also has the right to file an injunctive action if the public interest is affected. Such actio popularis actions have been very effective in eliminating unfair clauses, e.g. in financial service contracts. The yearly total of filed injunctive actions is very low in the Visegrád 4 countries, at not more than 1-2 actions per country. However, it should be pointed out that in Hungary and Poland compensatory collective redress is available in combination with an injunctive action, which significantly increases the impact of such a redress. In contrast with this, in the Czech Republic, the consumer organisation often withdraws the filed action, because of the length of the procedure or due to competency problems between the courts and other supervisory bodies. In Poland, the President of the Competition and Consumer Protection Office (UOKiK) does not have an obligation to initiate an injunction procedure automatically at the request of a consumer organisation or the ombudsman; it is at his discretion. A further criticism is that an injunction decision against a foreign trader is not enforceable, and it is reported in all the Visegrád countries that consumer organisations generally lack sufficient financial and human resources. The impossibility of consumer organisations to demand monetary compensation is problematic in the Czech Republic and Slovakia.

Other existing mechanisms – class action, and actio popularis
Class action mechanisms as a form of group action have been in force since 2010 in Poland, and in Hungary since January 2018. Group actions popped up in Poland like mushrooms and were filed in very different areas, such as construction disasters, mass poisoning and unfair clauses in credit or travel contracts, but also against motorway operators and against a regional authority. The number of suits initiated is over 100, but many claims were rejected due to the limited scope of application of the class action. Class actions can be initiated exclusively regarding tortious conduct and product liability, but claims for personal injury and infringement of human rights (health, body integrity, good reputation image, etc.) are excluded from the scope. In contrast, the Hungarian scope of application does not exclude personal injury, but limits the fields of law in which class action can be used. Therefore, a group action can be filed in Hungary in labour and consumer disputes and over some health claims resulting from environmental damage. Group actions in both countries follow in some respects the US class-action model but, regarding joining the group, just an opt-in possibility is given, and the Polish model in particular contains numerous safeguards to avoid malicious, ruinous claims.

As other interesting collective redress, Hungary improved its “actio popularis” rules in 2012 and differentiated between so-called public interest actions and public interest enforcements, which can be commenced if the infringement has harmed a large, identifiable group of consumers, or has caused a significant disadvantage. The public interest action can end in two ways, first with a declaratory judgment establishing the infringement or second with a cease and desist order on its own or with a case order accompanied by a restitution order. In the first model, which ends with the declaratory judgement, consumers have to file a simplified follow-on damages claim. In this claim, they need to prove the causal link between the infringement and the extent of the damage suffered. A public interest enforcement presumes a prior administrative process that has established the infringement. Despite high expectations, this type of claim has so far not achieved its purpose. Collective actions have been filed much less often after the amendments than before 2013. This can be explained by the continuing decline in consumer financing and the abolition of the Department of Collective Action at the Consumer Protection Agency. In addition, the reluctance of consumers to file follow-on complaints regarding the damage suffered needs to be emphasised, as does the lack of information on the existence of actio popularis decisions.

Unlike in Hungary and Poland, the two other Visegrád countries have not introduced new group action mechanisms yet; the Czech legislator is working on a class-action proposal, but the new government has not given priority to this entering into law. Business associations, especially the banking association, have been trying to have the legislation shelved until the new Directive on representative actions has been announced

Are representative actions suitable collective redress models for the V4 countries?
The proposal for the Directive allows "qualified entities", such as consumer organisations (but also ad hoc entities), to launch actions on behalf of all consumers. These entities will have to satisfy minimum reputational criteria (they must be properly established, not for profit and have a legitimate interest in ensuring compliance with the relevant EU law). Compensatory collective redress actions will also be available. A very important feature of these actions is that, in order to protect the interests of consumers, the above-mentioned entities will be entitled to seek redress by repairs, exchanges, reductions and termination of the contract or repayment of the purchase price. A very interesting innovation is that if a prior administrative or court decision has assessed an infringement, it should be taken as irrefutable evidence in any subsequent redress action not just in the same but also in other Member States. This emphasis on the acceptance of court and administrative decisions should avoid legal uncertainty and unnecessary costs for all parties, including the judiciary. Such a new development could certainly bring positive changes; the only question to pose is whether the legitimacy of bringing representative actions should be reserved for consumer associations alone.

In the Visegrád 4 countries, there is considerable concern that - due to the lack of funding of consumer organisations and the impossibility of receiving funding from third parties - these entities will not be able to perform properly. The situation, which has been observed in current injunction practices, will not improve in the future. It should therefore be recommended that other state organisations (e.g. consumer authorities, the ombudsman, financial supervisory authorities and trading standards agencies) should also receive the right to launch these collective actions. The state organisation has better access to evidence and it has a bigger legal department than consumer organisations. To support the participation of consumers in civil law proceedings, it seems useful to introduce parallel “clean” opt-in class action models in all the Visegrád states. It is also recommended to define the form and content of simplified individual follow-on-damage claims, similar to the Hungarian model after public interest/enforcement actions. These changes should be proposed with sufficient precision at the European level, because otherwise is can be assumed that the national legislatures of some countries (including the Visegrád states) would not make their collective redress mechanisms significantly more effective, due to the resistance of business and banking associations. Without simple, clear and feasible collective redress, the enforceability of consumer rights will not improve in Slovakia and the Czech Republic at all and just a new rule on paper will be announced.  

Wednesday, 20 June 2018

Workshop 'Vulnerable consumers or citizens?'

Christine Riefa (Brunel University) and Severine Saintier (University of Exeter) are organising a workshop Global Consumer Lives: '(Vulnerable) consumers or citizens?: is there a correct rationale for a fairer access to justice' on July 10 at Brunel University. Find more information at this website.

Friday, 15 June 2018

AG opinion in Wind Tre: aggressive practices require active conduct

On the 31st of May the AG Campos Sánchez-Bordona's opinion in the Wind Tre cases (C54/17 and C55/17) was published. This is the first case where the meaning of aggressive commercial practices is discussed, making it highly important. Before Wind Tre the only ECJ case on aggressive practice was Purely Creative (C-428/11), in which one of the blacklisted practices was contested, without invoking art. 8-9 of the Unfair Commercial Practices Directive (UCPD, Directive 2005/29/EC).

In the Wind Tre case the issue of the relationship between sectoral legislation, such as the Universal Service Directive (Directive 2002/22/EC), as lex specialis to the UCPD and the general rules of the UCPD is discussed.

Facts of the case

The dispute concerned the marketing of mobile phones in Italy. The mobile phones came with SIM cards which had answering and internet services pre-installed, of which fact consumers had not been informed. It is important to note that there was no complaint as to the cost of these services or the information provided about their function, the complaint was about telecom companies omitting to inform consumers that these services were pre-installed.
The same practice was used by two companies, Wind Tre and Vodafone Italia, and the Italian Market Authority (Autorità Garante della Concorrenza e del Mercato, hereafter AGCM) imposed fines on the two companies for engaging in an aggressive practice. The telecom companies challenged that decision in court, claiming that the AGCM lacked competency to impose fines stating that the telecommunications authority (Autorità per la Garanzie nelle Comunicazioni, hereafter: AGCom) was responsible instead. This argument was based on art. 3(4) UCPD stating that in case of a conflict between the UCPD and other sectoral rules on unfair commercial practices, the latter will prevail and apply.
The case reached all the way to the Council of State (Consiglio di Stato) which ruled in favour of the competence of the AGCM stating that the practice was aggressive within the meaning of the Italian Consumer Code (transposing the UCPD). It argued that even though sectoral legislation of the telecommunications sector was also breached, the case in question presented a ‘progressive harmful conduct’, which gave rise to a more serious infringement, thus making the application of the Consumer code, instead of the sectoral legislation, appropriate. (para 25)

Questions

     The Italian court referred 7 questions, which the AG Campos Sánchez-Bordona, with the agreement of all parties, summed up into the following two groups (para 32).
  1.  Can the conduct of the telephone operators be classified as an ‘unsolicited supply' (as per point 29 of Annex I of the UCPD) or an aggressive commercial practice?
  2. According to art. 3(4) UCPD should the UCPD cede to other EU rules, and, if so, to national provisions enacted in implementation of those rules?
The first group of questions refers is of a substantive nature as to whether the practice in question can be characterised as aggressive according to the UCPD; either using the blacklist of the UCPD, or by using art. 8-9 UCPD.
The second group of questions refers to the relationship between the UCPD and other EU sectoral legislation as lex specialis.

AG's Opinion

In answering the first question, AG Campos Sánchez-Bordona provides us with what has been the most detailed analysis of the elements of aggressive commercial practices by the Court to this day. 

Inertia Selling

He begins to first examine whether the practice in question can be caught by the blacklist, and specifically point 29 forbidding inertia selling. According to the AG, there are two conditions to satisfy simultaneously: 1) unsolicited supply and 2) unlawful demand of payment (para 44).
From the facts it can be established that the phone operator had not properly informed consumers on the pre-installed services on the sim card, meaning that consumers could use them without configuring them. AG Campos Sánchez-Bordona examines whether this supply, of which consumers were not informed of, qualifies as ‘unsolicited supply’. In his opinion ‘unsolicited’ means more than not being provided with essential information on a service, it means that the consumer was not aware of its existence (para 48).
The AG finds that a consumer (and not the average consumer) has no reason to expect that services have been preinstalled, if he has not been informed thereof and which he has to opt out of by using a process which he is likely to be unaware of (para 53).
Hence, whilst in this case unsolicited supply is possible, the AG does not find the same for the demand for payment. In his opinion not any demand for payment could fulfil the conditions of point 29, but it needs to be an undue request for payment. The referring court specifies that there was no complaint as to the cost of the services or the information about them, only about the lack of information about the pre-installation.
AG Campos Sánchez-Bordona argues further that the average consumer could expect that the SIM card purchased would be able to provide him with services about the costs of which he has been informed. 
It is worth noting that the AG makes reference to the average consumer in the context of the blacklist, where the average consumer test is not meant to apply. This goes to show that the blacklist does not offer the legal certainty promised.
Based on the above reasoning, point 29 of Annex I of the UCPD on inertia selling is not applicable. The next step is to examine whether the practice can be caught by art. 8-9 UCPD.

Aggressive Practices

The focus is on the practice in question being one of omission of information.
AG Campos Sánchez-Bordona looks to the factors of art. 9 UCPD to determine what would qualify as a practice using the notions of: harassment, coercion or undue influence. Out of art. 9 UCPD the AG deduces that harassment and coercion cannot be applied in this case as they require ‘active conduct, which is not present in the case of an omission of information’ (para 64).
It is not clear how the AG reaches that conclusion, as the factors of art. 9 UCPD apply for all three categories of harassment, coercion and undue influence without distinction. Also, even the omission of information requires an active choice of the trader to omit that information, so one could argue that active conduct is not entirely absent.
The AG continues to examine solely whether the practice can be caught under the concept of undue influence. Undue influence is the only one defined in UCPD in its art. 2(j), unlike harassment and coercion.
Undue influence refers to exploitation of a position of power which significantly limits the ability of the consumer to make an informed decision. The AG differentiates between two different kinds of positions of power (para 67):
  1. Exploitation of a position of power which allows the trader to infringe the consumer’s freedom when it comes to buying a product.
  2. Position of power held by a trader who, following the conclusion of the contract, may claim from the consumer the consideration which the latter undertook to provide on signing the contract.
Consequently, the AG defines a position of power in undue influence as both applying in pre-sale and post-sale conditions. What is to be noted is the focus on the fact of the conclusion of a contract, of consideration of the terms, that is the use of contract law terms through which aggressive practices seem to be defined. However, aggressive practices are broader than that, to the extent that they cover all transactional decisions of the consumer and are not limited to the decisions to enter into a contract.
The opinion explains that the aim of prohibiting aggressive practises is, in essence, protecting the freedom of contract, as consumers should be bound only by obligations that they freely entered into. So the criterion is whether the omission of information about the pre-installation impaired the freedom of choice of the consumer to the extent, where he accepted contractual obligations he would not have otherwise (para70).
AG Campos Sánchez-Bordona found the practice not to be aggressive, as according to him, the practice was not sufficient to impair the freedom of the consumer to such an extent that he would not have entered the contract. The AG does not elaborate on how he reached that conclusion or what is the standard against which it is weighed. This view of aggressive practices appears to raise the standard, making it more difficult to show that impairment of the freedom of choice of the consumer is indeed significant enough.

Lex specialis

Given the answer to the first two questions, there was no reason to examine the rest, on the conflict of law, yet the AG did submit his observations.
In these he makes the accurate observation that the UCPD is not designed to fill the gaps that sectoral legislation leaves; instead it offers its own stand-alone system of protection which exists in parallel with the sectoral legislation (para 94). This sets the tone also for art. 3(4) UCPD that should be interpreted strictly as focus should be on maintaining a high level of protection. Therefore, art. 3(4) UCPD is better conceptualised as regulating conflict between provisions and not systems of sectoral legislation (para 111). In this case, it means that the existence of sectoral legislation that covers aspects of unfair commercial practices does not preclude the application of the UCPD.
AG Campos Sánchez-Bordona didn’t find a conflict in this case between the UCPD and the Universal Service Directive, but rather the need for them to be applied jointly (para 129). The Universal Service Directive regulates the information requirements, which are crucial for determining whether there was unsolicited supply as per point 29 of the Annex I of the UCPD.

Conclusion

This is an intriguing case, as it is the first of its kind for aggressive practices in the UCPD. It reveals contrasting interpretation of the UCPD notions and objectives between the Member States and AG Campos Sánchez-Bordona. Italian authorities viewed aggressive practices as a tool for penalising the abuse of power by the trader. The AG on the other hand interpreted the same provisions focusing on protecting consumers' contractual freedom, especially as applied to the decision to enter into a contract. It remains to be seen what the Court will decide and this blog will follow the developments with great anticipation.