Monitoring duties of online platform operators before the Court - case C-18/18 Glawischnig-Piesczek

Before the summer we briefly referred to the opinion of Advocate General Szpunar is case C-18/18 Glawischnig-Piesczek (see: Recent developments in online content moderation...). Last Thursday, the Court of Justice delivered the judgment in the case, clarifying the interpretation of Articles 15 and 18 of Directive 2000/31/EC on electronic commerce. 

Source: Pixabay

Background of the case

The case concerned a defamatory comment published on Facebook about a member of the Austrian Greens party, Ms Eva Glawischnig-Piesczek. The politician brought an action against the operator, requesting it to cease and desist from publishing photographs of her if the accompanying text contained allegations identical to those declared illegal or having equivalent content. In doing so she relied on Austrian provisions authorizing the courts to order host providers to terminate or prevent an infringement, in line with Articles 14(3) and 18 of E-Commerce Directive. The referring court, however, run into doubts whether an order to remove or disable access not only to a particular item of information, but also to equivalent items complied with Article 15(1) Directive 2000/31. Pursuant to this provision, Member States shall not impose a general obligation on providers of, among others, hosting services to monitor the information which they transmit or store, nor a general obligation actively to seek facts or circumstances indicating illegal activity. The referring court also wondered about the territorial scope of such an order (for a similar discussion about the right to be forgotten, see: No one-size-fits-all approach to search engine de-referencing...)

Judgement of the Court

The Court gave a comparably broad reading to Article 18 Directive 2000/31 concerning judicial powers to adopt measures designed to terminate alleged infringements and prevent further impairment of the interests involved. According to the Court, Member States enjoy a broad discretion in relation to actions and procedures for taking necessary measures (para. 29). Such a margin of discretion is due to, among others, the rapidity and geographical extent of the damage arising in connection with information society services. Both of these factors were also clearly at play in the present case (para. 36).

Having said that, the Court decided to distinguish between injunctions concerning information whose content is identical to the one which was previously deemed illegal and injunctions concerning information with equivalent content (whose message remains "essentially unchanged and therefore diverges very little from the content which gave rise to the finding of illegality", para. 39).

In the former case, the Court confirmed broad powers of the national court and found that a host provider can be ordered to block access to or remove information with identical content, irrespective of who requested the storage of that information. The injunction granted for that purpose cannot be regarded as imposing on the host provider a general monitoring obligation, but rather concerns the monitoring ‘in a specific case’ (paras. 34, 37). 

When it comes to information with equivalent content the Court sought a balanced solution. It considered that injunctions should generally be able to extend to information, the content of which, "whilst essentially conveying the same message, is worded slightly differently, because of the words used or their combination, compared with the information whose content was declared to be illegal" (para. 41). The objective of an injunction, however, may not be pursued by imposing an excessive obligation on the host provider. To achieve this objective, the injunction must properly identify the specific elements of equivalent information, such as the name of the person concerned, the circumstances of the infringement and equivalent content to that which was declared to be illegal (para. 45). The monitoring of and search for information required of the host provider should be limited to information containing the elements specified in the injunction and be capable of being carried out by automated search tools and technologies (para. 46). Differences in the wording of equivalent content must not, in any event, be such as to require the host provider concerned to carry out an independent assessment of that content.

As regards territorial scope, the Court once again confirmed the broad reading of Article 18(1), Directive 2000/31, which "[did] not make provision ... for any limitation, including a territorial limitation, on the scope of the measures which Member States are entitled to adopt" (para. 49). Following the judgment, therefore, the E-Commerce Directive does not preclude the relevant injunctions from producing worldwide effects. Member States must, nevertheless, ensure that the measures which they adopt take due account of the rules applicable at international level.

Concluding thoughts

The judgment of the Court has multiple implications. Firstly, it strengthens the protection of parties affected by illegal content, but seeks to achieve this without undermining the validity of Article 15. As such, it does not provide for a straightforward solution to each and every future case and sets quite demanding requirements for both national courts and host providers. The former need to define what content they consider to be equivalent to that which had been deemed illegal. How courts will cope with such a task remains an open question. Host providers, in turn, must be ready to to take steps to monitor their platforms for identical or equivalent information, which - as the Court suggests - may require the use of technological tools. The same seems to be true for smaller platforms, even if arguments related to rapidity and geographical extent of the damage may not apply to them with equal force.

The judgment in C-18/18 Glawischnig-Piesczek is clearly relevant beyond the social media context. As noted by Christian Twigg-Flesner in a recent entry, the ruling can also be applied to other platforms like online marketplaces. Operators of such platforms could be required to take steps to monitor their content e.g. as regards the recurring presence of misleading information. The question remains whether the same could also become true for persons engaging in illegal actions.

Finally, attention should be drawn to the brief part of the judgment concerning territorial scope of online moderation. One cannot help noticing the similarity between this question and the one addressed in recent Google case. In Glawischnig-Piesczek, the Court did not provide for an equally balanced framework, but limited itself to stating that injunctions with worldwide effects are not precluded by Directive 2000/31. This remains in line with the opinion of Advocate General Szpunar - notably, the same AG whose advice was followed in the Google case. Both findings are, therefore, not necessarily inconsistent. In fact, the opinion in Glawischnig-Piesczek explicitly refers to the Google case. According to the AG, like with the right to be forgotten, "the legitimate public interest in having access to information will necessarily vary, depending on its geographic location, from one third State to another" (para. 99). Consequently, the limitation of extraterritorial effects of injunctions concerning harm to private life and personality rights, for example by way of geo-blocking, may remain "in the interest of international comity" (para. 100). Whether this is how the Court's reference to "the rules applicable at international level" is going to be read, nevertheless, is far from certain.

Financial expertise does not preclude qualification as consumer – CJEU in Petruchová (C-208/18)

Yesterday, the CJEU issued a judgment in the case C-208/18 Jana Petruchová v FIBO Group Holdings Limited (the case has not yet been published in English; the link refers to the French version). The case concerns an individual contract for difference (CfD) concluded between the claimant and the defendant and, particularly, the definition of a ‘consumer’ in the context of financial investments under Article 17(1) of the Brussels Regulation. The preliminary question referred to the CJEU was whether Article 17(1) of the Brussels Regulation should be interpreted as meaning that a person who engages in the trade of foreign currency exchange is a consumer or whether the individual’s financial knowledge and expertise, the complex nature of the contract, and the risks involved determine that that person is not a consumer. A summary of the facts of the case and an analysis of AG Tanchev’s opinion can be found here.

It is noteworthy that the defendant never argued that the claimant was acting in the sphere of her professional activities (para 46). In fact, the claimant was, at the time of the conclusion of the contract, a university student, which leads the CJEU to immediately ascertain that the contract was not concluded within the scope of the claimant’s professional activities. Instead, the argument is that the professional nature of the contract is not the only criterion that matters when determining whether a party qualifies as a consumer. However, just like AG Tanchev, the CJEU rejected this argument. The CJEU declared that factors such as the amounts involved in the financial transactions, the risks of financial losses associated with such contracts, the financial knowledge or expertise that the person might have or its active engagement in such financial operations are irrelevant in the qualification of a person as a consumer (para 59). In this sense, the CJEU reaffirmed that the crucial test is whether the contract relates to the person’s professional activities or whether the contract’s goal is to satisfy the individual’s personal needs (para 56).

This conclusion is not surprising, since the CJEU had already established (for example, in the Schrems case) that the concept of consumer has an objective character and that it is not connected with subjective aspects such as the particular knowledge that the individual has about the object of the contract (para 55).

Furthermore, the CJEU concluded that even though the definitions of a ‘consumer’ present in other EU legislative instruments are interpretively relevant (para 61), the fact that financial instruments are excluded from the scope of the Rome I Regulation is irrelevant in this case, since the two Regulations pursue different goals (para 64). The qualification of an individual as a ‘retail client’ is also irrelevant for the qualification as a consumer (para 77).

Half-baked transparency rules in Kiss and CIB Bank (C-621/17)

The CJEU issued another judgment today interpreting provisions of the Unfair Contract Terms Directive, in the case Kiss and CIB Bank (C-621/17). We have provided an extensive comment on AG Hogan's opinion in this case previously (AG Hogan in Kiss and CIB Bank...). The judgment has not yet been published in English (providing comments in that language seems low on the list of priorities of the CJEU - looming-Brexit impact?), but as our blogging team is international, we are able to provide you with a summary.

Generally, the judgment is rather brief but there are some important statements made in it, and some confusing ones.  The national court may have a difficult time applying this judgment.

 

Core terms

 

The CJEU supports AG Hogan's opinion that it is the national court who needs to decide whether a given contract term is a core term (para. 33). In the given case the consumer claimed unfairness of terms establishing certain additional charges placed on him when he took out a consumer credit. To the CJEU it does not look like the consumer questioned the adequacy of these charges in exchange for the provided services, but rather more generally contested the reason for having been charged them. Consequently, the CJEU indicates to the national court that it was likely not a core term at stake, which makes art. 4(2) UCTD inapplicable (para. 35).

 

A subtle distinction has been made in this case. After all, the consumer demanded the recognition of unfairness as he was not told what services these charges were supposed to compensate. Therefore, he did question the existence of a relation between the charges and the services they were supposed to cover. However, pursuant to the CJEU, this apparently does not amount to questioning the adequacy of a charge in exchange for the provision of a service.

Interpretation of transparency under Art. 4(2) and Art. 5 UCTD and substantive transparency

 

An important side note perhaps, where the CJEU deviates from the reasoning of AG Hogan: In para. 36 the CJEU clearly states that the same requirements for the principle of transparency apply under art. 4(2) and art. 5 UCTD. The CJEU confirms again its judgment in the case Kásler. It also reiterates - after Bucura judgment - the importance of the substantive aspect of the principle of transparency (para. 37). As the contested terms specified the percentage of charges, the duration the charge would need to be paid for, as well as the method of its calculation, the CJEU considers the economic consequences of having to pay these charges to be foreseeable to the consumer (para. 39).

Are credit providers required then to list services for which they charge payments?

... maybe?? This is where the judgment could use some more of the transparency it is trying to evaluate. If we read paras. 43-44 the CJEU seems to indicate that despite there not being a general obligation for credit providers to list all services provided in exchange for various charges, the protection of a weaker contractual party awarded to consumers by the UCTD requires that consumers can reasonably understand or deduct the character of actually provided services on the basis of a contract, as a whole. This should especially facilitate consumers' evaluation of whether various charges or services do not overlap. This btw is exactly the point that Mr Kiss was making, as he claimed that the charges he was asked to pay for are to compensate the bank for services, for which the bank already charges credit interest rates. On the one hand, the national court should then examine whether such an overlap does not occur, which forces the credit provider to account for the services that a given charge aims to compensate. On the other hand, however, the conclusion of para. 45 is not that subtle. There, the CJEU only draws attention to the first part of its conclusions: that the principle of transparency does not require credit providers to list all services provided in exchange for a given charge. 

 

So, could we infer from the judgment that whilst credit providers do not have to list all services, they should list some of them, justifying why a given charge was set? Not necessarily, as the CJEU further repeats that not listing services for which a given charge was issued does not automatically breach the principle of transparency, provided the consumer can reasonably understand or deduct the character of actually provided services on the basis of a contract, as a whole (para. 54). The credit provider may then take a risk of not listing the services that a given charge should cover, if they think they could later claim that the consumer should have had an idea of what these services might have been.

Art. 5 UCTD as part of the unfairness test under Art. 3(1) UCTD

 

Another important clarification, in spite of AG Hogan's opinion, is the CJEU stating that assessment of the transparency of a contract term pursuant to art. 5 UCTD is one of the elements of the unfairness test under Art. 3(1) UCTD (para. 49). The CJEU reiterates the principles of the unfairness test as established in older case law (Aziz and Constructora Principado) (paras. 50-51). 

It will, therefore, not be easy for consumers to claim that not having received information on the list of services, for which a given charge is issued, they were unfairly treated by credit providers;

• first, they would have to be able to prove the lack of transparency, which the credit provider may dispute by stating the consumers should have been able to deduct what services a charge has reasonably covered;
• second, they would need to be able to prove that they were put at a significant disadvantage by the lack of specificity of these services, which the CJEU does not seem to be convinced had been the case as the consumer's legal position did not seem to deteriorate (para. 55).

CJEU in Dziubak (C-260/18) - no replacement of unfair terms with "usages"

This morning, the CJEU published a much-awaited decision (only available in French and Polish ATM) on unfair terms in foreign currency-indexed loans. In Dziubak, a Polish couple has sued Raffeisen bank over the terms setting the indexation mechanism in the credit contract that the consumers had concluded with the bank. Said terms applied a known mechanism - indexing outstanding amounts in line with the PLN-CHF buying rate and quantifying instalments (due in Zloty) via the selling rate. The particularity in this case was that the bank used its own exchange rate tables, hence being able to directly determine the applicable rates. 

The referring Polish court had no doubts that the terms were, as the Dziubaks had claimed, unfair. However, the court was in doubt as to what the consequences of such finding should be. 

The concerned consumers maintained that the contract should be invalidated. In the alternative, they demanded the court to remove the indexing mechanism and leave the interest determination terms in place - meaning that the contract would become one in national currency, but with an interest rate indexing which is not the one typical for contract in Zlotys.

According to the referring court, such a solution would transform the nature of the contract and hence be in contrast with basic principles of the Polish legal order, such as freedom of contract. As the parties had concluded a foreign currency-indexed credit contract, replacing it with a regular variable interest mechanism would denature the original agreement. 

Raffeisen, on the other hand, suggested that the gap resulting from the removal of the unfair terms could be filled by resorting to general principles of fairness and customs. Interestingly, according to the referring court, one possible outcome of such exercise would be... to reintroduce the unfair terms to the affected contracts, as a reflection of what is "customary" in the relevant market.

As we know, previous CJEU case-law has set very strict limits to the possibility of replacing an unfair term by means of national rules - in particular, the Kásler decision allowed making use of national supplementary or default rules when the contract would otherwise be invalid and such invalidity would be contrary to the consumer's interest. But one crucial question in Dziubak is precisely this - who decides what is (not) in the consumer's interests? Can a court decide that maintaining an unfair term in place is better for the consumer than invalidating the whole contract, even as the consumer maintains otherwise?

Against this background, the CJEU (by and large in line with AG Pitruzzella's opinion, that we discussed earlier) reached a number of conclusions:

1) If national legislation requires a contract to be considered invalid when the removal of an unfair term would change its nature given the resulting difference in its main object - such as could be the case if a foreign-currency indexed rate is turned into a regular variable interest mortgage - such legislation is compatible with the Directive;

2) In this case, the Kasler standard means that invalidation of the contract must be the outcome where the consumer so prefers: given that the Court's case-law grants the consumer final word on whether an unfair term must be considered as binding on them, a fortiori they must be able to decide whether rescuing the contract is or not in their own interest. In this respect, the "interest of the consumer" can only be assessed with reference to the moment when the controversy takes place;  

3) General principles or rules are not tantamount to supplementary or default rules which apply when the parties have not made specific provisions. As these rules do not equally express the legislator's view as to what would make a reasonable balancing of interests in a specific constellation, the application of general principles by a national court cannot be considered to enjoy the same "presumption of fairness" as default rules and hence cannot be used to replace unfair terms; they can thus not be used to supplement the contract in order to prevent its invalidity. 

Back in Poland, the Dziubaks' legal team seems to have taken this judgement as a victory:

Source: twitter

This appears slightly puzzling from a legal point of view: in fact, by indicating that no replacement by means of general principles can take place, the Court seems to have indicated that either the unfair terms are maintained or the contract (and other similar contracts) must be invalidated - would this not be getting many consumers "stuck" with unfair terms if they do not have the money to return all the outstanding capital immediately?

The concrete circumstances may however be of importance - since in 2015 the Swiss franc underwent a major appreciation against (the Euro and, as a consequence, other European currencies such as) the Zloty, which had already depreciated significantly in 2008-2009, many consumers have paid very high instalments which were supposed to mainly cover interests. If the original contracts are invalid, however, it could be possible to claim that only the capital sum is due - and then a settlement of accounts may counterintuitively play in favour of quite a few consumers. Furthermore, it could be that the decision will trigger a wave of settlements or renegotiation, which again may turn out as a gain for Polish lenders.

As far as other consumers are concerned, however, the decision looks like a mixed bag - first, the deference to national rules of contract law may mean quite diverging levels of protection across Member States; second, the Court's resolve to prevent all sort of gap filling interventions when no supplementary rules are readily at hand may actually have a chilling effect on consumers who may not want to start proceedings if the result is that they have to choose between an invalid contract and the original unfair term. On the bright side, the prospective of courts starting to replace unfair terms with equally unfair customs seems to have been washed away. Congratulations to Ms Dziubak and her lawyer's daytime drinking improv!

CJEU confirms stricter requirements for valid cookie consent - case C-673/17 Planet49

Yesterday the Court of Justice delivered its judgment in case C-673/17 Planet49, concerning the requirements for a valid consent to the storage of cookies. The judgment largely falls in line with the previous opinion of Advocate General Szpunar, on which we reported in an earlier post (see: Pre-ticked checkboxes NOT informed consent...).

Background of the case

Source: Pixabay

To recall, the case involved a promotional lottery whose prospective participants were asked, among others, to provide personal details and agree to be contacted by various sponsors. Besides several items, to which users agreed by ticking corresponding boxes, the form included another, already pre-ticked checkbox, which concerned the placement of cookies by Planet49. German consumer organisation vzbv questioned the validity of such 'consent' under Directive 2002/58/EC on privacy and electronic communications. Following a 2009 amendment, Article 5(3) of that Directive required Member States to ensure that the storing of information, or the gaining of access to information already stored, in the terminal equipment of a user is only allowed on condition that the user concerned has given his or her consent, having been provided with clear and comprehensive information, in accordance with Directive 95/46/EC, inter alia, about the purposes of the processing.

As readers may remember, Directive 95/46/EC was, in the meantime, repealed and replaced by the General Data Protection Regulation. The E-Privacy Directive was also supposed to be replaced with a regulation, with the aim to increase coherence with the GDPR. The respective proposal, however, got stuck in the legislative pipeline. The Court was not distracted by these facts and decided to interpret Directive 2002/58 in the light of both Directive 95/46 and Regulation 2016/679.

Judgment of the Court

First of all, the Court agreed with the Advocate General that consent referred to in Article 2(f) and in Article 5(3) of Directive 2002/58 cannot validly be obtained by way of a pre-ticked checkbox which the user must deselect to refuse his or her consent. To support this conclusion, the Court referred to the requirements for consent to be 'specific' and 'unambiguous' under Directive 2002/58 as well as the even more detailed wording of the GDPR.

Importantly, the Court did not elaborate on the requirement that consent must be ‘freely given’, arguing that a corresponding question had not been asked by the referring court. Response to such a question - one of major importance to the digital economy - would involve an assessment whether user’s consent to the processing of personal data for advertising purposes constituted a prerequisite to that user’s participation in a promotional lottery. As noted in our previous post, the Advocate General elaborated on this matter in a way that was subject to criticism. Against this background, self-restraint showed by the Court is to be welcomed.

As regards the question whether the interpretation set out above should differ, depending on whether or not the information stored or accessed on user's terminal equipment qualifies as personal data, the Court responded with a clear 'no'. This remains in line with the rationale of Directive 2002/58 which aims to protect the user (including natural persons acting for business purposes) from interference with his or her private sphere, regardless of whether or not that interference involves personal data.

Finally, as regards the scope of information to be provided to the user before obtaining his or her consent, the Court opted for a broad reading of Article 5(3) of Directive 2002/58 in conjunction of Article 10(c) of Directive 95/46 and Article 13(1)(e) of the GDPR. In this respect, the Court, once again, sided with the Advocate General, stressing that "clear and comprehensive information implies that a user is in a position to be able to determine easily the consequences of any consent he or she might give and ensure that the consent given is well informed. It must be clearly comprehensible and sufficiently detailed so as to enable the user to comprehend the functioning of the cookies employed" (para. 74). The Court considered that information on both the duration of the operation of cookies and whether or not third parties may have access to them had to be provided to the user.

 

Concluding thought

The judgment in Planet49 strengthens the protection of privacy in the digital sphere, not only of consumers stricto sensu, but of internet users more generally. Moreover, the Court confirmed that the standard of 'cookies protection' does not depend on whether or not user's personal data is involved. Privacy, according to this reading, concerns the very fact of placing pieces of software on user's 'terminal equipment'. This resembles the way in which some consumer authorities have read the notion of 'aggressive practices' under Directive 2005/29/EC on unfair commercial practices, also beyond the cookie context (see especially the Italian decision against Facebook). Whether or not such an approach to the UCPD will hold, and how it might be related to standards of disclosure, is still an open question (on the latter, see the judgment of the Court in Wind Tre, para. 45 et seq). When it comes to the E-Privacy Directive these questions do not emerge: here, without doubt, the duty to inform provides a further layer of protection to the one provided by the consent framework. The E-Privacy Directive, therefore, is quite remarkable: it combines high standards of consumer law and data protection law and applies them beyond their traditional scope. Hopefully, internet users will truly be able to benefit from it.