BEUC’s 7 recommendations for post-Brexit positive consumer protection

With Brexit finally approaching, the questions surrounding the legal uncertainty that will most likely follow the UK's departure from the EU are louder than ever. BEUC issued a position paper containing seven recommendations to secure positive outcomes for consumers after Brexit (found here). These seven recommendations are intended for the regulatory actors, not consumers themselves. In short, BEUC argues for a close cooperation between the EU and the UK (including the creation of joint surveillance bodies), as well as for the maintenance of the existing level of consumer protection. The seven recommendations are the following (as summarized by BEUC):

1. Inform consumers about what Brexit means for them

BEUC defends that the first step to take is to inform consumers about any changes that their rights will suffer. BEUC suggests preparing concrete guidance documents such as factsheets.

2. Protect consumers when implementing the withdrawal agreement

BEUC highlights the need to maintain current levels of consumer protection when implementing the withdrawal agreement, namely consumer safety when it comes to imported goods. In fact, BEUC reminds that UK customs will be required to ensure compliance of imported products with both UK law and EU law (particularly when it comes to imported products arriving in Northern Ireland and considered "at risk" of entering the EU market). For this, UK customs will need trained staff. Furthermore, BEUC considers that EU authorities will need additional financial and human means to oversee the controls that UK customs will perform. Finally, BEUC stresses that the role of the joint committee of the withdrawal agreement will be essential, given that it will define the criteria according to which goods are at risk of entering the EU market via Northern Ireland.

3. Make consumer protection a key objective of the future relationship

BEUC recommends that there is a chapter dedicated to consumer protection in the withdrawal agreement (which could look like this). The level of consumer protection should not be reduced, to encourage trade and investment in the UK. The level of protection of consumers' privacy and personal data should also remain high, and the EU should explore the possibility of an adequacy decision. BEUC mentions six points that the chapter should contain: i) affordable access to telecommunications for consumers who are traveling or communicating with other countries should be preserved; ii) the security of an affordable energy supply should be protected (namely the integrity of the single electricity market between Ireland and Northern Ireland should be renewed); iii) unjustified geoblocking should be eliminated; iv) access to affordable flights should be ensured; v) consumers should be properly informed about their rights; vi) consumers should have access to redress and online dispute resolution mechanisms.

4.  Ensure consumer choice of goods and services

In addition to the concerns expressed in point 2 regarding the import of safe products, BEUC recommends a baseline of zero tariffs and quotas to avoid that consumers are hit by unexpected high custom duties.

5. Maintain regulatory dialogues to preserve consumer safeguards

BEUC suggests the creation (or maintenance) of regulatory cooperation mechanisms, operating on a voluntary basis, to guarantee the surveillance of the market. These cooperation mechanisms should cover enforcement of consumer rights. Moreover, the UK and the EU should avoid a race to the bottom when it comes to the regulation of competition.

6. Assess the impacts on consumers

BEUC suggests a comprehensive qualitative and quantitative analysis of the effects of a future agreement on consumers.

7.  Involve consumer organizations and be transparent

BEUC states that the "level of transparency provided by the EU during the Brexit negotiations was unprecedented" and that the same level of transparency is expected in the future (also of the UK government). This requires consumer organizations to have access to consolidated negotiated texts, in order to provide recommendations and to inform consumers. To this end, BEUC recommends the creation of an EU-UK trade advisory group.

Volkswagen hit by a multi-million fine from the Polish consumer protection authority

Last September we informed our readers about an interesting report from BEUC summarizing the developments in law enforcement following the Dieselgate scandal. Last week a fine of over PLN 120 million (approx. EUR 28 million), imposed on Volkswagen Group Polska by the President of the Office of Competition and Consumer Protection in Poland (UOKiK), was added to this list. The violations established by the decision (the operative part is available in Polish here) are anchored in the Polish provisions implementing Directive 2005/29/EC on unfair commercial practices (UCPD), specifically Art. 4(1), Art. 5(1), Art. 5(3)(2) of the Act on counteracting unfair market practices (Ustawa o przeciwdziałaniu nieuczciwym praktykom rynkowym). These correspond, respectively, with: the general clause on unfair commercial practices, the specific provision on misleading actions, specification on misleading actions related to the main characteristics of the product.

According to the press release, the President of the UOKiK contested following behaviours of the trader: disseminating false information in advertising materials which suggested that Volkswagen, Seat, Skoda and Audi cars were environmentally-friendly and met the requirements for nitrogen oxide emissions; providing incorrect nitrogen oxides emission parameters in EC certificates of conformity; issuing guidelines for sellers of these cars which suggested that consumers' complaints should not be taken into account. 

Besides imposing a fine, the President of the UOKiK also obliged the trader to send a letter to the affected consumers and publish the content of the decision on its website. VW can appeal the decision to the Court of Competition and Consumer Protection (SOKiK) in Warsaw.

Ex officio unfairness assessment limited to contractual clauses connected to the dispute – Opinion of AG Tanchev in Case C‑511/17 Unicredit Bank Hungary

On the 19^th of December 2019, AG Tanchev delivered an Opinion on Case C-511/17 (found here), which deals with the scope of the obligation to assess the unfairness of contractual terms ex officio, under Directive 93/13/EEC (Unfair Terms Directive). As AG Tanchev starts by noting, this case is related to other cases on the Hungarian framework on consumer credit agreements denominated in a foreign currency (for example, Sziber C‑483/16, OTP Bank and OTP Faktoring C‑51/17 and Dunai C‑118/17).

The ex officio obligation in question is well established in the CJEU’s case law. This obligation is aimed at ensuring an effective protection of the consumer under the Unfair Terms Directive and it intends to restore the balance between the consumer and the professional party (see, for example, OTP Bank and OTP Faktoring C‑51/17 and Pannon GSM C‑243/08). As the AG acknowledges, the interpretative framework of the obligation to assess unfairness of contractual terms ex officio affects the civil procedure principle that the subject matter of an action is delimited by the parties and the court can go no further than that subject matter (ne ultra petita). In fact, the existence of this obligation means that under national procedural law the court must go beyond the object of the dispute as originally defined by the parties (para 44).

The main question raised in this case was, as summarized by the AG, whether a national court is required under Articles 6(1) and 7(1) of Directive 93/13 to examine ex officio the unfairness of all of the terms of the contract even if they are not necessary to decide on the parties’ claims in the dispute. In other words, the question underlying this case is whether that obligation should be unlimited and, if not, what the limits of that obligation are. Must all contractual terms be examined for unfairness based on the courts’ own motion?

To clarify, there are three different dimensions to this issue. First, whether national courts must only assess the unfairness of the terms invoked by the consumer or also the unfairness of other terms that the consumer did not invoke (ex officio). Second, whether the courts must take the whole contract into account when assessing the unfairness of the terms invoked. Third, whether there is an ex officio obligation regarding investigative measures, if the court does not have all the necessary elements to assess the unfairness of a term.

All the parties’ observations – as well as the AG’s – agreed that an unlimited obligation to assess the unfairness of contractual terms ex officio would largely (and unnecessarily) hinder fundamental principles of national procedural law. Illustratively, UniCredit Bank Hungary defended a triple criterion to limit the ex officio obligation: a national court must examine unfair terms ex officio only if i) the court has ‘the necessary legal and factual elements’ for that examination, ii) if the term concerned is relevant to the decision to be given and iii) if the term has a material and logical relationship with the case. In its statement, Hungary followed the same lines of reasoning, arguing that the court must examine ex officio ‘terms whose unfairness can be clearly established, as a matter of fact, on the basis of the available evidence’.

Following the same logic, the AG concludes that Articles 6(1) and 7(1) of the Unfair Terms Directive require national courts to assess ex officio the unfairness of contractual terms which are related to the object of the dispute and have a link with the legal or factual elements in the case file. This opinion suggests, therefore, a double criterion to limit the ex officio obligation to assess unfair terms: a relation between the clause and the object of the dispute and a link with existing legal or factual elements in the case. In other words, the courts’ obligation to assess ex officio the unfairness of contract terms does not extend to all contract terms, but only those with a link to the case in question. Consequently, AG Tanchev’s opinion is that national courts do not have to examine ex officio all the other contractual terms for unfairness, but merely to take all the other terms into account when examining the unfairness of a specific term, according to Article 4(1) of the Unfair Terms Directive.

This interpretation also means that it is not enough that the contractual term is relevant to the object of the dispute, but it is also necessary that the court possesses some legal and factual elements to determine the unfairness of the term. AG Tanchev also states that Articles 6(1) and 7(1) of Directive 93/13 allow national courts to ‘take ex officio investigative measures to complete the case file’ (e.g. asking for clarification or documentary evidence from the parties) in order to obtain the necessary legal and factual elements to carry out an ex officio examination of unfairness (para 55). The AG’s opinion follows the CJEU decision in VB Pénzügyi Lízing (C‑137/08). According to the AG, it appears that if the national courts do not have the necessary legal or factual elements, they are not obliged to assess the unfairness of the term, although they are able (but not obliged) to request those elements from the parties.

While this interpretation seems reasonable and it strikes a balance between fundamental principles of civil procedure law and EU consumer protection, this last argument regarding ex officio investigative measures is slightly more confusing than the previous ones. In fact, as the AG acknowledges, the CJEU has previously highlighted the need for ‘sufficient evidence’ in order to assess the unfairness of the contractual terms (para 62). The AG addresses this aspect by stating that ‘this may be viewed as lending support for the position that the national court has at its disposal sufficient legal and factual elements for the ex officio examination if necessary by being able to take ex officio investigative measures to that effect’. More clarification on this aspect in the final CJEU decision would be desirable.

Ex officio control in European order-for-payment procedure

A case we have not reported yet on this blog but is certainly of interest in the light of several other cases on (national) expedited debt collection procedures - such as Salvoni, Profi Credit and Addiko Bank - is Bondora (Joined Cases C-453/18 and C-494/18), a Spanish preliminary reference on ex officio control of unfair terms in the context of a European order-for-payment procedure. In short, the CJEU held that national courts can request from the creditor additional information relating to the terms of the agreement on which the claim is based. For a more extensive discussion of the case, we refer to this blog on ConflictofLaws.net.

No inertia selling in non-individually requested energy contracts - EVN Bulgaria Toplofikatsia and Toplofikatsia Sofia (joined cases C‑708/17 and C‑725/17)

Facts

Joined Cases C‑708/17 and C‑725/17 (delivered on the 5^th of December 2019 and found here) deal with owners of apartments in a building in co-ownership. In both cases, there is a contract for the supply of thermal energy concluded between the majority of the owners of the building and an energy supplier (EVN Bulgaria Toplofikatsia and Toplofikatsia Sofia, respectively). Also in both cases, the energy companies sent to the individual co-owners (Ms Dimitrova and Mr Dimitrov, respectively) a bill for energy consumption costs. The co-owners in question alleged that there is no contractual obligation between them and the respective energy companies since they did not individually request the supply of thermal energy, according to the prohibition of inertia selling of Directive 2011/83/EU and of Directive 2005/29/EC. Moreover, Ms Dimitrova and Mr Dimitrov argued that the consumption reflected on the bills did not reflect their actual energy consumption, which would breach Article 13(2) of Directive 2006/32.

Legal issues

There are two relevant issues from a EU consumer contract law perspective: first, whether there is inertia selling in the case of lack of individual request of energy supply; second, whether the co-owners of a building are consumers. Moreover, from a EU consumer energy law perspective, the case determines whether the bills for the consumption of thermal energy can be calculated in proportion to the heated volume of each owner’s apartment. This case is also interesting because it addresses the relationship between EU consumer law and national contract law.

CJEU’s decision

The CJEU started by determining the applicability of the Consumer Rights Directive. In this case, there is a contract concluded between the thermal energy providers and, according to Bulgarian law, the owners of a building in co-ownership. The question was whether the owners of the building can be considered consumers. Following AG Saugmandsgaard Øe’s opinion, the CJEU answered this question in a brief and evident manner: as long as the owners are not involved in commercial or professional activities, they are consumers within the meaning of Article 2(1) of the Consumer Rights Directive.

Then, the CJEU dealt with inertia selling. Inertia selling has been defined in the CJEU’s case law as a ‘conduct whereby the trader demands payment from a consumer for a product or service which has been provided to that consumer without the consumer soliciting it’ (Wind Tre and Vodafone Italia, C‑54/17 and C‑55/17). Inertia selling is considered an unfair commercial practice under Article 5 and under point 29 of Annex I of the Unfair Commercial Practices Directive. In addition, inertia selling is prohibited by Article 27 of the Consumer Rights Directive. The notion of inertia selling revolves around the concept of solicitation as the act of asking for a service or a good to be provided to the consumer. Therefore, to discuss whether this is a case of inertia selling, the CJEU had to discuss the notion of consent. In fact, the question is whether Mr and Mrs Dimitrova consented to the contract, considering that they did not individually agree to it, but that the majority of co-owners as a group decided it. In other words, when can we consider that a consumer ‘solicited’ a service?

The CJEU highlighted that aspects regarding consent and the formation of the contract are determined by national law, as is acknowledged by Recital 14 and Article 3(5) of the Consumer Rights Directive. Bulgarian energy law provides that the energy installations in a building in co-ownership follow from the written consent of (at least) two-thirds of the owners of the building. Therefore, the energy service appears to also have been solicited by the co-owners in question, since the rules on contractual consent are defined by national legislation. Article 27 of the Consumer Rights Directive states that ‘the absence of a response from the consumer following such an unsolicited supply or provision shall not constitute consent’. Taking Bulgarian law into account, the CJEU determined there was no unsolicited supply of thermal energy in the terms of Article 27 of the Consumer Rights Directive. It is noteworthy that, as the Court implied, the consent necessary to have a ‘solicited’ energy supply can be found in the co-owners’ agreement to be subject ‘to all (…) the decisions adopted by the general meeting of the owners of property in that building’. As a consequence, the CJEU concluded that the Consumer Rights Directive and the Unfair Commercial Practices Directive do not preclude a national law that requires co-owners to pay for energy bills regarding a contract that they did not individually request (and did not use). The take-home message is that the mere lack of individual consent for the supply of a service does not automatically mean that there will be inertia selling under EU consumer law.

Finally, the defendants claimed that to calculate the bills for consumption of thermal energy proportionally to the heated volume of the apartment instead of based on actual consumption goes against Directive 2006/32 and Directive 2012/27. However, both the AG and the CJEU concluded that a law that allows for such a method of bill calculation does not violate EU law, considering that the above-mentioned Directives give the Member States a wide discretion in what concerns the calculation method for billing for thermal energy consumption in buildings in co-ownership.

Symposium 'Consumer and Data Privacy: the digital revolution of legal, social and economic interaction'

Happy 2020 to all our readers! After (I hope) a relaxing Christmas break for most of us, it is time to look forward to consumer events/news/developments that are awaiting us in the coming weeks/months. To start with, you may be interested in a symposium, which takes place that on January 24th at Maastricht University, on the topic of 'Consumer and Data Privacy: the digital revolution of legal, social and economic interaction'. Three keynote speeches have been scheduled by: prof. Sally Wyatt (Maastricht University), prof. Roger Brownsword (Bournemouth University and King's College London) and prof. Hans-W. Micklitz (EUI). The registration is open until January 17th and there is still a possibility to submit your research posters.