New clarifications on information rules in the Consumer Credit Directive: the CJEU in Volkswagen Bank

In September 2021 the CJEU delivered an important judgment on the interpretation of the creditor's duty to inform and the associated consumer's right of withdrawal in Directive 2008/48/EC. Unfortunately, the judgment took a while to be published in English, and therefore we only managed to create this note now. The judgment remains relevant, also in light of the new Proposal (on which we reported here), which contains equivalent provisions in Articles 21 and 26.

The judgment concerned C-33/20, C-155/20, and C-187/20 joined cases involving consumer credit and further shaped the content and application of Article 10(2) and Article 14(1) of the Directive.

In terms of Article 10, the judgment is fairly technical with answering very specific questions on the content of the credit agreement, adding to the already detailed content of Article 10. The CJEU in this judgment specifies for instance that the contract must state clearly that it is concluded for a fixed term and that the contract does not need to set out all the situations provided by national law in which the contracting parties can terminate the contract. Particularly interesting are two interpretations provided by the CJEU:

On Article 10(1)(l) under which credit agreements must state in a clear and concise way the applicable rate of late payment interest at the time of contract conclusion, the arrangements for adjusting the rate, and any charges payable at default, the question was, in what way should the rate of interest be indicated. In the issue at hand, the contract said that the rate of interest will be 'five percentage points above the relevant base rate'. While the relevant base rate is fairly easy to determine, the CJEU did not agree with this formulation, they reasoned that this is the formula provided for calculating the rate of interest. In order to fully inform consumers, the contract must state the rate of interest in a specific percentage, similar to how the borrowing rate and the annual percentage rate of charge must be presented. In addition to expressing the late payment interest in a percentage then, the contract must also specify the way in which this rate is adjusted, enabling an average, reasonably observant, and circumspect consumers to determine and understand the arrangements for varying the late payment interest. In order to achieve this, two conditions must be satisfied: first, the method of calculation must be set out in a way that is readily understood by an average consumer who does not have specialist knowledge in finance and which enables the average consumer to calculate the rate of late payment interest based on the information provided in the contract; second, although the CJEU seems to be of the opinion that a national base rate is a good benchmark, this is only so, if the contract set out the frequency with which the base rate may be varied, as determined by national provisions.

Another interesting aspect of the judgment was the CJEU developing interpretation of Article 14 on the right of withdrawal. The CJEU ruled that if the information is not dully included in the contract following Article 10 and was neither communicated at a later stage, there is no time limit for the consumer to exercise the right of withdrawal under the Directive nor can the Member States impose such limitation in national legislation. The CJEU's standpoint was that in that case, the consumer was unaware of the limitation of the right, and the consumer could not be held responsible for that lack of awareness. This is true even if the right of withdrawal was exercised following a considerably long period after the conclusion of the contract; the CJEU dismissed the possibility of the consumer being held liable for the abuse of this right under the circumstances.

Consequences of code-sharing agreements - CJEU in United Airlines (C-561/20)

On April 7th the CJEU issued a judgment in United Airlines (C-561/20), addressing rights of air passengers in a situation of a delayed connecting flight. We commented on the opinion in this case last December ((Not)Dashing through the snow...). AG Athanasios Rantos argued for the applicability of Regulation 261/2004 to a delay of a second connecting flight, which was operated by a non-EU air carrier (United Airlines) between two US airports, considering that passengers made their reservation with an EU air carrier (Lufthansa) and the reservation encompassed connecting flights leading passengers from Brussels (Belgium) to the US. Previous case law of the CJEU already emphasised the need to treat flights that were included in one reservation as one unit (para 29). The CJEU agrees with this interpretation, as well as with the fact that since Regulation 261/2004 places liability for delayed flights on operating air carriers, passengers have a claim in this case against a non-EU air carrier - United Airlines (paras 33 and 41-42). They operated all of the flights, under a code-sharing agreement with Lufthansa, which means they acted on behalf of a party who had a contractual obligation towards passengers (paras 39-40). 

Right to be forgotten vs. right of access to information. AG opinion in Google case (C-460/20)

Freepik (iconicbestiary)

One of the characters in a well-known movie called "The Social Network" said that the internet's not written in pencil, but it's written in ink. We know that information, once posted online, does not die, but circulates for many years. However, the General Data Protection Regulation (GDPR) guarantees us the right to erasure of our personal data (also known as the right to be forgotten), and the right to object to processing. Both rights can be exercised in certain situations specified in the regulation, such as when the data is processed unlawfully or because of a particular situation of the data subject. I will not go into details, as the purpose of this post is not to comment on the GDPR provisions, but to give an overview of an opinion delivered recently in the case C-460/20 Google by Advocate General Giovanni Pitruzzella. Although this is not the first case concerning deletion of personal data available on the Internet (see, for example, judgments of the Court of Justice in cases: C-131/12 Google Spain and Google, C-136/17 GC and Others, C-18/18 Glawischnig-Piesczek), this issue still raises doubts and will probably be the subject of preliminary questions more than once.

The case concerns the processing of personal data of a man holding important positions in financial services companies and his ex-partner who was a proxy in one of those companies. One of the websites published three articles that questioned the investment model adopted by some of the companies. In addition, it posted photos of the man and his ex-partner in a luxury car, a helicopter and in front of a plane. The photos, as well as the content of the articles, suggested that they were leading a sumptuous life at the expense of third parties. Because Google's search engine displayed links to pages with the articles in its search results, as well as thumbnail images of the articles, the plaintiffs requested that both the links to the pages and the thumbnails be removed from the list of search engine results. They claimed that they contained a number of erroneous allegations and defamatory opinions based on untrue facts. In their opinion, they were victims of blackmail by the website.

The German Bundesgerichtshof (Federal Court of Justice) has raised doubts about the interpretation of Article 17(3a) of the GDPR, a provision that entitles a controller to refuse to delete personal data if the processing is necessary for the exercise of the right to freedom of expression and information. The questions referred for a preliminary ruling thus concern the balancing of two conflicting fundamental rights guaranteed by the Charter of Fundamental Rights of the European Union: the right to information and freedom of expression, and the right to respect for private life and protection of personal data.

The Advocate General recognized and emphasized in his opinion the important role of "gatekeepers" played by search engines. Their activity is essential in ensuring universal, even democratic, access to information. As he points out, "in the vast ocean of information created on the Internet, much information would remain virtually inaccessible without the intermediation of these search engines" (para. 2). At the same time, search engines exercise control over the circulation of information on the Internet, since the inclusion of a link to certain websites in a search list, on the one hand, facilitates access to information for any Internet user and contributes to the dissemination of that information, while on the other hand, it may constitute a serious intrusion into the private sphere of the individuals to whom the information relates. Nevertheless, the right to respect for private life and to protect personal data are not absolute. According to the AG Pitruzzella, given the context of the case, and in particular the fact that the data subject performs a public function (more or less important, political or economic), it must be assumed that the right to information overrides the right to protection of personal data. He notes that "the confidence both of other economic operators and of consumers is a prerequisite for the proper functioning of the market. This confidence requires public access to information about persons in professional roles that is likely to affect market dynamics and consumer interests, sometimes even more markedly than the acts of policy makers. Naturally, this information is essentially that which relates to their professional roles, but can also extend to aspects of their private sphere where they are connected or, in any event, likely to impact their professional activity and affect public confidence" (para. 28). 

However, there are exceptions to the rule. The right to information will not prevail if the information presented is false, even if it concerns a person who plays an important role in society. Incorrect information not only violates the protection of personal data but also the dignity of the data subject by distorting his or her identity (para. 31). In such a situation, the right to data protection will enjoy priority. This conclusion was drawn by the Advocate General based on the principle of data accuracy formulated in Article 5(1d) of the GDPR, according to which personal data must be accurate and, where necessary, updated, while data that are inaccurate in light of the purposes of the processing must be erased or rectified without delay (para. 32). Data accuracy is one of the basic principles of the processing of personal data and its violation implies unlawfulness of the processing.

Freepik (rawpixel.com)

A special role in this aspect is played by the operator of the Internet search engine, who acts as a data controller and is therefore responsible for the entire data processing. Its task is to assess whether a request to remove links to websites or images, i.e. a de facto request to delete personal data, should be accepted. The search engine operator, acting as a controller under the GDPR, must balance the mentioned fundamental rights. How it should be done? In the AG's view, some kind of "procedural data due process" should be introduced. This is to impose certain obligations on both the data subject and the controller, which, although not explicitly stipulated in the regulation, can be interpreted from its content and are intended to serve the effective implementation of the right to be forgotten. First, if the data subject claims that information about him or her is false, he or she should provide a prima facie evidence for its falsity unless "this is, in particular in view of the nature of the information concerned, manifestly impossible or unduly difficult" (para. 44). Secondly, the controller should carry out the verification of the disputed information "which is within the scope of his concrete capacities". Thus, he should analyze all data in his possession as the operator of the search engine, using the technological tools available. Moreover, the operator of the search engine, where possibile, should "initiate rapidly an adversarial debate with the web publisher who initially disseminated the information, who will then be able to set out the reasons supporting the truth of the personal data processed and the lawfulness of the processing" (para. 45). Then, the operator will have to decide whether or not to grant the request for de-referencing. The request may be dismissed only "if substantial doubts remain as to whether the information in question is true or false, or if the weight of the false information in the context of the publication in question is manifestly insignificant and that information is not of a sensitive nature" (para. 46). The search engine operator is thus supposed to act as a quasi court or like an arbiter by actively seeking the truth. In conclusion, the AG believes that appropriate activity should be required on the part of the data subject (by making it plausible that the information is false) and on the part of the controller (by comprehensively verifying the accuracy of the information).

As far as the removal of thumbnail images displayed in the results of an image search is concerned, the AG Pitruzzella considers that the same principles should be applied here. The controller must also balance the rights, and in this case should take into account only the informational value of the images as such, regardless of the content they illustrate on the website from which they originate. Conversely, if "in connection with a request for de-referencing of the link to a web page, the display of photographs in the context of the content of that web page were contested, it would be the informative value that those photographs have in that context which should be taken into account for the purposes of that balancing exercise" (para. 56).

The AG's opinion is not surprising, as it is in line with the existing case law of the Court. The question is whether this position, assuming that the Court will follow it, will contribute to strengthening the position of data subjects vis-à-vis the controllers, i.e. Internet search engines? It seems that the argument of universal access to information, especially information about public figures (and in the age of the Internet the boundary between "public person" and "private person" is extremely fluid and unclear), can always be used as a justification for refusing to remove links to websites from the list of search results. The right to protection of personal data interferes here not only with the right to information, but indirectly also conflicts with the economic interests of the search engine operator who makes profits from such a business model. The more information, links, clicks and views, the better. The same is true for website operators who publish content on their portals. Even imposing high fines for unjustified refusal of a data deletion request, and thus violating GDPR regulations, does not deter the "big players". However, in order not to end with such a pessimistic tone, let's hope that as time goes by, this trend will reverse and the right to be forgotten will become an effective tool for removing incorrect information online that undermines someone's reputation. Like a metaphorical eraser that wipes off the ink with which one writes on the Internet*. 

*I refer to the words of Advocate General Maciej Szpunar in his opinion in Case C-18/18 (para. 2).

A promise is a promise - or is it? Ask the average consumer! CJEU in C‑249/21, Fuhrmann

 We've all been there - trying to decide whether to go for the hotel which promises nicer breakfast or the one with free cancellation until 24 hours before arrival. We don't know what happened to mr B, who booked an expensive hotel in a German village and didn't show up to take possession of his room(s). We do know, however, that he did not cancel his reservation in time - after which he was confronted with a hefty bill for a five-night stay he had reserved and made no use of. This led to an interesting decision by the CJEU last week, in case C-249/21.

The hotel reservation in this case took place via booking.com, which displays a final button: "complete booking" once a user has filled in all necessary identifiers. Does this mean that once they have clicked the button, a consumer has in fact entered a contract with the facility they selected?

According to the national court that referred this case to the CJEU, the dispute depends on whether the words ‘complete booking’ (in the German original: Buchung abschließen), satisfies the obligation laid down in Paragraph 312j(3) of the BGB, which requires the trader to display in an easily legible manner on the button for placing orders the words ‘order with obligation to pay’ or a corresponding unambiguous formulation. This provision implements the information obligations established by the second subparagraph of Article 8(2) of Directive 2011/83; the next section, namely Paragraph 312j(4) of the BGB, provides that a contract is then concluded if the information/warning was correctly provided. 

 Is "complete booking", in other words, a sufficient clue that a contract is about to be concluded, or should more explicit language be adopted given the fact that "booking" in everyday language can easily refer to a non-committal form of reservation with no contract being concluded?

The CJEU recalls that the Consumer Rights Directive must be interpreted with an eye to the achiement of a high level of consumer protection; in this spirit, however, any formulation that will deliver the essential notice to the consumer will be apt to comply with the Directive's requirement: while the Directive itself mentions "order with an obligation to pay" as an example of wording that can convey the necessary message, according to the court this does not mean that service providers have to reproduce the exact same wording (para 26-27). However, according to the Court it is also clear from the wording of the Directive that the button itself must display sufficiently unambiguous language - the context alone, or previous stages in the interaction between consumer and trader, cannot make good for insufficiently clear communication at the late stage since the Directive's article 8 refers to information to be explicitly provided just before the contract is finalised (para 28-29, with reference to recitals).  

In conclusion, thus, it is for the referring court to ascertain whether, in the day-to-day use of the German language, "Buchung abschließen" can be considered to carry an unambiguous meaning which is tantamount to "order with an obligation to pay". In doing so, the court will have to keep in mind the "average consumer who is reasonably well informed and reasonably observant and circumspect".  

A number of elements are remarkable or interesting in this case: first, the demanding interpretation of article 8(2), excluding that the context of the transaction would be enough to expect the consumer to understand a certain click as entailing an obligation to pay; second, the fact that booking.com likely uses very similar language across its language versions, but will now probably have to initiate an investigation into the overall implications of all those versions (or change the button to add a reminder that confirming means entering an obligation to pay, which would probably - without really changing the legal reality in most Member States, scare off a certain quota of consumers); third, it reminds us of the importance of different implementation techniques, as it was Germany's specific choice to connect the contract's conclusion to the compliance with information obligations in cases like this one; finally, and perhaps most startingly, the case reminds us of the platform paradox. While booking.com had been the one setting up the context of the transaction as well as the concrete looks and language of the confirm button, the company stays entirely out of the underlying litigation: if their button, in other words, would be found ambiguous, other service providers (ie the hotels) would possibly be in trouble.  Neither does it seem to me - but it may be due to my poor reading - that article 4 in the modernisation directive, amending the CRD to add specific information obligations on the side of platforms, would change this conclusion. LMK via available channels if you have any thoughts on this!

Proposal on Empowering Consumers for the Green Transition/Part 2

 Last week, I posted a summary of the main changes the Proposed directive for empowering consumers for the green transition would bring to the Unfair Commercial Practices Directive. Today's second part will be devoted to the Consumer Rights Directive. 

Next to preventing "greenwashing" and unsubstantiated claims, the Commission aims that consumers get the right information, that is information that allows to make them more sustainable choices - in particular choosing for more energy efficient, durable and reparable products. 

Six items are added to the pre-contractual information requirements, both for distance and off-premises contracts and for other transactions coming under the scope of the Directive. 

These six additional items concern guarantees, updates and repairs (including some complicated language about telling consumers what they have not received information on).  

–information on the existence and length, of a producer’s commercial guarantee of durability for all types of goods, when this information is made available by the producer; 

–information that no information has been provided by the producer about the existence of a producer’s guarantee of durability for energy-using goods;

–the existence and length of the period during which the producer commits to providing software updates for goods with digital elements;

–the existence and length of the period during which the provider commits to providing software updates for digital content and digital services; 

–the reparability score of the good as applicable under Union law; 

–other repair information, should no reparability score be available at Union level – such as information on the availability of spare parts and a repair manual.

The guarantee information, in particular, needs to be provided also in the context of contracts concluded with electronic means, before the consumer concludes the contract. This includes the possibly confusing "non-information" referred to above ("information that no information has been provided... about the existence of a producer's guarantee of durability"). The proposal explains that, for energy-using goods, providers also need to give information concerning durability when this can be easily and reliably calculated - so the "negative information" above means sellers would have to say something like "we make no promises as to the product's durability". The proposal explains that 

The problem of limited durability contrary to consumer expectations is most relevant for energy-using goods, which are goods that function from an external energy source. Consumers are also most interested in receiving information about the expected durability of this category of goods. For these reasons, only for this category of goods, consumers should be made aware that the information about the existence of a producer’s commercial guarantee of durability of more than two years has not been provided by the producer.

While the reasoning seems plausible, the text is particularly clumsy and could use a clarification/exemplifications.  Here's to the hope that it can be improved in the legislative process - form is substance, even in consumer law :). 

Finally, it is interesting to observe that the reference to an applicable reparability score is, so far, aspirational - no such European scheme exists, despite the warm reception of the French initiative which for the first time established such scoring in Europe (the so-called "indice de réparabilité"). In this respect, a petition has been launched months ago by the Greens, but I could find no official update connecting this reference in the proposal to actual legislative initiatives in the indicated directions. 

This is it for now - while normally information requirement may not be the most exciting of developments, the connected issues here, such as the reparability score and the fight against planned obsolescence all give us reason to think that there will be quite something to report on in the near future. Stay tuned!

Proposal on Empowering Consumers for the Green Transition/part 1

Last week, the Commission has presented a new proposal in the context of its Consumer agenda and circular economy action plan, the Proposal for a Directive on Empowering Consumers for the Green Transition. The proposal aims to empower consumers to play their role in the transition to a circular economy by providing them more information concerning key sustainability features of the products they buy and by clearing out misleading information – also known as greenwashing.  

The Directive has a relatively short text with only two main articles, amending respectively the Unfair Commercial Practices Directive (UCPD) and the Consumer Rights Directive (CRD) to add a few items. I will split the overview in two posts in order to avoid a text wall, so here we go with the first part: changes to the UCPD.

 

First off, the proposal adds a number of practices to the blacklist of practices that are always unfair under articles 6 and 7 UCPD. These include, in essence:

• Displaying sustainability labels which are not based on a certification scheme or established by public authorities;
• Unsubstantiated or inflated environmental claims, including when mandatory requirements are presented as distinctive features of the product;
• Omitting to inform consumers about planned obsolescence features or about the adverse impact certain updates may have on product functionality;
• Omitting to inform consumers of the limited reparability of a product or of the fact that the product is designed to limit its functionality when used in combination with non-original spare parts;
• Inducing the consumer to replace parts of a good earlier than necessary.  

Based on occasional news, it seems plausible that at least some of these practices were in fact already the target of national enforcement policies. More innovative is the opening to a broader meaning of “sustainability” in some of the provisions, which is explained in the recitals: “Information provided by traders on the social sustainability of products, such as working conditions, charity contributions or animal welfare, should not mislead consumers either.” Hence in the proposal’s article 1, 

‘sustainability label’ means any voluntary trust mark, quality mark or equivalent, either public or private, that aims to set apart and promote a product, a process or a business with reference to its environmental or social aspects or both. 

Comparably, “sustainability information tools” are defined as 

software, including a website, part of a website or an application, operated by or on behalf of a trader, which provides information to consumers about environmental or social aspects of products, or which compares products on those aspects;

Why does the Directive engage with such information tools?

 

According to the proposal, if a trader provides such tools, they would have to include “information about the method of comparison, the products which are the object of comparison and the suppliers of those products, as well as the measures in place to keep that information up to date”. All this information shall be considered “material information” to the ends of article 7 UCPD, meaning that failure to include it (in a way reasonably accessible to the consumer) will be considered a misleading omission. 

 

This is, given the state of real-world developments, perhaps a bit disappointing: in particular, it says nothing about more socially pressing omissions: should a seller who, for instance, has been made aware of terrible working conditions at their production sites not make mention of that on their website, at least when they hint in any way to their efforts (which doesn’t seem prohibited – “unsubstantiated environmental claims” would be forbidden but in the social compartment only made-up labels seem to be covered)? It may well be that some member states could read this requirement into the directive’s spirit since the proposal does not amend the general unfairness and misleading-ness tests. However, it would be even better if loopholes like this one would be addressed in the political process in the months to come.