Tomorrow Never Dies: VLOPs debacle

Most of us in the consumer protection field celebrate that as of tomorrow, August 25th, the obligations of the Digital Services Act (DSA) will start binding very large online search engines (VLOSEs) and online platforms (VLOPs). 

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The European Commission designated the first set of VLOPs and VLOSEs on April 25th (see here). To recall, VLOSEs encompass Bing and Google Search, whilst VLOPs are: Alibaba AliExpress, Amazon Store, Apple AppStore, Booking.com, Facebook, Google Play, Google Maps, Google Shopping, Instagram, LinkedIn, Pinterest, Snapchat, TikTok, Twitter, Wikipedia, YouTube and Zalando. 

The designation occurred on the basis of the self-reported user data (more than 10% of EU population as active users) and the platforms were given 4 months to start complying with the obligations that the DSA introduced for VLOPs and VLOSEs. These obligations aim to improve transparency (detailed reporting obligations etc), user empowerment (improved content moderation, opt-out from profiling/recommenders systems, enhanced minors protection, bans on advertisements based on sensitive data etc) and facilitate enforcement (via reporting and cooperation obligations).

Unsurprisingly, we have already seen some pushback against these new obligations. Namely, Amazon Store brought an action to the General Court claiming that it should not have been seen as a VLOP (see case T-367/32) and that some of the DSA obligations should not be applicable to it (duty to provide users with an option for reach recommender system that is not based on profiling; duty to compile and publish an advertisement repository). The arguments that Amazon Store brings in are based on the principle of equal treatment and the need to protect Amazon's fundamental rights. The latter is quite ironic, considering that one of the contested obligations, on ensuring that users may opt for not being profiled, aims to protect the fundamental right of users' privacy.

This claim may have just been a strategy from Amazon Store to delay its compliance with the DSA. It is hard to imagine that they would be successful in proving that they are not a VLOP (see also BEUC's commentary on this here). We will follow this case but for now, let us hope that tomorrow brings a positive change!

Bad faith of sellers in unfairness cases - CJEU in CAJASUR Banco (C-35/22)

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In a recent case, from 13 July, in CAJASUR Banco (C-35/22), the CJEU reflects further on the need of national laws providing effective and equivalent consumer protection against unfair contract terms. In this Spanish case, the consumer succeeded in claiming unfairness of terms in a mortgage loan agreement. However, the bank appealed the order to repay consumer fees for the legal proceedings. Pursuant to Spanish law, only defendants who were in bad faith would need to pay such costs. The bad faith would be established if before the legal action the bank 'has received a due and substantiated demand for payment, mediation proceedings have been initiated or a request for conciliation has been made...' (paras 9 and 29-30). The consumer did not take such actions in this case. 

The question posed to the CJEU boiled down to: Whether if national laws prevented consumers from claiming back costs of legal proceedings, when such consumers have not taken any actions prior to brining proceedings against sellers, this would contradict Article 6 UCTD - providing effective sanctions against unfairness of contract terms. As the Member States have procedural autonomy, they may set rules regarding costs of legal proceedings, provided that these comply with the principles of effectiveness and equivalence (para 24). The CJEU reiterates its various previous rulings on the impact that awarding (or not) of costs may have on consumers' willingness to exercise their rights against unfair contract terms (paras 25-28). 

In light of facts of the given case, what struck the CJEU was the one-sidedness of the Spanish law requirement to initiate mediation/conciliation before legal proceedings. This burden is purely placed on consumers as plaintiffs in cases against unfairness (para 31). Whilst taking of such steps may help with releasing the pressure on the judicial system (argument of the Spanish Government), the CJEU legitimately then expects this burden to be shared between the parties. For example, banks could be expected to pro-actively approach consumers with contracts containing terms that have been established as unfair in settled national case law (para 32). If national law places such burdens solely on consumers, it does not encourage sellers 'to draw, voluntarily and spontaneously, all the consequences of the case-law on unfair contract terms and thus promotes the continuation of the effects of those terms.' (para 34). The CJEU, expecting active behaviour from the sellers, then continues to state that if in case of 'inertia on the part of the seller...' in contacting consumers and disapplying unfair terms to them, consumers start legal actions, this should not be held against them (para 35). Conclusively, the CJEU then recognises that national law could choose bad faith as a requirement for awarding costs of proceedings (para 38). However, national courts should be ready to recognise such bad faith also when banks, aware of consumers' weaker position, wait with admitting the claim until consumers' take action, just to avoid having to pay the costs of proceedings, instead of informing them of terms' unfairness of their own will (paras 36-37).

What looked at a glance as another judgment focused on a small procedural issue, actually  could have far-reaching consequences for consumer protection. If the reasoning of the CJEU is extrapolated to other situations when sellers have knowledge of unfairness of consumer terms but do not act on it, which would lead to the recognition of sellers acting in bad faith, in various national laws this could have further ramifications for award of damages, burden of proof, etc.

Consumer Law Scholars Conference 2024 - call for abstracts

The Sixth Annual Consumer Law Scholars Conference will take place at Berkeley Law from February 29 to March 1, 2024. This is a small but prestigious event in the field of consumer law, with participants supporting in-progress scholarship and building valuable networks. To achieve this aim, workshop sessions are organised during which commentators rather than authors present the papers. All participants are expected to read papers and participate in the discussion. Some authors may choose to present their sessions in plenary 'lightning round' with brief author presentations encouraged. If you have an unpublished paper, which you plan to finalise by January 26, to send in an abstract by September 8! (all details may be found here)