Transparency about online payments even if they are conditional - CJEU in Conny (C-400/22)

Last week, on May 30, the CJEU gave its judgment in the Conny case (C-400/22) elaborating on the requirement from Article 8 of the Consumer Rights Directive to clearly label an online obligation to pay on a website on a relevant button with the words 'order with obligation to pay' (or an equivalent of this).

Photo by Alice Pasqual on Unsplash

The facts of this case are interesting as it was a trader that tried to argue that the lack of clear wording on a website about an order with an obligation to pay should lead to the voidness of the concluded contract. The contract in case was a lease contract, concluded between a landlord and a tenant. Pursuant to German law, this lease contract had a ceiling on the rent that consumers had to pay and if this ceiling was exceeded, consumers could claim reimbursement of overpayments. Conny - a debt collection company - offered to collect the rent overpayments as an assignee of consumers rights. The contract between Conny and consumers was concluded online, via its website. Consumers had to approve T&Cs and click on a button to place the order, which button was not labelled with the required wording. The reason given for this was that the payment was conditional on Conny successfully securing the debt collection. Only at that time consumer would have had to pay a third of the annual rent saved, pursuant to T&Cs. The landlord used the lack of the proper labelling on Conny's website as an argument that the assignment of consumer rights was void and, that therefore, Conny could not have been successful in claiming repayment of rent from the landlord. 

Order with an obligation to pay - whether payment is conditional or unconditional

The CJEU clarifies, as expected, that the trader's obligation to transparently inform consumers concluding a contract through its website about an obligation to pay, just before a consumer binds themselves to this payment, does not change if the payment is dependent on satisfying a subsequent condition (para 56). This allows the consumer to explicitly acknowledge his consent to be bound by an online order with an obligation to pay (paras 43, 50). The CJEU points to the lack of distinction in the CRD between conditional and unconditional payments, as well as the duty to inform placed on traders when an order 'implies' an obligation to pay (paras 46-47). A different interpretation would have led to traders being able to explicitly inform consumers about their obligation to pay not at the ordering process, when consumers may still avoid the order and the subsequent payment obligation, but only at a time when the payment becomes due (para 52). Traders could then circumvent their duty to inform by placing in their T&Cs an objective condition, fulfilment of which would be required to lead to a payment obligation (para 53).

Sanction of voidability

An important clarification follows in paras 54-55 of the judgment. The CJEU emphasises the CRD's wording, which only states that a consumer is not bound by the contract in case the above-mentioned trader's duty has been breached. This does not need to indicate that a contract is void, but rather that a consumer has an opportunity to avoid it. This would make a significant difference in cases such as the one referred to the CJEU, when it is a trader who is trying to use an infringement of consumer protection rules as a 'weapon' against, ultimately, a consumer.

CJEU in EIS (C‑266/19) – Reasonable expectation prevails over proportionality concerns in duties to inform

Case C‑266/19 (not yet available in English; in French here) concerns EIS and TO, who are competitors in the business of online sales of erotic products. The relevant claim was that EIS did not clearly inform consumers about its phone number in the right of withdrawal model form (annexed to the Consumer Rights Directive) and about the fact that consumers can use that phone number to exercise their right of withdrawal, even though EIS had one and mentioned it in a clear and legible manner on the bottom of its website. One interesting aspect about this case is that it is originally a competition law case that, in the referring court’s perspective, depends on an answer to a consumer law problem. Providing wrong or incomplete information on the right of withdrawal in consumer contracts (and therefore breaching consumer law) is considered to be unfair competition according to German law (para 21). So, even though there are no consumers directly involved in the dispute, the CJEU was called to interpret a provision of the Consumer Rights Directive.

The Consumer Rights Directive regulates the pre-contractual disclosure of available means of communication to consumers in several provisions. Article 6(1)(c) states that the trader must inform the consumer on means of communication ‘where available’. Article 6(1)(h) states that the trader must inform the consumer on the conditions, time limit and procedures for exercising the right of withdrawal (which, according to Article 6(4), can be done through the model form annexed to the Directive). The dispute, in this case, lied here: is a phone number used by a trader for professional purposes and shown in the homepage of the trader’s website considered an 'available' means of communication? Moreover, should Article 6(1)(c) and (h) and 6(4) – together with annex I point A – be interpreted as imposing a duty on the trader to explicitly inform the consumer on a phone number that can be used to exercise his right of withdrawal?

This case builds on Amazon EU (see our report on it here), where the CJEU interpreted partly the same provisions and established that an unconditional obligation to have a phone number available to consumers is not proportional, considering the economic context of some traders’ business model. Following the guidelines set out in Amazon EU, the CJEU clarified, in the present case, that the professional party who concludes a contract with a consumer via a website and that, logically, does not use a phone number for the process of concluding that contract (even though it has one available for other professional purposes), is not obliged to communicate it to the consumer in the context of the model form in annex I part A (para 36). However, interestingly, the CJEU established an exception to this rule. According to the CJEU, if the phone number is publicly displayed on the trader’s website in such a way that it would lead the average consumer to think that the trader uses that phone number to communicate with consumers in general, then it must be considered that that phone number is available within the meaning of Article 6(1)(c) (para 37). That is the case, for example, when the phone number is available on the trader’s website under the heading ‘contact’. Therefore, it must also be considered that a phone number is ‘available’ in the meaning of annex I part A and must be consequently included in the model instructions on the right of withdrawal (para 38). In this way, and even though the CJEU does not explicitly say it, it appears to have privileged the protection of the reasonable expectations of consumers over proportionality concerns.

Commission fines electronics companies for fixing resale prices

On the 24th July, the EU Commission issued fines against four electronics companies for breaching antitrust rules by fixing resale prices on their online retailers.

All four companies, namely Asus, Denon & Marantz, Philips and Pioneer, did not allow their resellers to set their own prices and instead pressured them to maintain a minimum resale price. The fines issued ranged from more than 63 million for Asus to 7.7 million for Denon & Marantz. The fines were reduced as a result of the cooperation of the companies to the investigation. The prime target of this practice were online resellers, who tend to sell their products at lower prices.

As online resellers adjust their prices automatically to that of competitors, the practice had a wide effect on the market. Furthermore, the goods in question were widely used consumer goods from computers to kitchen appliances and personal care products, meaning a significant impact on consumers.

The practice of fixing resale prices is prevalent in online markets and Commissioner Margrethe Vestager highlighted the fact that the online market is ever growing and it is imperative to protect consumers.

What happens to the consumer affected by these high prices in electronics? They can seek damages in court, following Directive 2014/104/EU (The Antitrust Damages Directive) using the Commission decisions as proof of illegal behaviour of the companies.

Prohibiting online platforms from reselling luxury goods - CJEU in Coty Germany (C-230/16)

The CJEU gave its judgment (C-230/16) yesterday in a competition law case that may impact how luxury goods are sold to consumers online in the future. Coty Germany - a supplier of luxury cosmetics in Germany - brought a case against one of its authorised distributors, Parfumerie Akzente for using online third-party platforms (amazon.de) to resell their products. Coty set up a selective distribution network in order to protect the luxurious image of the brands it represents (eg Marc Jacobs, Calvin Klein). Their claim was that if their distributors use then online third-party platforms to resell their products, the objective of brand image protection is undermined. The distribution agreement allowed for the online sale of products supplied by Coty but only through the online webstore of the authorised distributor, whilst ensuring that the luxury character of the cosmetics was maintained. German courts brought the case the the CJEU as there was doubt whether the express prohibition in the distribution agreements of re-selling products through online stores of third-parties could restrict competition under art. 101(1) TFEU.

The CJEU has no doubts that maintaining a prestigious, luxurious image of the brand may justify the introduction of the selective distribution system (paras 28-29). Can such a distribution agreement prevent the distributor from re-selling the goods on an online website of a third-party? The CJEU determines that such a limitation could be justified, provided that it would apply in a non-discriminatory fashion, uniformly to all distributors, and was proportionate. From the Court's observations it seems that in this case the restriction was justified and proportionate (paras 44-53). As Coty does not have a contractual relationship with an online third-party platform reselling its goods, it would be difficult for it to ensure that they are being sold in a way guaranteeing to show off their luxurious character (paras 48-49). Moreover, distributors are allowed to sell these goods online - just on their own websites, which makes the restriction proportionate.

This judgment may mean that the offer for certain luxury goods on online platforms such as Amazon or eBay will be more limited in the future. Unless, suppliers of these goods will create their own webstores on these platforms.

More consumer access to cross-border online services

The European institutions reached an agreement on further EU approach to "unjustified" geoblocking of online consumer products or services (EU negotiators agreed to end unjustified geoblocking). What does it mean "unjustified"? First, it would apply to situations where traders prevent consumers from other Member States to conclude online contracts for the sale of goods, even if traders are released from the obligation of delivery to the consumer's Member State. If the consumer undertakes to pick up the good at the trader's premises or arrange the delivery himself, preventing the sale of goods contract from being concluded based on the geographical location of the consumer seems unjustified. Also, when consumers wish to purchase electronically supplied services (such as hosting services for their websites), they should not be required to pay additional fees than consumers located in the same Member State as the service provider. The same should apply to the situation when the services are provided in a specific physical location, as it should not matter then who purchases these services. Does this mean that traders will now have to sell cross-border? No, there won't be an obligation to sell to consumers from other Member States, but rather an obligation not to discriminate against them, without a justification. It could be seen as unjustified to require consumers to pay only with the debit or credit card issued in the Member State of the trader's location. The plan is for the new Regulation to enter into force within the next year.

Towards a more coherent European contract law (once again)? Major amendments to the sales proposal

Last Tuesday the Commission published an amended proposal for a directive on certain aspects concerning contracts for the (online and other distance) sales of goods, introducing far-reaching changes to the original file. Most importantly, the scope of the proposal was extended to cover face-to-face sales of goods, meaning that the European lawmakers are now looking into a much broader reform of consumer contract law. Like the original proposal, which extended only to distance sales, but unlike the currently applicable Directive 1999/44/EC, the amended proposal is based on a full harmonisation approach. Impact of such a fully harmonised set of rules is discussed in the Staff Working Document accompanying the proposal. Should the newly presented file go through, Directive 1999/44/EC on consumer sales would be repealed completely. 

The idea of having two distinct sets of contract rules for distance and face-to-face sales did not seem to sit well with anyone from the very beginning. A potential extension of the scope was already envisaged in late 2015, when the original proposal was tabled. Concerns with regard to the original file were also voiced by stakeholders and co-legislators. Indeed, up till now reports about the progress made in the European Parliament and the Council with regard to the sales proposal were not very encouraging. Much more attention seemed to be devoted to the second proposal adopted at the same time, concerning contracts for the supply of digital content. Analyses were nevertheless ongoing - for further reading see in particular the results of the Commission's REFIT exercise or the impact assessment carried out the the European Parliamentary Research Service. 

This is not to say that the amended proposal will not be a source of controversy. Past experience with regard to the harmonisation of European contract law shows that this is a very tricky ground. Even if the potential inconsistency between the rules applicable to different sales channels is now removed and material scope of the proposal is largely based on Directive 1999/44/EC, the full harmonisation approach is bound to raise concerns. Suffice it to recall that this was one of the key issues raised by BEUC with regard to the original proposal. Heated discussions concerning the particular solutions provided for in the proposal are thus to be expected.